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Geoblocking in online trading - avoid warnings

Geoblocking in online trading – New EU law, avoid warnings by adapting your sales. The new geoblocking regulation for online trading comes into force on Christmas 2018. React now and ensure legally optimized sales structures.

Actually, the matter was quite simple: Anything that hinders cross-border online trade is prohibited. Antitrust law has always ensured this. Online trading in particular should make a significant contribution to a uniform EU-wide internal market. The reality, however, looks different. Cross-border online trade within the EU is now specifically blocked by geoblocking. The Internet does not enable a unified internal market. The concept of geoblocking was born. However, the end of artificial borders in the digital internal market through geoblocking is imminent at Christmas 2018: the regulation against geoblocking in online trading will come into force.

##What exactly is it about?
The EU Parliament and the European Council have approved the EU regulation against geoblocking in online trading. This will therefore be issued soon and will explicitly prohibit measures that prohibit cross-border online trade in goods and services. The general clause of the regulation against geoblocking in online commerce therefore stipulates the following: A retailer may not block or limit a customer's access to the retailer's online offerings through technical measures or in any other way for reasons related to nationality, place of residence or related to the location of the customer's branch. The regulation against geoblocking in online trading prevents discrimination based on the nationality, place of residence or place of establishment of the customer and thus aims to remove obstacles to online trading.

###An example
A company has no knowledge of consumer protection law in the UK or France and therefore rejects purchase requests from these countries. Or it decides to redirect such inquiries to another website with different sales conditions. This self-protection of the dealer is linked to the buyer's place of residence. Is this protection no longer possible?

According to the regulations of the regulation on geoblocking in online commerce, every EU citizen should be able to carry out all everyday transactions such as purchasing products online, renting equipment or purchasing concert tickets within the entire EU. He may not be prevented from doing so, directly or indirectly, because of his nationality, his place of residence or the location of his place of business. Nationality, residence or the location of the branch should not determine whether a customer has access to a company's goods and services. Retailers are no longer allowed to treat customers in EU member states differently when it comes to pricing, sales and delivery conditions solely because of their nationality, place of residence or the location of their branch. In the example above, the company would therefore be violating the regulation against geoblocking in online trading.

##Which measures will be prohibited in the future?
According to the regulation against geoblocking in online trading, the ban on discrimination will apply to the following cases: If the trader sells goods that are to be delivered to a Member State to which the provider generally offers delivery according to its website or its delivery conditions, or to are picked up at a location that the dealer has agreed with the customer, he may not serve corresponding customer requests at different prices or conditions due to nationality, residence or the location of the branch. This prohibition of discrimination on the three grounds mentioned (nationality, place of residence, place of establishment) also applies to services provided electronically, such as cloud services, data warehousing, web hosting, firewalls, and to services that the customer uses in the country in which the provider operates, for example hotel accommodation, sporting events, car rental or tickets to music festivals.

If a dealer makes offers to conclude a contract and at least one of the above-mentioned case groups is fulfilled, the dealer may not discriminate against customers in terms of price or the sales and delivery conditions on the basis of one of the three reasons mentioned (nationality, place of residence, place of business). He is also not allowed to discriminate when making payments, i.e. take measures that would similarly hinder an online transaction. For example, he may not require that the credit or debit card be issued in a specific EU member state.

##What exceptions apply?
In particular, there are the following exceptions, some of which may apply to companies. However, many legal questions will arise in the future when interpreting these exceptions. When delivering goods, the equal treatment requirement only applies to those EU member states to which the company also wants to deliver. If a company sees difficulties in an EU member state for whatever reason, it can decide not to deliver to that EU member state at all. However, he must make this clear in his offer. However, the case may be different if the customer is willing to pick up the goods from the company. The provision of different country versions of the website and the reference of a customer to a website that is appropriate for his place of residence should remain permissible, as access to the website is not hindered; However, it is more than questionable whether the prices and conditions on the respective country versions can still differ from one another if a customer makes such a reference.

The regulation against geoblocking in online trading also does not cover digital media with copyright references such as offers such as Netflix, e-books, music, films and computer games. They are exempt from the geoblocking regulation, as are services in areas such as finance, audiovisual media, transport, healthcare and social affairs. Cross-border sales to end customers may be refused here. However, an examination reservation is regulated for this. This means that after some time the European Commission will have to examine whether it is justified to maintain these exceptions, such as geoblocking on Netflix.

##Price discrimination equals price differentiation?
The geoblocking regulation will cause considerable confusion at least in the following area. Unlike price discrimination, price differentiation is not prohibited by the regulation against geoblocking in online trading. What is meant by this is not easy to understand from the wording of the regulation against geoblocking in online trading. Price discrimination should mean setting a higher price solely for one of the three reasons for discrimination mentioned (nationality, place of residence, place of establishment). However, as long as there is no such discrimination, the retailer is allowed to set its prices and sales and delivery conditions differently for its online offers, including according to EU member states and even according to areas or specific customer groups within an EU member state. Unfortunately, the regulation against geoblocking in online trading is not more specific.

Therefore, the company may offer the same product in different countries on different websites at different prices. However, according to the regulation against geoblocking in online trading, every customer must be free to choose which website they use to purchase the respective product. A customer in Italy who compares the product on the German company's Italian and Danish websites and finds that the product is cheaper on the Danish website must not be limited to the higher price on the Italian website. How exactly the distinction is made in practice between price discrimination and price differentiation under the regulation against geoblocking in online trading and where they overlap must be decided by the European Commission guidelines and the courts.

It should be noted that when trading online, every company is still free to decide into which price segments it divides its product range or whether it offers a certain product at different prices and different conditions, for example because it wants to specifically target certain customer groups in certain jurisdictions . Even after the regulation against geoblocking in online trading, every company is still entitled to tailor its offers or its general access conditions to its product range to a specific country. He may also maintain various websites for this purpose. However, retailers are still not allowed to exclude their customers from purchasing the goods for one of three reasons (nationality, place of residence, place of business).

###An example
A retailer based in Germany wants to increase its sales of fitness equipment in the DACH region and is setting up a special website with special prices for this purpose; Higher prices apply for all other countries. A customer based in Italy may not be excluded from purchasing fitness equipment online on this specific website because otherwise they would be discriminated against based on their place of residence. However, the company is entitled to limit its delivery area to certain countries; It must therefore provide appropriate information about this in its offer. However, if the customer in Italy now requests that he wants to pick up the fitness equipment in Austria, the purchase via the special website would have to be permitted again in accordance with the regulation against geoblocking in online retail. The example shows that in the future, companies will have to plan very carefully for their online offerings which price differentiation should apply and how they can best implement it without committing price discrimination at the same time.

##What awaits us?
The regulation against geoblocking in online trading is difficult because, on the one hand, entrepreneurs remain free to design their offers and choose marketing, but on the other hand, there is no distinction allowed to be made based on nationality, place of residence or place of business as to who is allowed to access the respective offer. In many cases, the courts will be concerned with which constellations there is a violation of the regulation against geoblocking in online trading and in which there is not. Companies should review their pricing and sales and delivery conditions until the regulation against geoblocking in online trading comes into force. This doesn’t just mean the “small print”, but also the entire offering on the website. If a dealer does not want to deliver to a certain EU member state, he must exclude it from his offer or design his offer accordingly. Likewise, deliveries through the back door must not be hindered by excessive shipping costs.

I also expect some legal questions regarding so-called price differentiation: To what extent can a company take advantage of price differences between EU member states? How can a company differentiate between prices without discriminating against potential customers? Do companies now have to set up “order clubs” into which they only allow certain wealthy customers to exclude other customers? Please feel free to contact us at any time.

Anwalt Gesellschaftsrecht und Handelsrecht

dr Andrelang, LL. M

Specialist lawyer for international business law

Specialist lawyer for commercial and corporate law


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