The EU puts an end to geoblocking and the discrimination in online sales

Contact: Patricia Bonet Macias, Net Craman Abogados
Posted Apr 1, 2019

In recent years, a large number of companies that act, including in the framework of the European Union, have conducted a use of discrimination in their online sales; for example, establishing different purchase prices for users depending on their country of residence. That is why, as a result of this reality, a growing amount of geoblocking has been taking place.

As an example, companies limit their product catalogues that the user can access, they establish different price policies in the country where the seller is from, the user is limited without being able to access the web page of the multinational parent company and are redirected to the subsidiary company’s website. There are also limitations in the payment method since the user cannot access the same as those that are enjoyed by the users with the same residence as the seller, as well as the limitations in the delivery of products and services are always at the expense of the user with a different nationality to the seller.

As a solution to this geoblocking, on the 3rd December 2018, the new Regulation EU 2018/302 on measures to prevent unjustified geoblocking and other forms of discrimination due nationality, place of residence or place of client establishment in the interior market began to be applied.

The purpose of the Regulation’s approval is to implement the well-known strategy for the Single Digital Market, strengthening the principle of free movement of goods and free trade, offering the same treatment to all EU clients, given that at, present the opposite is served.

From now on, the traders that act online cannot block access on purchasing websites, they will have to guarantee access to all users on equal terms, as well as allowing the same payment methods in all of the EU, to allow foreign invoicing addresses and not to just some EU countries. However, in relation to delivery addresses it will be allowed to use a limited list of countries, corresponding to those which the vendor actually makes shipments. Additionally, one might think that the Added Value Tax may also be the subject of discussion and that the countries should adjust to a universal rate so that there is no such difference in prices. Nothing could be much further from the truth, what comes to discuss the new regulation is the price regardless of the tax that establishes the internal regulations of each State, being able to fix what is agreed.

It would be worthwhile to highlight that; the consequences are that in the next few months we will be able to see the results of the approval of this Regulation are relevant. As it happens, a few weeks ago, we found out about the fine that the European Commission had imposed on the clothing company GUESS for an amount of 39.8 million euros. The performance of this company has been considered a geoblock which violates the new Regulation, amongst other things for example, having an anti-competitive behaviour, making restrictions in the selective distribution contracts, for having established higher prices in Central and Eastern European countries, reaching 10% higher than the rest and they may have even distorted the prices. Such is the case that it may result in damage claims on behalf of the affected companies or people whilst the evident limitations lasted (2014-2017).

From this perspective, the traders that act online must meet the new Regulation since, it is envisaged that within two years from its vigorous entry, the European Commission will do the first evaluation of its impact in the interior market.