EP votes on the geo-blocking regulation

After a political agreement on the proposed regulation prohibiting unjustified geo-blocking had been reached in November last year, there was a general expectation that new rules will formally be adopted in early 2018. The first step was made today by the European Parliament, which approved the proposal in a plenary vote.

The new rules define three specific situations in which a different treatment of customers (consumers and businesses as end-users) from different Member States is considered unjustified and is therefore prohibited. These include:

• The sale of goods without a request to deliver them to a territory in which the trader does not operate (the customer orders a product and collects it at the trader's premises or organises delivery himself);
• The provision of (some) electronically supplied services, such as cloud, data warehousing, website hosting;
• The provision of services which are received by the customer in the country where the trader operates (e.g. hotel accommodation, car rental).

In the abovementioned circumstances customers across the EU should be able not only to access online interfaces directed to customers from other Member States and compare a wider range of offers, but also finalise transactions on conditions offered in those territories.

Contentious issues

An element which caused controversy from the very beginning related to the interface of the geo-blocking proposal with the provisions of private international law. In particular, concerns were raised that traders who decided to serve a consumer from another Member State, in compliance with new rules, would be considered to "direct their activities" to the country of that consumer, within the meaning of Article 6 of  Rome I and Article 17 of Brussels I regulation (recast). The text adopted today includes additional wording which aims to mitigate this risk (recital 13).

An even more controversial topic referred to the material scope of the proposal, especially the treatment of electronically supplied services providing access to copyright-protected content. Should, for example, Belgian customers be allowed to buy their Netflix or Spotify subscription for the price offered in the Polish market? This raised concerns not only about price arbitrage, but, more importantly, about the impact of such a solution on the territorial licensing schemes. And these points of criticism were even stronger than in the previous discussions on cross-border portability.

At this point it is worth recalling that audio-visual services were kept out of the scope of the Commission's proposal from the very beginning, even if, at the internal level, this choice was not entirely unanimous. The decision was explained by the need to establish consistency between the scope of the new measure and Article 20 of the Services Directive. Besides, the issue of digitally distributed AV content was to be addressed by the copyright package. 

Limitations of the scope of the act adopted today do not stop here, however. No dramatic change of the status quo is also expected with respect to services providing access to other copyright-protected content such as music (e.g. streaming services), literary works (e.g. e-books) or video games. Services of this kind have technically been kept within the remit of the act (thus falling under the provisions on automatic re-routing or payment methods), but have been excluded from its core access provision (Article 4). 

Concluding thought

The compromise reached in November and, consequently, the final draft must come as a relief to the creative industry. What is left for those hoping for a border-free access to copyrighted works - at least to the extent allowed by existing licensing arrangements - is a "review clause" requiring the Commission to assess, after two years, if the scope of the act should be extended. Until this happens, one can be advised to rather focus on the impact of the geo-blocking regulation - as it currently stands - on the e-commerce market (e.g. Rome&Brussels I litigation, developments in package delivery) as well as the on-going copyright reform, particularly the proposal on online transmissions.

The proposed geo-blocking regulation is now awaiting a vote in the Council and is expected to come into force later this year.

More consumer access to cross-border online services

The European institutions reached an agreement on further EU approach to "unjustified" geoblocking of online consumer products or services (EU negotiators agreed to end unjustified geoblocking). What does it mean "unjustified"? First, it would apply to situations where traders prevent consumers from other Member States to conclude online contracts for the sale of goods, even if traders are released from the obligation of delivery to the consumer's Member State. If the consumer undertakes to pick up the good at the trader's premises or arrange the delivery himself, preventing the sale of goods contract from being concluded based on the geographical location of the consumer seems unjustified. Also, when consumers wish to purchase electronically supplied services (such as hosting services for their websites), they should not be required to pay additional fees than consumers located in the same Member State as the service provider. The same should apply to the situation when the services are provided in a specific physical location, as it should not matter then who purchases these services. Does this mean that traders will now have to sell cross-border? No, there won't be an obligation to sell to consumers from other Member States, but rather an obligation not to discriminate against them, without a justification. It could be seen as unjustified to require consumers to pay only with the debit or credit card issued in the Member State of the trader's location. The plan is for the new Regulation to enter into force within the next year.

Modernising copyright: watching Netflix while abroad

Yesterday, the Council and the Parliament have informally agreed on new rules that will allow subscribers to paid online content (online music, games, films and TV shows) in any Member State to access this content in another Member State - while they are temporarily visiting it (also when they travel for business, so this protection would be applicable not only to consumers). Readers of this blog who travel abroad have probably been frustrated by geo-blocking rules (set up to protect exclusive licensing) that often prevented accessing online content when abroad. Free of charge services would still be excluded from the scope of these new rules, which means that such service providers will have a choice whether to enable their customers to access their services cross-border (Accessing online films and TV while abroad: deal with Council). The intention is for these rules to start applying as of the beginning of 2018 (DSM: EU negotiators agree on new rules allowing Euorpeans to travel and enjoy online content services across borders).

Third DSM package adopted

On  25 May 2016 the European Commission adopted an extensive set of measures announced in the Digital Single Market Strategy.

The e-commerce package consists of:

1. Proposal for a regulation on addressing geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market
2. Proposal for a Regulation on cross-border parcel delivery services 
3. Proposal for a revision of the Consumer Protection Cooperation Regulation 
4. Guidance on the application of the Unfair Commercial Practices Directive

The content package includes:

1. Proposal for a revised Directive on audiovisual media services
2. Communication on online platforms and the Digital Single Market

Furthermore, on 2 June a communication on a European agenda for the collaborative economy was presented.

A more detailed description of the adopted measures with particular relevance to consumer law will follow shortly. 

First data on geo-blocking practices in the e-commerce sector published

On 18.3.2016 the European Commission (DG COMP) published an issues paper presenting its initial findings on geo-blocking practices in the e-commerce sector. The sector inquiry conducted by Directorate-General for Competition is a part of a wider initiative on geo-blocking, which was already announced in the last year's communication on Digital Single Market. 

The recently published document is based on responses of more than 1400 companies involved in online sales of consumer goods and in the supply of digital content. Nearly three quarters of replies come from online retailers. Questionnaires were also sent to operators of online marketplaces, price comparison tools and payment systems. Data obtained from digital content providers (broadcasters, electronic communications companies) were analysed separately. 

For purposes of the study, geo-blocking is interpreted broadly and refers to "commercial practices whereby online providers prevent users from accessing and purchasing consumer goods/digital content services offered on their website based on the location of the user in a Member State different from that of the provider". It can take a variety of forms such as "(i) preventing the user from accessing the website, (ii) automatically re-routing the user to another website, (iii) refusing payment or (iv) refusing delivery". However, it does not include geo-filtering, which consists in "offering different terms and/or conditions depending on the location of the user".

Initial findings reveal significant differences with regard to consumer goods and online digital content. In online sales of tangible goods geo-blocking appears to be less widespread and usually stems from a unilateral business decision. According to respondents, geo-blocking in this field is mostly manifested by a refusal to deliver abroad. Conversely, complete denial of access to digital content based on IP verification is by no means unheard of, and is often required contractually. However, it is important to note that most restrictions in this field are imposed in licensing agreements with right holders and therefore cannot be regarded as illegitimate per se.

The discussed issues paper only gives a partial picture of the ongoing sector inquiry and we still have to wait at least a couple of months for a more detailed analysis in the preliminary (mid-2016) and final report (early 2017). It goes without saying that the current wording warrants further elaboration. The part on digital content only deals with audio-visual and music content, while computer games, software and books (including e-books) are analysed in the chapter on consumer goods. Reasons for such a differentiation are not explained, though. The interface between competition law and intellectual property also deserves a more in-depth evaluation. Judging by the cautious wording of the present document, spectacular antitrust interventions in the field of digital content do not seem very likely. At the same time, it is to be expected that the e-commerce inquiry will constitute a source of information for other Directorates-General, which are currently working on a legislative proposal on geo-blocking (scheduled for mid-2016). There seem to be a common understanding that the principle of non-discrimination laid down in Article 20 of the Services Directive does not offer consumers an effective tool of protection and is barely enforced in practice (see e.g. BEUC response to public consultations). Be it as it may, developing an adequate policy solution is a challenging task, which requires a careful examination of numerous subtle interconnections with existing and upcoming legislation. It remains to be seen if the broad approach, apparently favoured by the Commission, will allow to strike a fair balance between the competing interests involved. How the subject of copyrighted digital content will be addressed in the geo-blocking proposal is one of many interesting questions to follow.

A look into the future: What does 2016 hold for consumer law?

There is no doubt that 2015 was quite a busy year for the European institutions. In the light of considerable social, economical and political challenges faced by the EU these days, the European Commission under the presidency of Jean-Claude Juncker proclaimed that it would carefully choose its priorities and focus on feasible initiatives. While it is still too early to predict whether this approach will go beyond mere declarations, an overall policy stance can already be inferred from first two work programmes published under rather high-sounding titles: A New Start and No time for business as usual. Key objectives within ten priority areas have been defined and measures to be taken in order to reach them were announced. But what does this actually mean for consumers?

From the consumer law perspective three areas deserve particular attention:

• Measures designed to create a connected Digital Single Market
• Initiatives aimed to further deepen the internal market
• EU international trade policy, especially the Transatlantic Trade and Investment Partnership (TTIP), which is currently being negotiated by the EU and the USA

As we have already reported, first three legislative proposals implementing the Digital Single Market were presented on 9 December 2015. The first one deals with a fully novel issue of digital content (e.g. streaming music, purchasing e-books), while the second one builds upon the existing regulatory framework for online sales of goods. Both measures are seeking to fully harmonise several core aspects of online business-to-consumer sales of tangible goods and supply of digital content, including rules on pre-contractual information duties, consumer’s right to withdraw from the contract, conformity of goods and digital content as well as relevant remedies. Furthermore, a proposal for a regulation on ensuring the cross-border portability of online content services in the internal market was adopted.

In 2016 the Commission will surely try to further proceed with these measures. Its new approach to the European law-making shall ensure that the Digital Single Market strategy does not share the fate of the Common European Sales Law. Efforts are made to secure a common understanding with the European Parliament and the Council on key initiatives already at an early stage. Despite public concerns about the impact of such arrangements on the democratic process, an inter-institutional Agreement on Better Law-making has recently been finalised. Time will tell whether this approach will produce the desired results. In any case, it seems unlikely that the flagship measures implementing the Digital Single Market, which are by no means uncontroversial, will come into force in the nearest months. Also the Dutch Presidency in the Council seems to be taking a ‘wait and see’ attitude to this issue.

2016 will therefore rather be a time of intense discussions, public consultations and further legislative proposals. We may, among other things, expect a proposal aimed to bring an end to unjustified geo-blocking as well as other forms of discrimination on the basis of residence or nationality. Detailed information on the envisaged copyright reform should be presented shortly. Of particular interest are also measures, which have already been adopted in the previous years – such as Regulation 524/2013 on online dispute resolution for consumer disputes – or those at an advanced stage of adoption. It is worth noting that the European ODR platform has lately become operational and will be made available to consumers and traders on 15 February. While a faster and easier, Internet-based mechanism of resolving disputes between consumers and traders sounds like a good idea, much still needs to be done to ensure its reliability and promote its use among both parties to the contract. Furthermore, in the following months we will almost certainly witness a long-awaited reform of EU data protection law. Following the agreement reached in trilogue last month, it appears very likely that the final texts of General Data Protection Regulation and Data Protection Directive will be formally adopted in the first quarter of 2016.

From the consumer law perspective, particular attention should also be paid to the Commission’s Regulatory Fitness and Performance programme (REFIT), i.e. a systematic analysis whether the existing regulatory framework is fit for its purpose. According to the recently published roadmap, a substantial part of EU consumer law will be subject to evaluation within next 18 months, namely:

• Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (Unfair Commercial Practices Directive);
• Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (Sales and Guarantees Directive);
• Directive 93/13/EEC on unfair terms in consumer contracts (Unfair Contract Terms Directive).
• Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers (Price Indication Directive);
• Directive 2006/114/EC concerning misleading and comparative advertising (Misleading and Comparative Advertising Directive);
• Directive 2009/22/EC on injunctions for the protection of consumers' interests (Injunctions Directive).

Additionally, Consumer Rights Directive 2011/83/EU and Regulation 2006/2004 on consumer protection cooperation are also expected to undergo separate evaluations in the coming months. During the first semester of 2016 public consultations on application of consumer legislation in Member States will be launched, which might well be a spark for another heated debate, reminiscent of the time when the Common European Sales Law was still on the agenda.

Without doubt 2016 will be a very exciting year in consumer law. Like every year, we will keep you posted about the most significant developments, so stay tuned!