Regulation (EU) 2018/302 of the European Parliament and of the Council of 28th February 2018, which shall enter into force on 3rd December 2018, establishes a number of measures intended for preventing unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market.
It is a well-known fact that practices exist consisting of the unjustified blocking or limiting by traders of access to their websites and applications to clients of other EU Member State wishing to carry out transactions. This is called “geo-blocking”. It can also happen when the general conditions for the sale of their products or for the rendering of their services are different depending on the circumstances. The Regulation prohibits these practices, although not completely, given that they are tolerated when an objective justification exists, including the legal provisions of the Member State in which the trader is established.
The Regulation is not all-encompassing in its effectiveness, and therefore, shall not be applicable to internal situations where the elements of the transaction are confined to a single Member State; neither shall it apply to activities comprising of rendering services such as financial, security, communication, health care and others established in Directive 2006/123.
Specifically, the prohibitions to traders as contained in the Regulation are projected in four basic areas:
a) Access to online Interfaces: the traders may not block or limit a client’s access to the trader’s online interface for reasons related to the client’s nationality, place of residence or place of establishment through the use of technological measures or otherwise. Likewise, traders may not redirect the client to a version of the interface different to that which the client has tried to access; however, an exception is established consistent with the cases wherein the client gives its explicit consent for redirection to another interface. The Regulation does not specify how such consent shall be given and how the client shall learn of the existence of this option.
b) Access to products and services: for the reasons given above, the traders may not apply general conditions to access to its products or services. This prohibition includes, among other cases, the purchase of products; the reception of services rendered by electronic means and does not consist of allowing access to works protected by copyright or allowing their use; or the rendering of services by electronic means, in a physical location in the territory of a Member State in which the trader carries out its activity. That said, this section of the Regulation contains an exception, when the measures are directed at clients from “a certain territory” or “specific groups of clients on a non-discriminatory basis”, however since these exceptions are tied to adjectives such as “discriminatory” and indefinite terms such as “specific groups”, determining whether or not an exception is warranted will have to give rise to doubts as to the scope of the prohibitions and as to the line to be drawn between permitted and prohibited activities.
c) Non-discrimination for reasons related to payment: the trader may not apply different payment conditions to a payment operation for reasons related to the client’s nationality, place of residence or place of establishment, or the location of the payment account, the place of establishment of the service provider, or the place of issue of the payment instrument within the European Union. However, this mandate shall not apply to those cases “justified for objective reasons”, where the trader may postpone the delivery of the products or the rendering of the services until he has been assured that the payment operation has been carried out correctly. Once again the lawmaker errs on the side of non-definition by not specifying or giving an accurate clue of what should be deemed an “objective reason”, in spite of defining however up to 18 legal concepts. Likewise, the Regulation authorises the trader to charge the expenses for using card payment instruments, for which the exchange rates are not regulated in EU Regulation 2015/751. It is unclear whether the trader may legally establish different payment conditions when dealing with means of payment by digital assets or digital currency, since the Regulation uses the term “currency”, an insufficient and out of date concept in the modern commercial context, which does not technically cover means of payment with digital assets or cryptocurrency.
d) Agreements on passive sales: the Regulation shall not affect those agreements which restrict active and passive sales within the scope of Regulation 330/2010 referring to transactions beyond the prohibitions seen in points a), b) and c) above. On the other hand, and in respect of passive sales, the agreements which impose obligations upon traders to act in breach of said prohibitions shall be null and void.
The Regulation establishes that each State shall designate organisms dedicated to the adequate and effective execution of the Regulation, and shall likewise issue rules containing the measures to be imposed in case of infringement, which should be “efficient, proportionate and deterrent”, terms which seem redundant given that it is unconceivable to introduce rules which are intended for or have something else as their object.
Finally, the Commission seems to be conscious of the substantial impact that the Regulation may have in the internal market and in cross-border e-commerce, but also of its practical applicability, and therefore establishes certain temporary milestones for controlling the effects of the Regulation. The Commission must issue periodic reports on such particulars, the first of which no later than 23rd March 2020, and subsequently every five years. These reports shall be presented to the Parliament, the Council and the Economic and Social Committee with a view to the modification of the Regulation.
Finally, this Regulation is presented to us as a rule that is perhaps well-intentioned but has not been thoroughly thought through , and which due to the vagueness in some of its terms and in the description of the exceptions, it may possibly generate different interpretations depending on the Member State and ultimately, confusion and legal insecurity among economic operators, aggravated by the provisional nature that the rule itself seems to suggest to us.
Eduardo Vilá
Vilá Abogados
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16th November 2018
