IMCO discusses geo-blocking

Written by Astrid Van Hecke on 27 January 2017 in EU Monitoring
EU Monitoring

On January 25, the IMCO Committee discussed the draft report by Roza Grafin van Thun und Hohenstein (EPP, PL) on geo-blocking.

Online Crackdown

Roza Grafin van Thun und Hohenstein (EPP, PL) said that only 8 percent of traders sell cross-border. One can see that the potential of e-commerce is far from being reached. There are problems in many fields: different VAT regimes, parcel deliveries, sales rules and so on. The main aim of her report is to ensure that consumers have access to more goods and services online and offline than today and that it is easier for the traders to sell to all potential EU consumer. She outlined the major changes she proposed to the Commission proposal:

She restricted the scope to consumers and business, B2B should not be regulated in this legislation, she said. She extended the prohibition of the blocking or limiting of online interphases also to online market places. Online market places should not be treated in a different way from traders. In case a consumer is redirected to another version of an interphase because of place of residence or so, the trader should provide clear and compressible information on this and the other interphase should also remain easily accessible. It is not necessary to ask explicit consent to consumers all the time, she said. She does not want to add another consent obligation when it is not necessary. Moreover, she proposed clarifications on the law applicable to the contract. Traders who sell need to know clearly what is meant by the obligation of not to discriminate. Either they need to know 28 legal different regimes or we expect them simply not to refuse selling to other Member States and treat those consumers as if they were domestic ones. She said that she prefers the second option. Obliging the traders to sell to 28 different regimes would be burdensome and could have negative effect on the single market. In most cases, when traders are approached by consumers of a Member State, the trader would refuse to sell. With the initial text they would be obliged not to geo-block and they would need to be prepared to apply 28 regimes. Consequently, she proposed that whenever a trader puts the general conditions on the website to which Member State he/she sells and if the consumer still wants to buy, then the trader will sell according to the trader’s domestic rules. This should only apply in cases when the trader does not offer cross-border delivery, and as described in article 4 of the regulation. In all other situations, where the trader targets consumers on different domestic markets, the seller will need to apply the law of the consumer’s Member State.

She continued by saying that she introduced non-audiovisual copyright services such as music only if the trader has the required rights. She stated that they will get rid of geo-blocking not related to copyright. In terms of those related to copyright, they need to try to solve the problem in other pieces of legislation. Finally, in terms of audiovisual services, she decided not to tackle this problem in this regulation. However, she asked the Commission to prepare a revision of this regulation within 2 years of the entry of force of the geo-blocking regulation. She put many clarifications in the text. She also introduced the term of temporary location and unjustified geo-blocking instead of geo-blocking. She explained that she also organised a consultation with Polish consumers who encountered geo-blocking. 59 percent of respondents said that it should be the law of the trader’s Member State that should be applied when purchasing goods and services in the EU. 40 percent said that it should be the law of the consumer’s Member State and 70 percent said that the laws should be made more similar to each other. She concluded by stating that one must not forget that the world of consumers and businesses are one.

Virginie Rozière (S&D, FR) argued that some people want to solve problems that are still structural problems in the European market, namely its fragmentation in several areas. This regulation will not be able to solve this. Businesses face this fragmented market and one has to take account of this reality. She said she understands the intentions of the rapporteur wanting to shed light on many points, but in some cases she is not sure that the objective is being achieved. In some amendments one might have difficulties and she presented which ones and why.

First, the applicable legislation and the competent jurisdiction: Rome I and Brussels I The businesses are concerned because they might find themselves in a situation of legal uncertainty. Cross-border trade exists and the provisions are already supposed to be applied now. The regulation clarifies the fact that the question of geo-blocking has to be dealt with independently from the criteria. Whether or not there is geo-blocking will not decide what the applicable law is. The provisions of Rome I and Brussels I will continue to prevail. She does not think that amendments 10 and 76, that are supposed to reassure them about the applicable law, reach their objectives. In terms of Rome I and Brussels I, the basic principles is the freedom of contracting. The company can choose the legislation under which it will be governed. The consumer is the weakest link and should be protected. It is not a B2B relation, but an imbalanced relation. Certain specific provisions for the protection of consumers have to be applied. If we apply these two amendment and if the consumer is in a Member State indicated by the trader as specifically targeted, then he/she is protected by the provisions but if he/she is in a Member State which is not specifically targeted by the trader, even if we look at the criteria in case law, then he/she is not protected. Therefore, she thinks that they are stepping backwards in terms of consumer protection and that is not one’s objective.

Second, concerning the scope, she stated that she is opposed to integrating electronic services which give access to works protected by copyright. She said that amendments 19 and 34 are a problem because cultural works function according to a special economic model and are very closely linked to territoriality. These are works that are intangible. Through licences, one creates value and part of the value is part of the chain that creates the cultural value. She said she wants to have a specific discussion on copyright and a horizontal legislation which abolishes the mechanisms to support creative work should be avoided, especially if there is no impact assessment. Her third concern is about competition law and passive sales. At present, there exemptions to competition law that are authorised. She is worried to limiting these exceptions and the restrictions to passive sales. The present state of exemptions ought to be kept. She referred to amendments 28 and 78. As for the single price for books, she explained that there are some Member States that want to maintain literary production and they want a single price for books. This is to support creativity. She referred to amendments 63 and 25 in this respect and said that they seem to threaten that. Finally, on the redirecting of websites, she agrees with the Commission’s point of view on that.

Anneleen Van Bossuyt (ECR, BE) explained that she had concerns over a whole range of things before the draft report was tabled. However, now she is more positive given the work done by the rapporteur. The report is a step in the right direction. Compared to the text of the Council, she said she saw a whole range of different points they moved closer to. The whole discussion about active and passive is very important. She is happy with the changes made by the rapporteur and the suggestions made so as to give retailers and businesses the opportunity to ensure that rights are protected. When it comes to re-routing, she believes that the rapporteur took a good approach. It is not appropriate to overburden the consumers with pop-ups and ask for many agreements. Neither the business nor the client would benefit from that. She asked for some clarification in terms of article 3.2., when she refers to comprehensive information. What does the comprehensive mean in that context? She said that her greatest concern is the copyright and authors’ right in the scope of the report. She does not think there has been an impact assessment on the possible consequences of this. It should be possible to have different conditions, for a regional territory or specific group of customers for instance. She pointed out that it is up to businesses to be able to set the sales price. We really want to ensure that we avoid the negative impacts of that, she said. The area of copyright should not be included. She concluded by saying that she is positive in general vis-à-vis the proposal that is currently on the table.  

Dita Charanzová (ALDE, CZ) stated that her group wants to go further. On the scope, they do not accept that the exclusion list of the services directive should be the exclusion list in this case. At least audiovisual works and transport should be included, she said. The ALDE group wants to do it now. If transport is excluded, then one ends up with a situation where online travel agents are covered but not the websites of airlines. As for audiovisual works, that is what people expect to be dealt with when speaking about geo-blocking. If audiovisual works are not included, then the citizens will be disappointed. She said she shares Ms Rozière concerns in terms of article 3 and the new version of redirecting. It is wrong to assume that consumers want to be redirected. The Council text is better in this respect. In terms of article 4, she said that copyright should be in article 4. However, they would table a recital to make it even more clear. She also mentioned that online forms need to accept foreign addresses, phone numbers and so on. Concerning article 6, she said they support her text and have difficulties with the Council text. If someone is willing to drive to Paris to pick up a parcel, then no one should prohibit this person from doing so. She warned against creating a loophole for Rome I.

Dennis de Jong (GUE/NGL, NL) pointed out that in the Resolution on the Digital Single Market, there was the safeguard that retailers that have web shops and prefer to sell to consumers close to their shop should not be part of the geo-blocking regulation as such. When comparing this to the specific aims in the current draft report, he said that it becomes very complicated for small entrepreneurs to know that he/she is safeguarded. He said that the consumer would still be able to understand that the consumer has to take care of the delivery. At the same time, when one has a problem with a product then one has to send it back to the Member State of the trader and then the guarantee kicks in. Consumers, unless the product is very expensive, will not use that sort of safeguard. Are we not overcomplicating things, he asked. Can we not have a more general exclusion of traders that are local and do not want to do business in the whole of the EU? He is not convinced that it could not be simplified. His group shares the concerns expressed by Virginie Rozière in terms of copyright. Copyright righted material cannot be easily included in this instrument. He mentioned that he was approached by bigger retailers that they want to be included in this regulation in terms of B2B. He also pointed out that the rapporteur says that temporary location is introduced, which he likes, but at the same time purely internal situations are excluded.

Julia Reda (Greens/EFA, DE) said that the report is an excellent starting point. As for the applicable law, she said that they do not want to create a situation whereby a company which has been geo-blocking and has no intention to direct their business to other countries would have to deal with additional obligations. However, the proposal on how to address this creates a loophole for those who do currently target other countries and do not geo-block. All they would have to do to no longer comply with the consumer law of other countries is to put a statement on the website. She would prefer the Commission proposal as a basis and define the case law more precisely. She welcomes the extension of the scope regarding copyrighted work. She pointed out that it has to be made clear that the question of whether the business model in the copyright sector is based on licensing and granting the rights on a territorial basis is not included in the geo-blocking regulation. The regulation applies only if the seller has the license for the country. If the seller does not have the licence, then the regulation does not apply.

She argued that she would go further as ALDE suggested. One has to recognise that most people refer to audiovisual content in terms of geo-blocking. She added that the Commission already did some legwork on this in the Impact Assessment for the portability regulation. She pointed out that sports is still excluded from the draft report. She explained that only the premium sports are usually licensed on a territorial basis. There are many other sports where territorial licenses is relatively uncommon. We could say that if the trader has the licence, then the regulation applies. In videogames and e-books territorial licensing is very uncommon. There is no reason to exclude it. In the music sector multi-territorial licensing is becoming more common. As for the audiovisual sector, the Commission has found that 40 percent of geo-blocking that takes place is not because of copyright restrictions. She regrets that they would not get rid of all geo-blocking, if the approach of the rapporteur is followed. However, they would be able to address 40 percent of geo-blocking in the audiovisual sector without changing the licensing model in the audiovisual industry. In addition, she wondered why B2B is excluded. She argued that it would be more complicated for a business to have geo-blocking for B2B but not for B2C. Concerning website rerouting, she argued that it might not be completely transparent to the consumer, especially when travelling. Consequently, they might have to think more about how to make this more consumer friendly.

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Astrid is Senior Monitoring Consultant at Dods EU Monitoring

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