European Commission finds geo-blocking to be widespread throughout the EU
30 March 2016
On 6th May 2015, the European Commission (the “Commission”) commenced a sector inquiry (the “Inquiry”) into the e-commerce sector in the European Union (“EU”). The Inquiry was instigated against the backdrop of the Commission’s Digital Single Market Strategy (which itself was adopted on the same day).
The Inquiry was launched in order to allow the Commission to gather market information and in doing so identify any possible competition issues affecting the EU e-commerce sector. The Inquiry has particularly focussed on measures taken by companies to limit cross border online trade in goods, services and digital content, which the Commission refers to as geo-blocking.
The Commission’s eventual aim for the Inquiry is to gain sufficient knowledge to understand the prevalence and nature of any barriers to e-commerce and to identify any potential competition issues. The Inquiry will also supplement actions that have been commenced within the framework of the Commission’s Digital Single Market Strategy.
The Commission published its initial findings on the issue of geo-blocking on 18 March 2016. To date, the Commission has sent requests for information to over 1,400 retailers selling consumer goods / service providers of digital content from all 28 EU Member States.
The Commission’s initial findings are that geo-blocking is prevalent in the EU with regard to both the sale of both consumer goods and provision of digital content. In relation to the sale of consumer goods, the Commission has found that geo-blocking is mainly based on the unilateral decisions of individual retailers. In relation to digital content, the Commission has found that geo-blocking mostly originates from contractual requirements from suppliers.
The Inquiry found that 38% of the responding retailers who sell consumer goods use geo-blocking in order to prevent sales to other Member States. The various forms that geo-blocking take include preventing access to the website for consumers in other Member State, refusing to deliver or accept payment and re-routing the consumer.
The Commission’s initial findings indicate that the majority of providers of digital content (68%) reported that they use geo-blocking to prevent access from users in other Member States. The most common method of geo-blocking used in this instance is by verifying the IP address of users, which provides the geographic location of the computer or smartphone. The Commission has found that 59% of those digital content service providers using geo-blocking practices in order to prevent access to digital content reported that they were contractually obliged to do so by their supplier.
The Commission notes that the number of participants is not proportionate over the EU Member States, mainly due to the varying sizes of e-commerce in each Member State. Therefore, the Inquiry’s findings are not statistically representative of the EU e-commerce sector overall.
A more detailed analysis of the Commission’s findings will be presented in a Preliminary Report due to be published for public consultation in mid-2016. The Commission’s Final Report is scheduled for the first quarter of 2017.