Anyone who has gone through the experience of purchasing a product or a service online in Europe has gone through at least one of these experiences, or all of them: a message informs you that a product or service is not available in your country; the moment you write your country of residence, or according to your IP address, you are automatically redirected to a specific page of the merchant with an offer (and pricing) tailor-made for those from your country; your credit card is rejected as a means of payment, as it has been issued by a bank from a “foreign country” in reference to the country of the website you are visiting; or, last but not least, the delivery cost to your home country, as you only learn at the end of your purchase, is so high compared to the price of the product or service that you just let it go. And, indeed, if you feel you have been abused by the seller in any way, you don’t really complain in legal terms, perhaps beyond an angry e-mail or online review: you are convinced it would be worthless and absolutely ineffective.

All these situations have been reviewed by the European Commission (EC) as a part of its Digital Single Market Strategy. And all of them will change, and some will become illegal, when a new regulatory package composed by three separate draft Regulations makes its way to the European official bulletin and becomes European law, directly applicable throughout the continent.

The three initiatives are

• a Regulation to address unjustified geo-blocking (here);
• a Regulation on cross-border parcel delivery services (here);
• a revision of the current Consumer Protection Cooperation Regulation (here).

Geo-blocking
The geo-blocking issue was first examined by the EC from the perspective of competition law, as a result of its findings after a “sector inquiry” on e-commerce. This action by the Directorate General for Competition (“DGComp”) consisted of a mandatory questionnaire sent to hundreds of companies across the EU. The answers confirmed and provided official figures for what was an obvious consumer experience: the vast majority of consumers in the EU experience geo-blocking or other geographically based restrictions when shopping on another EU country’s website. The goods and services most affected by geo-blocking are clothing, footwear and accessories, physical media (books), computer hardware and electronics, airplane tickets, car rental, digital content such as streaming services, computer games and software, e-books and MP3s. And the same can be said of B2B relations where companies act as end users.

So, in parallel to the DGComp procedure, which is still going on and will result in a series of criteria about which agreements and licences are or are not valid under EU law (and, in particular, under the Regulation on “Vertical Block Exemption” or VBER), the EC decided this faster and more effective solution to the issue: a new Regulation preventing direct and indirect discrimination by traders artificially segmenting the market on the basis of the customers’ residence.

Indeed, other rules were supposed to have prevented or limited this practice already, such as the non-discrimination principle in Article 20(2) of the Services Directive (2006/123/EC3), the country of origin mechanism and some applicable rules in the field of payments and credit cards or in the transport sector. But it was clear that none of these were enough to actually stop discrimination based on nationality or place of residence or establishment.

So, what will be the new legal framework? The Regulation will apply to these three situations:

1. where the trader sells goods, provides services, or seeks to do so, in a Member State other than the Member State in which the customer has the place of residence or the place of establishment;
2. where the trader sells goods, provides services, or seeks to do so, in the same Member State as the one in which the customer has the place of residence or place of establishment, but the customer is a national of another Member State;
3. where the trader sells goods or provides services, or seeks to do so, in a Member State in which the customer is temporarily located without residing in that Member State or having the place of establishment in that Member State.

The material scope is aligned with that of the Services Directive. This means that this Regulation will not apply to economic services of general interest, transport services, audio-visual services, gambling activities, healthcare services and certain social services. Regarding the territorial scope, it will equally include “traders” (as online retailers and service providers are called here) established in the EU as well as those established in third countries but selling or seeking to sell goods and services to customers in the Union.

The Regulation includes a series of prohibitions regarding restrictions in access to “online interfaces”, defined as any software, including a website and applications, operated by or on behalf of a trader, which serves to give customers access to the trader's goods or services with a view to engaging in a commercial transaction with respect to those goods or services.” The following prohibitions will apply:

1. Traders shall not, through the use of technological measures or otherwise, block or limit customers’ access to their online interface for reasons related to the nationality, place of residence or place of establishment of the customer.
2. Traders shall not, for reasons related to the nationality, place of residence or place of establishment of the customer, redirect customers to a version of their online interface that is different from the online interface which the customer originally sought to access, by virtue of its layout, use of language or other characteristics that make it specific to customers with a particular nationality, place of residence or place establishment, unless the customer gives his or her explicit consent prior to such redirection. In the event of such redirection with the customer's explicit consent, the original explicit consent, the original version of the online interface shall remain easily accessible for that customer.

After this principle of “freedom of access” to any website or to access any app in Europe has been established, the text establishes a series of prohibitions. It will be forbidden to impose on customers any difference in the conditions of access to their goods or services for reasons related to the nationality, place of residence or place of establishment of the customer. These situations apply: 

a. where the trader sells goods and those goods are not delivered cross-border to the Member State of the customer by the trader or on his or her behalf;

In other words, the Regulation does not impose the obligation to deliver goods to any address abroad. But if the customer who is a resident in another country can have the goods delivered in the country of the trader (to pick them up there or to have them sent to his/her own country at his/her own cost), that cannot be prevented by the trader.

b. where the trader provides electronically supplied services, other than services the main feature of which is the provision of access to and use of copyright protected works or other protected subject matter;

Any services provided online will not be allowed to be limited to some consumers on the basis of their country of residence, with the exception of the online delivery of films, music or other protected content (for which another Regulation, on cross-border portability, imposes a limited and temporary cross-border access).

c. where the trader provides services, other than those covered by point (b), and those services are supplied to the customer in the premises of the trader or in a physical location where the trader operates, in a Member State other than that of which the customer is a national or in which the customer has the place of residence or the place of establishment.

These prohibitions are completed with a rule on electronic payments, according to which traders shall not apply different conditions of payment for any sales of goods or provision of services for reasons related to the nationality, place of residence or place of establishment of the customer, the location of the payment account, the place of establishment of the payment service provider or the place of issue of the payment instrument within the Union. This applies to electronic transactions and credit card payments materializing in a currency accepted by the trader.

Member States are requested to create structures supporting consumers in the case of a dispute in these matters. And, understandably, any agreement which may result in one of the prohibited restrictions is declared null and void, including the so-called passive sales restrictions (a concept used in competition law and referring to sales generated by general advertising or online promotion that reaches customers in other distributors’ exclusive territories or customer groups).

Parcel delivery
Except for services provided online, or intangible goods, e-commerce requires the delivery of the purchased product to the consumer. But the EC reports that even when there is no geo-blocking — that is, when cross border access to a retailer’s website in another country is perfectly possible — there are structural difficulties seriously limiting cross-border online shopping in the EU (according to the EC, in 2014, only 15% of consumers bought online from other EU countries, although 44% did so in their own country; over three quarters (84%) of online sales in 2014 came from the country in which the selling company was located). The Commission puts the main blame for this situation in the high cost of cross-border parcel delivery. In its analysis, published with these proposals, it explains that too often it is the cross-border element that increases the price and not the distance between the trader and its customer. And that, in a single market, cannot be accepted in principle.

Indeed, the prices of cross-border parcel delivery of online purchases are part of the contractual freedom of the companies providing those services and cannot be imposed by law. But the EC believes that imposing compulsory transparency to those tariffs will certainly reduce them. That is essentially what this Regulation does: it imposes a series of obligations upon companies over a certain dimension (more than 50 employees or with an establishment in more than one Member State).

Interestingly, the EC reports that an estimated 80% of addressed postal items generated by e-commerce today weigh less than two kilograms. Therefore, they can and in fact are often processed in the letter-post mail stream. For this reason, those postal items are subject to the Regulation, and those companies who are covered by the rules on universal service as imposed by Directive 97/67/EC will be forced to publish their list of tariffs on a yearly basis, as they apply to a specific set of services contained in an annex. They will also report to the EC, on a confidential basis, their “terminal rates” (payments from the originating universal service provider to the destination universal service provider for the costs of cross-border parcel delivery services in the destination Member State).

The information on tariffs will, in turn, be made public by the EC itself on a pan-European basis. The pressure imposed on providers reaches an unprecedented limit when the Regulation requires national authorities to assess the “affordability” of those tariffs applied by universal service providers.

The scope of this Regulation is limited to e-commerce and parcel delivery. This concept does not cover pure transport services (that is, it must include activities related to the clearance, sorting, transport or distribution), nor does it cover delivery of goods of more than 31,5 kg (therefore excluding logistics). 

A standard provision mandates Member States to establish effective, proportionate and dissuasive penalties for breaches of these obligations.

Enforcement of consumer protection laws
The final regulatory piece of this package is not a new Regulation, but a review of the existing Regulation on consumer protection cooperation ("CPC Regulation") of 2004. Existing national arrangements for the enforcement of the Union consumer laws are considered insufficient in a cross-border context. This is particularly important in the case of e-commerce. Effective EU-wide cross-border enforcement cooperation among public authorities is therefore crucial to prevent non-compliant traders from exploiting gaps, territorial and other limitations in the enforcement capacity of each Member State.

Therefore, this reviewed Regulation establishes mechanisms of alerts and mutual assistance among national authorities, complementing it by providing them with a new and stronger legal basis for an efficient and legally sound cooperation across borders. There is also a mechanism to tackle malpractices concerning more than two countries, whereby Member States will jointly address cases affecting consumers from those countries with the facilitation of the Commission. In the case of “widespread infringements”, there will be coordinated actions among Member States, common actions against widespread infringements with Union-dimension and concerted investigations of consumer markets. Widespread infringements with Union dimension, which are likely to harm consumers in a large part of the EU, are defined according to thresholds based on two criteria that need to be fulfilled in terms of the number of countries and population concerned.

Timing
These initiatives will now go through the ordinary legislative procedure, which may last at least a year. Then, the geo-blocking Regulation establishes a transition period of six months; the one on parcel delivery, a transition period of one year; and the one on consumer protection, no transition period at all.