Insights European Commission publishes initial findings on geo-blocking in relation to its sector inquiry into e-commerce in the EU.

In May 2015, as part of its Digital Single Market Strategy, the Commission launched a sector inquiry into e-commerce in the EU.

The aim of the inquiry was to gather data on the functioning of e-commerce markets in order to identify possible restrictions or distortions of competition, in particular in relation to cross-border online trade.

As part of the inquiry, the Commission requested information from a variety of stakeholders in e-commerce markets throughout the EU both in relation to online sales of consumer goods (such as electronics, clothing, shoes and sports equipment) as well as in relation to online distribution of digital content.

The Commission has now published its initial findings in respect of geo-blocking, i.e. business practices whereby retailers and service providers prevent online shoppers from purchasing consumer goods or accessing digital content services due to the shopper’s location or country of residence.

The initial findings show that geo-blocking is widespread in the EU: 38% of retailers selling consumer goods and 68% of digital content providers said that they geo-block consumers located in other EU Member States.

Widespread geo-blocking is, the Commission says, partly due to unilateral decisions by companies not to sell abroad but also to contractual barriers set up by companies preventing consumers from shopping online across EU borders.

As far as retailers of consumer goods are concerned, geo-blocking mainly takes the form of a refusal to deliver abroad.  Refusals to accept foreign payment methods, and, to a lesser extent, re-routing and website access blocks is also prevalent.  While the majority of geo-blocking results from unilateral business decisions of retailers, 12% of retailers said that they employ contractual restrictions to sell cross-border in relation to at least one product category.

As for online digital content, the majority (68%) of providers said that they geo-block users located in other EU Member States.  This is mainly achieved by using the user’s internet protocol (IP) address that identifies and gives the location of a computer/smartphone.  59% indicated that they are contractually required by suppliers to geo-block.  The findings show that there are significant differences as regards the prevalence of geo-blocking between different digital content categories and EU Member States.

These initial findings will feed the Commission’s on-going analysis of the sector in order to identify possible competition problems.  They will also assist in deciding what action to take to address barriers that hinder cross-border e-commerce as part of the Digital Single Market Strategy.

A more detailed analysis of all findings from the on-going e-commerce sector inquiry will be presented in a Preliminary Report due to be published for public consultation in mid-2016.  It will not only cover geo-blocking, but any other potential competition concerns affecting European e-commerce markets as well.  The Final Report is scheduled for the first quarter of 2017.  To read the Commission’s press release in full and to access the initial findings, click here.