Europe moves to free consumers from tyranny of geo-blocking

There is nothing more effective than a hidden camera to register incredulity.

In the parlance of today's typical consumer, "geoblocking" probably doesn't mean anything and yet most online shoppers have likely fallen foul. A recently produced "candid camera" advert by the BEUC, the European Consumer Organisation, shows us how by recording what happens when shoppers are placed in absurd positions.

Picture the scene: a woman walks into a boutique deli to buy a cardamom bun but is asked for a passport or national ID before she can do so. German customers cannot buy pains aux raisins, while loaves of bread will not be sold to Bulgarians. One by one their eyes widen at the man behind the counter and his ridiculous terms and conditions. Another is handed a wildly inflated £12 bill. "Because I'm Belgian?" he asks. Well, yes.

The ad is shocking because in a “real world” context customers do not expect to be treated with wildly differing policies from deadpan retailers, and yet online this is exactly what often happens.

Yesterday, the European Commission introduced proposed measures aimed at bringing some regulatory certainty and oversight to the issue of geo-blocking, and brining online sales under the scope of Single Market rules.

There are several types of geoblocking but most relate to online trade where the would-be European consumer is blocked, to some extent, from buying goods or services from an EU-based company.

The practice can be in contravention of single-market trade rules and yet many consumers and businesses alike are not aware of them, or their rights, or when they are in breach. It is a situation the commission is now looking to remedy.

Significant research has been carried out identifying various forms of geoblocking. Today, the EU says the issue is "widespread" across Europe, both as a result of decisions taken by individual companies to limit sales and because of existing contractual barriers to cross-border trade.

The commission’s ongoing antitrust sector inquiry into the ecommerce sector – launched in May 2015, as one of a number of measures being taken to remove cross- border barriers set out in the Digital Single Market Strategy – found that, of more than 1,400 businesses surveyed, 38 per cent of retailers and 68 per cent of digital content providers said they employed some form of geoblocking.

While it is technically not allowed, consumers are only beginning to become aware of what it even means.

The Irish Competition and Consumer Protection Commission, in response to a query for this article, said it had no record of contacts from consumers on the topic and that while a "more detailed analysis may uncover a small number, this would take some time as consumers are likely not to have used the term geoblocking".

Instead, relevant complaints or queries are more likely be termed “contractual disputes or “refusal to supply”. Awareness, or a lack of, is a big part of the problem.

At a very basic level, geoblocking includes restricting access to websites across borders or rerouting people to “national” versions of the site; allowing access but denying the ability to purchase or complete an order; allowing purchases but not facilitating delivery.

Getting back to the commission’s advert, nationality or place of residence can be key. Geoblocking may involve altering prices depending on where the query is coming from or denying access to things like services and special offers.

Raising awareness of such an esoteric phenomenon really requires a marquee case. Enter Disneyland Paris, which last month capitulated to regulatory pressure to amend pricing structures that saw UK and German holidaymakers paying more for holiday packages than the French.

Consumer discrimination

The mere prospect of consumer discrimination at the magic kingdom was enough to grab headlines, and the commission had a cause celebre to spread the message of its impending crackdown.

In exchange for fair access to offers on its website, a regulatory investigation into the theme park was dropped. The probe was a test case but the PR was probably a better outcome for all concerned.

"People are not always aware or they don't want to complain or they don't want to be bothered," explains Anna Heryan at the Dublin office of the European Consumer Centre (ECC).

Heryan, a dispute-resolution adviser, headed up a 2013 report measuring experiences relating to the EU services directive and, in particular, article 20.2 dealing with non-discrimination rules. Even though it is only three years old, that original report did not contain the phrase “geoblocking”, a further sign of its nascence in online consciousness.

“Consumers weren’t really aware of the protection they can enjoy; and not only consumers but traders weren’t really aware of existing rules. So we are concerned about enforcement,” Heryan says.

“It’s really frustrating because you can go on a website and you see something that you really want to buy and when you order it you can’t get it delivered.

“It’s not fair because the clarifications they [companies] offer are very weak. There is a lack of transparency and that’s what is causing frustration.”

Awareness, enforcement, explanations – the commission has a way to go before the idea and practice of consumer rights reaches past bricks and mortar and into the digital continent.

Heryan says of particular concern in Ireland is the disparity between UK and Irish prices for consumer goods. The ECC doesn't get into specifics, partly because they don't take the "name and shame" approach – hoping instead to engage with errant companies and convince them to change their ways. And also because many of them are simply unfamiliar with the rules.

The Dublin ECC office is co-ordinating a follow-up report on customer experiences, due in October. Early indications point to about 600 consumer complaints relating to the services directive between 2013 and 2015, three times the level recorded in the initial research (200 complaints).

They do not yet know the nature of the complaints but the majority (probably at least 500) will relate to article 20.2, including geoblocking. The Commission's "three pronged" strategy to tackle geo-blocking – addressing delivery charges and their transparency, the enforcement of, and guidance on, consumer rights, and the prevention of geographical or national discrimination – will require consideration and formal adoption by both the European Parliament and Council before they can take force.

It is a situation that needs to be harnessed before it gets out of control – the estimated average annual growth rate in online sales of goods was about 22 per cent between 2000 and 2014 (this is somewhat qualified in that while more than half of EU citizens shopped online last year, only 16 per cent did so on sites based in other European countries).

Buyer behaviour varies too. In Ireland 30 per cent of online shoppers make "cross-border" purchases. This compares with 20 per cent in the UK, 2 per cent in Romania and 68 per cent in Luxembourg.

In a sense, there may be such a thing as self-imposed geoblocking. That is to say, even where consumers may be able to buy in another country, myriad factors discourage them including language barriers, logistics and distribution costs and simple “home bias”, particularly when linked to familiar, comforting consumer rights.

On the company end though, the commission found just over a third (38 per cent) of retailers collect information on user location in order to apply geoblocking techniques.

Delivery refusal

“The responses indicate that retailers with a higher turnover are more likely to apply geoblocking compared to smaller retailers,” it said. “Geoblocking most commonly takes place in the form of a refusal to deliver consumer goods to users in other member states.”

About three-quarters of retailers do not charge different prices in different countries but 12 per cent said they face contractual restrictions on the movement of goods (notably for clothes and shoes, consumer electronics, and sports and outdoors products). The e-commerce inquiry also takes into account the sale of digital content, a rapidly growing market.

In that area, the "vast majority" (68 per cent) of respondents to its survey restrict access based on location, mostly through a simple denial of access to online platforms. This is not so common in Italy, for example, but is very common in the UK.

Not surprisingly, 59 per cent of providers said they were contractually required by rights holders to geoblock their material – films, sport and TV series featuring highly – a specific aspect of the overall argument that will prove difficult to unpick.

Assessing this material on the grounds of EU competition law, the commission says, would require a “case by case” approach. Things are likely to prove more tricky to resolve than the disputed sale of a cardamom bun. But the European Commission’s efforts at breaking down digital borders, or at least understanding their complexities, could hamper the practice of geoblocking before it becomes a wider consumer experience.