Is Geo-Blocking a bad thing?
This week the Council of the European Union posted on Facebook that, after a heroic act in favor of European consumers, they are now ending "unjustified geo-blocking in the EU". But is Geo-blocking actually a bad thing?
First of all, as a conservative libertarian, I have always defended free market and economy, which means, I defend little or absolute no interference of government in economic matters. That being said, when I first read about the EU banning (that is the word they used) geo-blocking, I had to see in details what this nonsense was about, and fortunately for you, I did. So here are my comments on this new binding legislation of the European Parliament.
When it all started?
A Commission survey found that geoblocking practices were identified in 63% of all websites assessed. It shows that in 2015, less than 40% of websites allowed cross-border customers to complete a purchase. Also, according to the European Commission, this results means less revenue for companies and less choice for consumers.
In my opinion, these results show absolutely nothing. It is very irresponsible, I would say, for the EU to assume based on a vague research, as the one mentioned in the Press Release, that the companies are doing restriction on sales merely for the purpose of creating barriers to trade. Maybe, the reason why companies create those types of restrictions is that they want to promote a certain market or increase sales from a specific target or audience. In addition, there are many small and medium companies that sell their products and services online but don't have the same appetite for bigger markets as big companies. That happens especially in Italy, Spain, and Portugal, where many local businesses sell their products online for their region only. To impose on this companies the obligation to sell and deliver their products without regional restriction is exactly the opposite of more revenue but it means more costs and less competitiveness. The market should be free to decide where they want to sell their products and how. The government should stay out of businesses, in special out of trading. In that sense, government interference is the bad thing and not geo-blocking per se.
My first question is: What is unjustified blocking? And How the legislation would address it in a non-wide definition?
According to the European Commission, the new rules define three specific situations where no justification and no objective criteria for a different treatment between customers from different EU Member States are conceivable from the outset. These are:
- The sale of goods without physical delivery. Example: A Belgian customer wishes to buy a refrigerator and finds the best deal on a German website. The customer will be entitled to order the product and collect it at the trader's premises or organize delivery himself to his home. - At first, this sounds fair for the consumer who has access to a better deal, and fair to the company that does not have the obligation to deliver in an area they don't do business.
- The sale of electronically supplied services. Example: A Bulgarian consumer wishes to buy hosting services for her website from a Spanish company. She will now have access to the service, can register and buy this service without having to pay additional fees compared to a Spanish consumer. - that's where it gets a little complicated. Ok, online services should be available to everyone because it is not impacted by logistic and operational problems, but there's a more moral question, regarding the free will of the company to decide whether it wants to sell their services to German customers cheaper than to Spanish, for example, because they are competing with a German company.
- The sale of services provided in a specific physical location. Example: An Italian family can buy a trip directly to an amusement park in France without being redirected to an Italian website.
The Commission response to my questions is:
"The Regulation does not impose an obligation to sell and does not harmonize prices. It does, however, address discrimination in access to goods and services in cases where it cannot be objectively justified (e.g. by VAT obligations or different legal requirements). The new rules will come directly into force after nine months from the publication in the EU Official Journal, to allow in particular small traders to adapt. Unlike price discrimination, price differentiation will not be prohibited, so traders are free to offer different general conditions, including prices, and to target certain groups of customers in specific territories. Moreover, traders will not be obliged to deliver goods to customers outside the member state to which they offer delivery. A clear explanation will have to be provided if a trader blocks or limits access or redirects customers to a different version of the online interface."
In the end, you can see by their response that all my concerns were somehow addressed in the legislation. They addressed it so well that in fact, I don't know why this new rule exists.
Fortunately, the Commission will carry out a first evaluation of the impact of the new rules on the internal market two years after their entry into force.
The European Parliament approved the regulation to end geo-blocking on 6 February 2018.