Explanatory Memorandum to COM(2016)289 - Addressing geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)289 - Addressing geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of ... |
|---|---|
| source | COM(2016)289  |
| date | 25-05-2016 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The Digital Single Market Strategy 1 adopted in May 2015 and the Single Market Strategy 2 adopted in October 2015 announced legislative action to address unjustified geo-blocking and comprehensively fight discrimination based on nationality or place of residence or establishment (in this explanatory memorandum for ease of reference all referred to as 'residence').
The general objective of this proposal is to give customers better access to goods and services in the Single Market by preventing direct and indirect discrimination by traders artificially segmenting the market based on customers' residence. Customers experience such differences in treatment when purchasing online, but also when travelling to other Member States to buy goods or services.
Despite the implementation of the non-discrimination principle in Article 20 i of Directive 2006/123/EC 3 ("Services Directive"), customers still face refusals to sell and different conditions, when buying goods or services across borders. This is mainly due to uncertainty over what constitutes objective criteria that justify differences in the way traders treat customers. In order to remedy this problem, traders and customers should have more clarity about the situations in which differences in treatment based on residence are not justifiable.
This proposal prohibits the blocking of access to websites and other online interfaces and the rerouting of customers from one country version to another. It furthermore prohibits discrimination against customers in four specific cases of the sale of goods and services and does not allow the circumventing of such a ban on discrimination in passive sales agreements. Both consumers and businesses as end users of goods or services are affected by such practices and should therefore benefit from the rules set out in this proposal. Transactions where goods or services are purchased by a business for resale should, however, be excluded in order to allow traders to set up their distribution systems in compliance with European competition law.
This proposal does not address pricing as such and traders consequently remain free to set their prices in a non-discriminatory manner. Nor does it address dynamic pricing, where traders adapt their offers over time, depending on a number of factors that are not linked to customers' residence.
• Consistency with existing policy provisions in the policy area
The country of origin principle under Directive 2000/31/EC 4 ("the e-Commerce Directive") has enabled traders providing information society services to operate cross-border and to provide their services on the basis of rules applicable in their country of establishment. Furthermore, the Services Directive includes rights for service recipients and seeks to ensure, under Article 20 that service providers established in the Union do not treat customers differently on the basis of their nationality or place of residence, either directly or indirectly. However, Article 20 does not sufficiently address discrimination of customers and has not reduced the legal uncertainty. As a result, it has been difficult to enforce the non-discrimination rule in practice. This proposal ensures, for the avoidance of any doubts, that in the case of conflict with Article 20 i of the Services Directive, the provisions of this Regulation will prevail.
There are also other provisions banning discrimination, including through denial of access to websites or rerouting, for reasons related to residence, e.g. in the transport sector. 5
Regarding non-discrimination in the use of payment means, Regulation (EU) No 260/2012 already prohibits traders from requiring bank accounts to be from a certain Member State for a payment to be made. This principle does not exist for other payment means. Regulation (EU) 2015/71 facilitated the use of credit cards by capping interchange fees for card-based payments transactions. Directive (EU) 2015/2366 6 also paved the way for a fully integrated market for retail payments in the EU. This Regulation goes a step further by preventing traders from applying different payment conditions based on the customer's residence. It is important to remember, however, that traders are free to decide which means of payment they accept vis-à-vis local and foreign customers.
The proposal is compatible with existing Union law on applicable law and jurisdiction 7 .
• Consistency with other Union policies
This proposal complements other initiatives under the Digital Single Market and Single Market strategies and aims to create the right conditions for improved access to services for consumers and businesses across the Union.
These initiatives include the proposals for a Directive on certain aspects concerning contracts for the supply of digital content 8 and for a Directive on certain aspects concerning contracts for the online and other distance sales of goods 9 . These proposals are aimed at achieving full harmonisation in the areas covered. Once adopted, they will further reduce differences in the consumer protection legislation of Member States, especially in relation to remedies consumers are entitled to in the case of defective goods or digital content.
Furthermore, the proposal for a 'Regulation on cross-border parcel delivery services' aims to enhance price transparency and regulatory oversight in that area. Consumers and small businesses report that problems with parcel delivery services, in particular high prices, prevent them from selling more to or buying more from other Member States. The proposal for a revised 'Regulation on Consumer Protection Cooperation' aims to improve co-operation between national consumer protection authorities and provide a stronger cross-border enforcement mechanism for consumer claims. Both of these initiatives are also scheduled for publication on 25 May 2016. The initiative on extending the Single Electronic Mechanism for VAT registration seeks to further simplify cross-border trade by reducing the administrative burden of VAT registration and payment on traders.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Article 114 TFEU. This Article confers on the EU the power to adopt measures which have as their object the abolishment of the barriers to the free movement of inter alia goods and services. Efforts made to abolish such barriers can be neutralised by obstacles raised by private parties, which segment the internal market along national borders. That is all the more problematic in the context of the internal market in a situation where the relevant laws of the Member States are insufficiently clear, uniform and effective to combat such obstacles. The proposal therefore addresses practices which hamper the free movement of goods and services within the internal market.
• Subsidiarity (for non-exclusive competence)
Access to goods and services on a non-discriminatory basis within the internal market is in essence a cross-border issue. EU intervention is necessary to prevent discrimination based on residence in cross-border commercial transactions. Legislative intervention by Member States is not sufficient to ensure non-discrimination in cross-border situations. In terms of effectiveness, only an EU intervention can ensure that conditions for customers’ access to goods and services do not vary across the Union. EU action will ensure greater legal certainty by clarifying the situations in which different treatment on the basis of residence is deemed discriminatory and therefore prohibited.
• Proportionality
The proposal aims to facilitate access to goods and services across the Union and creates, in particular, targeted obligations for traders not to discriminate between customers based on residence in specific circumstances. These obligations do not extend beyond what is necessary to solve the problems identified and are limited to the situations set out in the proposal. The proposal also increases legal certainty for traders by clarifying the existing obligations and specifying when customers should be treated equally in cross-border purchases. Moreover, the proposal does not impose on traders any disproportionate costs. Costs emerging from the proposal consist mostly of one-off adaption costs.
• Choice of instrument
While a non-binding instrument such as a recommendation or guidelines could support market developments in this area, the effectiveness of such instrument is expected to be very limited. The Commission guidelines 10 on the application of Article 20 i Service Directive of 8 June 2012 provide clarification also in specific situations, such as those covered by this proposal. However, Member States have not adapted national laws to provide more concrete rights to customers or stepped up enforcement, nor have traders altered their practice.
For this reason, only a legislative instrument can effectively address the problems identified. A Regulation is preferred, as it is directly applicable in Member States, establishes the same level of obligations for private parties, and enables the uniform application of rules on non-discrimination based on residence across all Member States.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Stakeholder consultations
A large public consultation was conducted from 24 September to 28 December 2015. Views from consumers, businesses, associations and Member States were sought. 433 replies were received. The results of the public consultation were published and are also contained in the Impact Assessment. Furthermore, in early 2015, the Commission had extensive discussions with stakeholders (consumers, businesses, consumer and business associations and national authorities), including through stakeholders workshops, to assess various possibilities for EU intervention and their impact. On 18 February 2016, the Commission held a workshop in Amsterdam to discuss the outcome of the public consultation and possible ways forward.
The vast majority of consumers experienced geo-blocking or other geographically-based restrictions when shopping in another EU country. 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. A majority of consumer and businesses consider that traders should inform customers about sales restrictions. Consumers expressed support for a policy option requiring traders to accept cross- border commercial transactions, however without an obligation for them to deliver. The majority of businesses oppose an obligation to sell and deliver throughout the EU and emphasize the importance of tailoring prices on different national markets, highlighting the need to respect their economic and contractual freedom. A large majority of all respondent groups agree that enforcement of rules and information requirements should be improved. 11
• Collection and use of expertise
The Commission launched a large mystery shopping survey, which analysed approximately 10,500 websites in the EU and modelled typical cross-border shopping situations. A Eurobarometer survey from 2016 focusing on business-to-business relations revealed that, as end users of products and services, companies face restrictions similar to those faced by consumers. The Commission has analysed a large number of complaints relating to cross-border shopping and conducted an evaluation of Article 20 of the Services Directive. In May 2015, the Commission launched a competition inquiry into the e-commerce sector, and reported its initial findings on geo-blocking in March 2016. 12 The Commission has also discussed this initiative with Member States in expert groups on the Services and the e-Commerce Directives.
• Impact assessment
An impact assessment was carried out for this proposal 13 . On 21 April 2016, the Regulatory Scrutiny Board issued a positive opinion to the resubmitted impact assessment. The comments of the RSB are taken on board in the final Impact Assessment.
The final impact assessment examines five scenarios and comes to the following conclusions: The option concerning increasing increase transparency (option 1) was considered, but will not achieve the objective on its own. Increased transparency plus a ban on blocking website access to website (option 2), combined with the consent-based solution banning of automatic rerouting was considered advantageous but it would address only a small part of the problem. The preferred option (option 3) is to combine these two elements with the definition of certain specific situations in which geo-discrimination cannot be justified (for goods, if there is no cross-border delivery by the trader; for electronically supplied services; and for services received outside the customer's Member State). Another option consisted in setting up an additional list of justifications in order to elaborate the principles of Article 20 i of the Services Directive (option 4), but that was discarded because of its complexity. The last option (option 5), which would require traders to ship tangible goods cross-border, was discarded because it would impose disproportionate costs on businesses.
• Regulatory fitness and simplification
The proposal applies to both traders and customers, i.e. consumers and businesses as end users. These categories include small and medium-sized enterprises (SMEs) and also micro-enterprises. Exempting these companies from the rules could undermine the effectiveness of the measure, as the majority of online trade in the Union is conducted by SMEs, including microenterprises in the Union.
The proposal will have positive effects on competitiveness by improving access to goods and services within the internal market for consumers and businesses. Regarding international trade, traders established in third countries are only within the scope of the Regulation to the extent they sell (or intend to sell) goods or services to customers in the Union.
The proposal concerns the offline and online environment, taking account of new technological developments where relevant, and is 'digital and internet ready'.
• Fundamental rights
The proposal respects in particular Articles 16 ('freedom to conduct a business') and 17 ('right to property') of the Charter of Fundamental Rights of the European Union. Traders are already subject to existing non-discrimination provisions under EU law. Traders can continue to decide where and when they offer their goods or services to customers. Their freedom to refuse a sales request or to apply different conditions is limited only in line with the non-discrimination provisions of this Regulation. All other reasons not to sell or to apply different conditions remain available to traders, e.g. if the product is not on stock anymore.
4. BUDGETARY IMPLICATIONS
The proposal has no impact on the European Union budget.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Regulation provides for the Commission to carry out periodic reviews of the impact of the proposal.
The Commission will monitor how the Regulation is applied by the market participants across the Union in order to ensure a consistent approach. It will also focus on the effects of the rules.
• Detailed explanation of the specific provisions of the proposal
Article 1 specifies the subject matter and the scope of the proposed Regulation. The material scope of the proposal is aligned with that of Directive 2006/123/EC to the extent possible in order to ensure consistency and maximum legal certainty for traders and customers. This means that, inter alia, non-economic services of general interest, transport services, audio-visual services, gambling activities, healthcare services and certain social services are excluded from the scope of this Regulation. The territorial scope is designed to equally include traders established in the EU and those established in third countries but selling or seeking to sell goods and services to customers in the Union. Article 1 also provides certainty to traders that compliance with this Regulation as such does not mean that the trader is directing his or her activities to a certain Member State for the purposes of Regulation (EC) 593/2008 14 and Regulation (EU) No 1215/2012 15 , which regulate matters related to applicable law and jurisdiction.
Article 2 contains the relevant definitions.
Article 3 establishes the obligations on traders not to prevent access to their online interfaces on the basis of customers' residence. It also requires the customer's consent for rerouting and requires traders to keep the version of the online interfaces that the customer sought to access before having been rerouted easily accessible. The trader is exempted from these obligations where the access restrictions or rerouting are required by law. In these exceptional cases the trader has to provide a clear justification.
Article 4 sets out three specific situations under which discrimination of customers based on residence is prohibited. The first situation concerns the selling of physical goods when the trader is not involved in the delivery of the product to the Member State of the customer. The second situation concerns the provision of 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. The third situation applies to services, which are provided by the trader in a Member State different from that of the customer's Member State of residence.
Article 5 lays down non-discrimination rules specifically in the context of payments. This rule provides that, in certain cases, traders cannot reject or otherwise discriminate with regards to payment instruments (such as credit or debit cards).
Article 6 provides that agreements with traders containing passive sales restrictions which would lead to violations of the rules set out in this Regulation are automatically void. It is designed to avoid circumvention of those rules by contractual means.
Article 7 is concerned with enforcement by Member States' authorities.
Article 8 requires Member States to designate one or more bodies providing practical assistance to consumers in relation to disputes resulting from this Regulation.
Article 9 is concerned with periodic reviews of the application of the Regulation by the Commission. Here it is specified that the first evaluation should assess, in particular, whether the prohibition of discrimination set out in Article 4(1)(b) should be extended to electronically supplied services, the main feature of which is the provision of access to and use of copyright protected works or other protected subject matter, provided that the trader has the requisite rights for the relevant territories.
Article 10 provides for two amendments of existing instruments relating specifically to the protection of consumers, namely Regulation (EC) No 2006/2004 and Directive 2009/22/EC. This would mean that this Regulation is added in the Annexes of those legal acts so that it can also be enforced by way of the measures provided in the Consumer Protection Cooperation Regulation as well as the Injunctions Directive.
Article 11 deals with entry into force and application.