• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
  • Our team provides practical and commercial advice founded on years of experience and technical know-how to technology and digital media companies that need to be alert to the rules and regulations of competition law.
  • Our Corporate Practice has a reputation for delivering sound legal advice, backed up with extensive industry experience and credentials, to get the best results from technology and digital media transactions.
  • In the fast-changing world of employment law our clients need practical, commercial and cost-effective advice. They get this from our team of employment law professionals.
  • Our team of leading IP advisors deliver cost-effective, strategic and commercial advice to ensure that your IP assets are protected and leveraged to add real value to your business.
  • Our litigation practice advises on all aspects of dispute resolution, with a particular focus on ownership, exploitation and infringement of intellectual property rights and commercial disputes in the technology sector.
  • We have an industry-leading reputation for our outsourcing expertise. Our professionals deliver credible legal advice to providers and acquirers of IT and business process outsourcing (BPO) services.
  • We work alongside companies, many with disruptive technologies, that seek funding, as well as with the venture capital firms, institutional investors and corporate ventures that want to invest in exciting business opportunities.
  • Our regulatory specialists work alongside Kemp Little’s corporate and commercial professionals to help meet their compliance obligations.
  • With a service that is commercial and responsive to our clients’ needs, you will find our tax advice easy to understand, cost-effective and geared towards maximising your tax benefits.
  • At Kemp Little, we advise clients in diverse sectors where technology is fundamental to the ongoing success of their businesses.They include companies that provide technology as a service and businesses where the use of technology is key to their business model, enabling them to bring their product or service to market.
  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
  • Acting for market leaders and market changers within the media industry, we combine in-depth knowledge of the structural technology that underpins content delivery and the impact of digitisation on the rights of producers and consumers.
  • We understand the risks facing this sector and work with our clients to conquer those challenges. Testimony to our success is the continued growth in our team of professionals and the clients we serve.
  • We advise at the forefront of the technological intersection between life sciences and healthcare. We advise leading technology and data analytics providers, healthcare institutions as well as manufacturers of medical devices, pharmaceuticals and biotechnological products.
  • For clients operating in the online sector, our teams are structured to meet their commercial, financing, M&A, competition and regulatory, employment and intellectual property legal needs.
  • Our focus on technology makes us especially well positioned to give advice on the legal aspects of digital marketing. We advise on high-profile, multi-channel, cross-border cases and on highly complex campaigns.
  • The mobile and telecoms sector is fast changing and hugely dependent on technology advances. We help mobile and wireless and fixed telecoms clients to tackle the legal challenges that this evolving sector presents.
  • Whether ERP, Linux or Windows; software or infrastructure as a service in the cloud, in a virtualised environment, or as a mobile or service-oriented architecture, we have the experience to resolve legal issues across the spectrum of commercial computer platforms.
  • Our clients trust us to apply our solutions and know-how to help them make the best use of technology in structuring deals, mitigating key risks to their businesses and in achieving their commercial objectives.
  • We have extensive experience of advising customers and suppliers in the retail sector on technology development, licensing and supply projects, and in advising on all aspects of procurement and online operations.
  • Our legal professionals work alongside social media providers and users in relation to the commercial, privacy, data, advertising, intellectual property, employment and corporate issues that arise in this dynamic sector.
  • Our years of working alongside diverse software clients have given us an in-depth understanding of the dynamics of the software marketplace, market practice and alternative negotiating strategies.
  • Working with direct providers of travel services, including aggregators, facilitators and suppliers of transport and technology, our team has developed a unique specialist knowledge of the sector
  • Your life as an entrepreneur is full of daily challenges as you seek to grow your business. One of the key strengths of our firm is that we understand these challenges.
  • Kemp Little is trusted by some of the world’s leading luxury brands and some of the most innovative e-commerce retailers changing the face of the industry.
  • HR Bytes is an exclusive, comprehensive, online service that will provide you with a wide range of practical, insightful and current employment law information. HR Bytes members get priority booking for events, key insight and a range of employment materials for free.
  • FlightDeck is our portal designed especially with start-up and emerging technology businesses in mind to help you get your business up and running in the right way. We provide a free pack of all the things no-one tells you and things they don’t give away to get you started.

Block party - an end to online consumer discrimination?

Executive summary

  • Following publication of proposals in 2016, the European Parliament, Council and Commission have reached political agreement to end so called geo-blocking practices for online consumers of products and services within the EU
  • In high level terms, geo-blocking includes any measures to restrict or redirect online consumer access on the basis of nationality, residence and/or temporary location
  • The new rules seek to enhance consumer access and encourage pan-EU cross shopping through removal of barriers to access, and closer harmonisation of terms of use, across the Union
  • The European Commission intends to publish a draft Regulation in early 2018, with the finalised text to become directly applicable across the Union, nine months later
  • Developments in this area will be of key interest to all online retailers of goods and services, operating within the Single Market

In brief

If the EU is a true Single Market, findings of a late 2016 European Council (EC) study suggest the Union has some way to go in removing cross-border trade barriers, at least within the online space.

Geo-blocking, or the practice of consumer discrimination in respect of access and/or price based on a customer’s nationality, residence and/or temporary location remains, by the EU’s own figures, a feature of some 63% of ecommerce sites 1.  Concerns abound across Member States, that these types of access restrictions severely curtail necessary competition, and stifle critical innovation in an EU Single Market eager to address an increasingly digital customer base.

In November 2017, the EC confirmed an agreement to ban unjustified geo-blocking, paving the way for draft regulation in this space. Despite 2018’s likely lively European legislative agenda, the EC has made clear its intention to have draft regulation together towards the start of the year, with finalised text becoming applicable nine months later.

Developments in this space are of key (and pressing) interest to all online retailers of goods and services, operating within the Single Market, and come at a time of dramatically increased transparency requirements for online retailer assessment and profiling of customers (against characteristics including those above) ahead of May’s General Data Protection Regulation (GDPR) introduction.

Background

Introduction of geo-blocking regulation closely follows recent Union efforts to smooth some of the rougher edges of the cross-EU consumer experience (similar moves including those to end cellular roaming charges and legislation to provide cross-border portability of online subscriptions and access to TV programmes). Efforts to alleviate online commercial friction represent a key pillar of the Union’s broader Digital Single Market (DSM) strategy. 

Whilst existing EU law (in the shape of Directive 2006/123/EC) provides general, non-specific prohibition of consumer discrimination, the EC appears to have taken the view that online leadership in this area requires more bespoke (and correspondingly direct) legislation. 

Cross shopping/ cross-border

Whilst a formal draft remains forthcoming (an early 2016 Proposal for Regulation can be accessed here), the EC has signalled the draft Regulation will 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”, being:

  • The sale of goods (without physical delivery). e.g. an Austrian consumer wishing to purchase running shoes, finding the most attractive deal (for collection) on a German website. 
  • The sale of electronically supplied services. e.g. a French consumer wishing to acquire hosting services for a website from an Italian company. 
  • The sale of services provided in a specific physical location. e.g. a Spanish family wishing to purchase theatre tickets for a performance in France, without being redirected to a Spanish website.

Importantly, the draft Regulation will not require a retailer to sell a product or service, and will not directly mandate price harmonisation. The draft Regulation will however target and prohibit retailer restrictions which cannot be justified by other, objective requirements (e.g. taxation or local laws). 

In addition, the draft Regulation will attempt to ease the extent to which EU consumers may make cross-border use of credit cards, by preventing retailers from applying different payment conditions based on a customer's residence. In effect prohibiting a retailer (under certain circumstances) from accepting only credit card payments from specific Member States. Simplifying (and reducing the cost of) cross-border credit card payments, follows recent EU moves to cap interchange fees for card-based payments (Regulation 2015/751), and is again indicative of a clear direction of travel, under the DSM strategy. This comes in addition to rules introduced under PSD2 (Directive 2015/2366), which, from January this year, banned credit and debit card surcharges for consumer transactions.

Whilst developments in relation to credit cards payments are (and will likely continue) to prove significant here, it should be noted that the draft Regulation will not represent a blanket requirement for retailers to accept any credit card transaction, under any circumstances.  Retailers will continue to be free to decide which means of payment are acceptable, in relation to local vs. other Member State customers. 

Impact for retailers – physical goods

Whilst geo-blocking undoubtedly represents a significant compliance consideration, retailers of physical goods should be reassured that neither 2016’s proposal (nor likely 2018’s draft Regulation) make any attempt to:

  • directly require pricing harmonisation; or
  • require a retailer to ship products cross-border (if this is not a service routinely offered).

The forthcoming draft however will:

  • prohibit retailers from denying access or rerouting a customer to a specific regional iteration of an ecommerce site, based purely on factors of nationality, place of residence or geographic location (blocking/ rerouting on other grounds, such as relevant local laws and restrictions will remain valid); and will
  • oblige retailers to permit customers from any EU Member State to purchase products from iterations of the retailer’s sites based in any other EU Member State (unless, as above, other relevant local laws or restrictions apply).

In practical terms, this raises an interesting dilemma, cross-border shipping of physical product is not in-and-of itself required under the Regulation, yet a consumer cannot be prohibited from making a cross-border purchase. Therefore, whilst an Austrian customer may be able to purchase running shoes from a German website, how, in practice, would these goods be obtained?

The EC takes a pragmatic approach here, indicating “the customer will be entitled to order the product and collect it at the trader's premises [if this is a service offered by the retailer] or organise delivery himself to his home [through his or her own shipping arrangements]”. In practice therefore, whilst a committed cross-border cross-shopper could purchase products (sporting or otherwise) from a Member State of choice, practicality (and likely cost) may prove significant barriers.

Interestingly, logistics & distribution providers and the EC appear to have identified a potential market opportunity for pan-EU consumer shipping solutions, with the EC recently bringing forwards a Proposal to simplify cross-border parcel delivery services. As things stand in Q1 2018 however, pan-national Member State shopping for goods at retailers without existing cross-EU shipping provisions seems likely a more attractive proposition on paper, than in practice. 

Impact for retailers – digital goods and services

While regulation in this space raises considerations for retailers of physical product, providers of online services are likely to feel a more acute impact (largely if not solely, as a result of the nature of digital goods and services). In simple terms, providing a pan-EU market for digital goods and services, free from access and (most) price restrictions/variations, opens the door to potentially friction free pan-EU (digital) cross shopping.

In respect of digital goods and services, the draft Regulation will likely:

  • mandate unification of access arrangements unless variations are not solely based on factors of nationality, residence and/or temporary location; and
  • require retailers to provide harmonised terms of use (including pre-tax pricing) to all EU customers.

For the first time, an EU customer, enjoying the same rights of access and pricing arrangements as any local customer will be permitted to cross shop digital music, e-books, video games and software, across the Single Market. Whilst these developments are clearly significant to any retailer of digital product, it is important to recognise the impact of the draft Regulation will be softened somewhat by significant carve outs, namely:

  • provision of financial, transportation, electronic communications, healthcare, audio-visual and broadcasting services are entirely excluded;
  • the draft Regulation will not alleviate or supersede a retailer’s obligation to obtain appropriate IP and other rights to distribute digital content across the Single Market, as required (e.g. a retailer will still require appropriate licencing to sell a specific e-book or album in a specific Member State); and  
  • the draft Regulation will not represent a requirement for retailers to comply with local laws and regulations in every Member State, simply as a result of lifting access restrictions to digital goods or service, unless the retailer “pursues…or directs” (read, directly targets) customers in those Member States (a no doubt significant multi-jurisdictional compliance relief).

Despite these restrictions, the draft Regulation represents a significant compliance consideration for all retailers of online goods and services. In time, dramatically improved consumer access, across the EU, may lead to near complete price parity across digital platforms and emergence of pan-EU price comparison providers.

Looking forwards, action points

As with all things DSM, moves to prohibit geo-blocking speak to both core EU values of open access, in addition to more contemporary EC concerns of modernisation, within the Single Market. 

In addition, the draft Regulation may prove an interesting compliment to legislation in the privacy space, including the GDPR, which seeks to provide EU consumers with better transparency of and control over circumstances in which profiling (using characteristics including location and/or nationality) significantly impacts upon an individual.

  • For retailers, the draft Regulation requires meaningful address of key questions:
  • do we engage in geo-blocking practices? (either through re-direction or access restriction);
  • if so, how is this technically achieved? (IP location, credit card details etc.);
  • can our practices be justified by national law or regulation? (e.g. price variation in accordance with local VAT/ sales tax requirements);
  • should changes be required to process, policy and/ or supplier arrangements, how might these be implemented, technically and organisationally?
  • to what extent should we consideration the wider privacy, monitoring and profiling implications of our online activities?

 

1http://ec.europa.eu/consumers/consumer_evidence/market_studies/geoblocking/index_en.htm#related_documents 

 

Contact our experts for further advice

Alex Ford-Cox