What does the Regulation do?
The Regulation (see here for the less snappy full title) is aimed largely at putting an end to commercial practices used by online sellers to restrict online cross-border sales based on nationality, residence or place of establishment of the customer. These include:
- blocking access to, or forced redirection away from, a website on the basis of an internet user’s EU nationality or place of residence within the EU;
- discrimination by retailers on the basis of the customer’s nationality or place of residence when they are purchasing (i) goods online, (ii) electronically supplied services (e.g. web hosting or cloud storage, but excluding copyrighted material such as ebooks and streamed movies), or (iii) services provided in a specific physical location (e.g. a theme park); and
- discrimination by retailers with regard to accepted payment methods on the basis of its association with an EU location.
The Regulation prohibits these practices where there is no objective justification for different treatment based on nationality, place of residence or establishment and obliges retailers to treat all EU customers in the same manner, regardless of nationality or place of residence or establishment. Like all other EU Regulations, it’s directly applicable in the UK with no national legislation required.
The Regulation enhances the current package of European Commission measures to boost the potential for cross-border e-commerce in the EU. It applies to both business-to-consumer and business-to-business (B2B) sales, provided that a B2B sale is not individually negotiated and the goods/services are not for re-sale.
How is the Regulation going to be enforced?
Member States must designate a responsible body for effective enforcement of the Regulation, and it is anticipated that the UK enforcement body will be confirmed in the coming weeks. It is for each Member State to determine the sanctions (i.e. penalties) for breach of the Regulation, provided these are effective, proportionate and dissuasive. The UK Government has not yet published details of the sanctions but they are likely to involve fines.
How will Brexit affect the Regulation in the UK?
The Regulation will apply to UK retailers from 3 December 2018. If an exit and transitional agreements are reached, these are likely to transfer the substantive legislation across to the UK statute books. If there is a “no deal” scenario, the Regulation will no longer apply to the UK.
Nevertheless, regardless of whether a deal is reached, UK retailers who offer goods or services to EU-resident customers will continue to be subject to the Regulation – retailers do not need to be established in the EU for the Regulation to apply, just serving its customer population.
What practical steps should you be taking?
You need to make sure that you review your standard documents (including terms and conditions of sale and website terms) and ensure that your selling practices comply with the Regulation by 3 December 2018, including:
- identifying and removing any measures used to block or limit a customer’s access to online systems (whether based on nationality of customer, place of residence or establishment). This includes automatic re-routing (unless the customer has explicitly consented to the redirection) and the website version originally accessed remaining accessible. Where geo-blocking/limitation of access/redirection is required for compliance with a legal requirement (EU/national law) you must provide a reasoned explanation, in the language of the online interface that the customer sought to access;
- reviewing existing pricing models. Consider whether your pricing models for goods/services are in any way discriminatory – for example, are prices automatically increased on the basis of an IP or residential address?
- reviewing payment methods. Are the means of payment in any way discriminatory, such as requiring a local bank account or card issuer? Within reason, customers should be able to pay by any payment means offered by you.
- reviewing distribution policies, logistics and delivery arrangements. You should check that you are not discriminating in terms of delivery arrangements between EU nationals.
A final point, and before you panic, customers from another Member State will need to provide a delivery address in accordance with a retailer’s usual terms. So where a retailer only offers delivery within its ‘home’ Member State, the customer will have to provide an address in that country or pick up the goods/arrange for onward direction.
If you would like any further information about the Regulation or would like our help in ensuring your commercial practices are compliant, please contact our EU, Competition and Regulatory specialist, Lindsay Draffan.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of November 5, 2018.