The end of geo-blocking on the internet prophesied by the European Commission as part of the strategy for a digital single market has not yet come to pass. Although geo-blocking is subject to comprehensive legal oversight at the level of the EU, such technical procedures are common practice in online commerce as well, for example in online gambling. The article gives an outline on some outstanding legal problems around geo-blocking.
An article by Ranjana Andrea Achleitner
The World Wide Web is characterised by geo-blocking practices, creating virtual national borders. Geo-blocking is understood to be technical procedures through which access to internet content, goods, services or websites is specifically controlled on the basis of the customer’s characteristics relating to geographic origin. This results in an artificial fragmentation of the digital single market, which the European Union has not yet succeeded in overcoming.
The three primary motives for geo-blocking are based, in brief, in licensing practice for copyrighted content, in commercial spheres for profit maximisation and, in terms of the different national consumer rights that still exist and the question of the place of jurisdiction in the event of a dispute. These motives illustrate the extremely complex framework for assessing the permissibility of geo-blocking; this complexity arises in large part because of the manifold interests of online traders, consumers, rights holders, collecting societies and the film industry, to name but a few.
The EU has a broad legal framework to control geo-blocking measures. Geo-blocking used on the basis of contractual agreements is to be measured against Art. 101 TFEU as well as the Vertical Block Exemption Regulation (VBER), as such practices lead to territorial restrictions relevant under competition law. In most cases, contractually agreed geo-blocking in connection with consumer goods violates the prohibition of cartels in Art. 101 TFEU and the VBER. In addition, the Geo-blocking Regulation now prohibits such restrictions, although it contains a comprehensive catalogue of exceptions. The question arises as to why, despite the clear legal situation in this respect, geo-blocking practices are nevertheless found on the internet to such a frequent extent. The reasons for this lie in particular in the multi-layered regulatory framework of competition law, which certainly also has regulatory gaps in the context of geo-blocking, as well as in the limited scope of application of the (somewhat toothless) Geo-blocking Regulation.
The primary reason for geo-blocking, which is currently still used extensively, is rooted in the licensing practice for copyright-protected online content (especially audiovisual services). Geo-blocking that is unilaterally initiated in this respect usually does not fulfil the conditions of Art. 102 TFEU, which is why EU competition law does not apply in this context. In the Murphy case, the European Court of Justice (CJEU) found exclusive licences to be permissible in principle, but absolute territorial protection going beyond this constitutes a restriction of competition. As a result, Geo-blocking clauses in licence agreements are to be measured against the standard of Art. 101 TFEU and are subject to the presumption of closing off national markets and creating an artificial partitioning of the single market. However, the CJEU and the General Court of the European Union have clarified that economic and legal circumstances may exclude the anti-competitive purpose of such clauses. In Groupe Canal+ v. Commission, both the European Commission and the General Court (T-873/16) declared a geo-blocking clause for passive sales in licence agreements between Paramount and Sky UK to be illegal, but at the same time did not question the exclusive licence as such. Although the CJEU recently annulled the General Court’s ruling in this regard (C-132/19 P), it also confirmed the existing line of case law – including that of the CJEU – on geo-blocking. Therefore, if agreements go beyond the essential core of the advantages that an exclusive licence is supposed to provide, they may constitute an anti-competitive practice.
This constellation clearly illustrates the problem of the tension between the territoriality principle of copyright law and the competition law requirements for absolute territorial protection in the form of geo-blocking. It should be noted that EU competition law is not capable of eradicating geo-blocking due to the factors just mentioned. A general statement on the permissibility of such agreements is not possible and it remains a case-by-case decision – much to the chagrin of consumers.
In view of this conclusion, the question arises as to whether the current antitrust framework adopts digital processes too late and also provides too few restrictive and therefore deterrent measures to counteract geo-blocking (“too little, too late”). One solution could be to revise the competition law provisions. For example, a special antitrust law could be created at the primary law level for internet distribution. Another approach would be to revise VBER by introducing a new category of “internet distribution”. The differentiation between active and passive sales in the VBER is no longer up to date anyways. A reform of competition law in terms of a primary law amendment is, however, to be considered unlikely; thus, alternative solutions such as copyright harmonisation or a secondary law regulation of geo-blocking should be taken into account.
In the fight against geo-blocking, the Union legislator has turned away from competition law and has recently enacted a series of secondary legislation designed to eliminate geo-blocking. First and foremost are the Geo-blocking Regulation, the Portability Regulation and the new Online-SatCab Directive. However, the new secondary legislation has a limited scope of application and thus its impact on geo-blocking practices will remain quite moderate. In this context, the introduction of the country of origin principle for the Internet by the Portability Regulation and the new Online-SatCab Directive should be highlighted; this extends the scope of the SatCab Directive without eliminating the territoriality principle of copyright. This closes the circle to the beginnings of the regulation of territorial restrictions in satellite broadcasting, from which the Union legislator has now borrowed for the Internet.
The country of origin principle could be an efficient solution to eliminate geo-blocking. However, this principle is controversial and its introduction in the online sector was accompanied by harsh criticism. In any case, the introduction of the country of origin principle for the internet requires accompanying (secondary law) measures that are able to cushion the negative effects for rights holders. In addition, the (currently discussed) extension of the scope of application of the Geo-blocking Regulation to copyright-protected online content represents a sensible and consistent approach against geo-blocking practices. Because it is an extremely delicate (legal and political) matter, it remains to be seen whether such a regulation can actually be enforced.
Geo-blocking is also directly initiated by member states by issuing blocking orders and blocking laws directly addressed to access providers. For example, such measures are practised in online gambling. Using the CJEU case law on blocking in copyright infringement, it can be concluded that geo-blocking of illegal online gambling can be permissible under EU law. This view is supported by the fact that the CJEU grants the member states extensive leeway in determining the level of protection in gambling law, which allows national autonomous regulations in the sense of the specific value system of a country. Again, further clarification by the CJEU is needed.
Overall, the European Union’s approach to the internet lacks coherency. While geo-blocking by online retailers has been combated through a series of legislative acts and the goal of dissolving virtual borders in the digital single market is ambitiously pursued, the EU at the same time allows geo-blocking by access providers, which in turn facilitates renationalisation of the internet.
Published under licence CC BY-NC-ND.
See for a more detailed analysis in German language: Achleitner Ranjana, Territoriale Beschränkungen im digitalen Binnenmarkt, Internetsperren durch Geoblocking im Lichte wettbewerbsrechtlicher, urheberrechtlicher, grundfreiheitlicher und grundrechtlicher Vorgaben des Unionsrechts, NWV, 2020. http://www.nwv.at/recht/europarecht/1458_territoriale_beschraenkungen_im_digitalen_binnenmarkt/