Geoblocking: Shop like a local – German government (Federal Ministry for Economic Affairs and Energy) transposes Geoblocking Regulation into national law (document 19/5098 of 17 October 2018)

Introduction

On 2 March 2018, the Official Journal of the European Union published the Geoblocking Regulation (EU) 2018/302. The Regulation entered into force on 22 March 2018 and will apply from 3 December 2018. It is part of the digital single market strategy for the EU initiated by the Juncker Commission. 

The Geoblocking Regulation will in future bindingly specify what type of conduct counts as unjustified geoblocking and thus breaches Article 20(2) of the Services in the Internal Market Directive 2006/123/EC. 

The aim of the Geoblocking Regulation is to guarantee the smooth functioning of the single market and access to goods and services in the entire EU without discrimination based on customers’ nationality, place of residence or place of establishment within the internal market. This will help complete the digital single market. Companies therefore need to adapt their websites, T&Cs and payment methods to meet the requirements of Articles 3, 4 and 5 of the Geoblocking Regulation in order to eliminate discrimination.

Federal Networks Agency responsible from now on – German Telecommunications Act amended 

The Geoblocking Regulation obliges Member States to name one or more bodies responsible for implementing the Regulation and to enact measures penalising breaches of the Regulation to ensure compliance with this Regulation. In addition, consumers are to be able to seek practical support from the competent body to resolve any disputes with providers arising from the application of the Regulation. 

The provisions of the Geoblocking Regulation are now to be implemented such that the Federal Networks Agency is named in the German Telecommunications Act as the competent body within the meaning of the Regulation. To this end, Article 116 Telecommunications Act will be amended to establish the new responsibility of the Federal Networks Agency for enforcing the Geoblocking Regulation. Section 116 Telecommunications Act allocates the official tasks and powers from the Telecommunications Act to the Federal Networks Agency. The Federal Networks Agency will in future have to supervise compliance with the requirements of Articles 3, 4 and 5 of the Geoblocking Regulation (EU) 2018/302. 

In the view of the German government, the Federal Networks Agency is fit to enforce the Geoblocking Regulation since in the context of responsibilities for other European Regulations it already has experience of penalising unlawful business conduct online and ensuring consumer protection rights (including the Open Internet Regulation). To enforce these laws, it has the option through the Telecommunications Act of prosecuting administrative offences and imposing fines.

The Federal Networks Agency will also be responsible in future for enforcing the Parcel Regulation. The Parcel Regulation and the Geoblocking Regulation were proposed by the Commission within the digital single market strategy as a combined action package for e-commerce.

Federal Cartel Office responsible in parallel 

The responsibility of the Federal Cartel Office for competition law aspects of Article 6 Geoblocking Regulation in the area of B2B remains unaffected by the allocation of powers to the Federal Networks Agency. 

According to Article 6(1) Geoblocking Regulation, the Geoblocking Regulation does not affect agreements on restrictions on active selling within the meaning of Regulation (EU) 330/2010 or agreements on restrictions of passive selling within the meaning of Regulation (EU) 330/2010 relating to transactions not subject to the prohibitions of Articles 3, 4 and 5 of the Regulation. In the recitals to the Geoblocking Regulation it is stated that agreements by which providers are obliged not to conduct any passive selling transactions with certain customers or groups of customers in certain sovereign territories are generally seen as competitively restrictive and normally cannot be excluded from the prohibition in Article 101(1) TFEU (see author’s additional notes in ZVertriebsR 2018, page 210 onwards, on the influence of the Geoblocking Regulation on distribution agreements).

Penalising infringements – Telecommunications Act amended 

The Act to Amend the German Telecommunications Act aims to create ways of guaranteeing the enforcement of the Geoblocking Regulation within the meaning of Article 7(2) Geoblocking Regulation and thus ensure access to goods or services regardless of location. The legislator has now established rules on this.

Ordering a penalty payment 

A new subsection 7 is to be created in section 126 Telecommunications Act. This will entitle the Federal Networks Agency to also take measures under section 126(1), (2) and (5) Telecommunications Act against breaches of the duties in the Geoblocking Regulation. The instruments of section 126(1) in conjunction with (2) and (5) Telecommunications Act enable the Federal Networks Agency to investigate a breach of the Geoblocking Regulation which it is aware of and to initially request that providers submit comments and a remedy within a certain period in accordance with Article 2(18) Geoblocking Regulation. If there is no remedy of the breach within the period, the Federal Networks Agency can make use of the instrument of ordering necessary measures to enforce compliance with the obligation (section 126(2) Telecommunications Act). With the option of threatening to impose a penalty payment of up to €500,000, the Federal Networks Agency now has the option of a recurring penalty to enforce the order irrespective of fault (section 126(5) Telecommunications Act). The penalty payment is of a preventive nature. If the provider complies with the requested conduct, the payment obligation lapses.

New offence subject to a fine

Section 149 Telecommunications Act An is also to be amended. Breaches of the Geoblocking Regulation will now be included as a regulatory offence. Section 149(2) no. 2 states that a fine of up to €300,000 can be imposed for breaches of Articles 3, 4, and 5 of the Geoblocking Regulation. Fines are imposed in regulatory offences proceedings to punish past breaches of the Geoblocking Regulation.

Other consequences of breaching the Geoblocking Regulation 

In addition to the fine now provided for in this bill, breaches of the provisions of the Geoblocking Regulation can have further consequences: in accordance with Article 10(3), the Geoblocking Regulation will be included in the Annex of Directive 2009/22/EC on injunctions for the protection of consumers’ interests. This will then lead to an addition to the list in section 2 German Injunctions Act. In this respect, qualified establishments can seek injunctive relief against providers that breach the Geoblocking Regulation. Breaches of the Geoblocking Regulation will also constitute a case of unfair competition under sections 3 and 3a German Unfair Competition Act. This will then also entitle competitors to file an action for damages and injunctive relief under section 8 Unfair Competition Act for breach of the Geoblocking Regulation. 

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We will keep a close eye on future developments for you.

About the author:  

Dr Mansur Pour Rafsendjani is a partner of Noerr LLP in Munich and a member of the Digital Business Group, focusing primarily on issues of the digital supply chain and digital commerce (purchasing, distribution and logistics).