Is the consumer being discriminated against?
What is geo-blocking, i.e. location-based restriction or residence-based discrimination? For the majority, these terms are unfamiliar but actually, we have experienced this as a consumer. Starting from 3 December, the creation of such restrictions is prohibited in the European Union.
“Unfortunately, your payment method is not acceptable” can be seen in the online stores of neighbouring or countries further afield, if it is a trader offering international delivery. The reason for this may be the consumer’s VISA credit card which has been issued in Estonia, regardless of the fact that it is the card of an international organisation. There is no answer to the question as to what could be the trader’s business risk in this situation and why the credit card is not acceptable.
Starting from 3 December, the creation of such restrictions is prohibited within the European Union in relation to the respective regulation of the European Union. For example, if a German online trader accepts a VISA credit card from German consumers, then they also have to do it for Estonian consumers. Estonian or another member state’s consumers must be offered the same type of payment options as local consumers, whether it be an option to pay with a transfer, card or on the delivery of goods.
How does geo-blocking work?
To put in simply, it is a situation in which consumers are denied the ability to sell things online or purchase services due to their citizenship, country they live in, or their place of residence or location. It is mostly due to the traders’ unwillingness to sell across borders.
The consumer’s purchasing desire can be blocked differently. Most often, the consumer is restricted when registering as a user of a desired online store because the drop-down menu does not have the option to select Estonia as the delivery address or to enter a phone number with an Estonian area code.
A redirection to a new website is used for blocking the consumer. For example, an Estonian consumer who is shopping at an UK online store with a top-level domain .uk, is directed to a website ending in .ee after entering their contact information. The website with an Estonian top-level domain has the same goods for a more expensive price or a smaller selection of products. After 3 December, this type of redirection can only be permitted with the clear consent of the consumer, but in this case, the consumer must still have access to the original site. For example, through an easily found link.
What else will change for the consumer with the new norms?
According to the new rules, in the case of a transaction within the European Union, a consumer of another member state cannot be refused the sale of goods or services. However, the trader is still entitled to choose whether the purchases are delivered to the member state into which the trader offers delivery or whether the consumer shall collect the goods from the place agreed upon.
For example, if an Estonian consumer wishes to purchase a camera from a German web store that offers delivery only within Germany, then the trader cannot refuse the transaction if the consumer agrees to come and collect the goods or finalises the delivery to an address in Germany.
This also applies for electronically provided services such as cloud services, data base services and web hosting, it will no longer be possible to refuse the provision of a service to the consumer of another member state. The same procedure is also valid for other services such as car hire or hotel accommodation. In the case of this service, higher prices for consumers from different countries has been observed more than restriction of access. For example, a couple of years ago, A French hotel was talked about because an identical five-day accommodation package cost 1,038 euros for Austrian and German consumers online, 858 euros for Italian consumers and 645 euros for Belgian or French consumers.
Are there any exceptions?
Some type of services are excluded from the scope of application of the new regulation, e.g. copyright protected or intangible works such as e-books. In the case of the above mentioned services, there might still be restrictions for a cross-border purchase desire. Therefore, a trader in Luxembourg may refuse a transaction if an Estonian consumer wishes to purchase software from their website if its sale is copyright protected and allowed only in countries that do not include Estonia.
The regulation also excludes financial, audiovisual, transport, health care and social services.
What benefits accompany the new rules?
Recent statistics shows that only 15% of Europeans purchase from online stores in other EU member states. One of the reasons is geo-blocking, i.e. the consumer’s location-based restriction.
Therefore, it can be believed that the new rules eliminate the location-based restrictions for the consumers of e-commerce, intra-union online trading will activate, which can benefit both consumers and businesses. The e-commerce rights of the consumers and the contractual obligations arising from the trader’s act have been the same for the past five years, regardless of the member state consumer’s place of residence.
Thus, purchasing goods from UK or German online stores, which have cheaper prices and a wider selection of goods, is definitely in the interests of consumers. At the same time, cross-border sales also give the business an opportunity to be part of the inner market’s trading by offering a competitive challenge and more customers.