The European Union wants companies selling digital content to citizens in EU Member States to do so across the entire region. Instead, companies continue to ring-fence their content, making material available in one region and not another.
The practice is known as geo-blocking and is carried out by checking users’ IP addresses and other data against commercial blocklists. A decision is then taken by providers as to which country’s content to serve to the user. This means that when an England-based Netflix user travels to mainland Europe, he can no longer access the same content he can when he’s at home.
In part to discover more about geo-restriction, last year the European Commission launched its Digital Single Market Strategy alongside an antitrust sector inquiry into e-commerce. After sending out questionnaires to both retailers of physical goods and companies offering digital content, the EU Commission has now published its initial findings.
Responses from more than 1,400 companies from all 28 Member States reveals widespread geo-blocking. In respect of physical goods, the EU reports that geo-blocking is often based on the “unilateral business decisions of retailers”, i.e simply not wanting to do business abroad.
“Where a non-dominant company decides unilaterally not to sell abroad, that is not an issue for competition law,” says European Competition Commissioner Margrethe Vestager.
However, the situation with digital content supply is somewhat different. While the decision not to sell physical goods elsewhere is mainly the decision of the retailers, it was found that agreements between suppliers and distributors are often the cause of geo-blocking of digital content.
While 68% of digital content providers told the Commission that they geo-block users located in other Member States, 59% admitted that they are contractually bound to do so by their suppliers. The Commission says that these kinds of agreements have the potential to restrict competition in the EU Single Market and breach EU antitrust rules.
While all digital content covered by the EU inquiry was found to be affected by geo-blocking, the chart below clearly shows that worst offenders can be found in the fiction TV, films and sports sectors, with almost three-quarters of suppliers of the former engaged in contractual blocking.
“The information gathered as part of our e-commerce sector inquiry confirms the indications that made us launch the inquiry: Not only does geo-blocking frequently prevent European consumers from buying goods and digital content online from another EU country, but some of that geo-blocking is the result of restrictions in agreements between suppliers and distributors,” Vestager says.
“Where geo-blocking occurs due to agreements, we need to take a close look whether there is anti-competitive behavior, which can be addressed by EU competition tools.”
The Commission notes that if specific competition concerns arise it could open investigations into restrictive practices and abuse of dominant market positions. However, any enforcement measures would need to be carried out on a case-by-case basis.
Margrethe Vestager will offer a more detailed analysis of the inquiry in a preliminary report set to be published and opened for public consultation mid-2016. The final report is scheduled for publication in the first quarter of 2017.
