Documents considered by the Committee on 22 November 2017 Contents

6Digital Single Market: Tackling unjustified geo-blocking

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; scrutiny waiver granted; further information requested

Document details

Proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market

Legal base

Article 114 TFEU; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(37818), 9611/16 + ADDs 1–2, COM(16) 289

Summary and Committee’s conclusions

6.1Geo-blocking is a practice that enables online sellers to deny consumers based in another EU country access to their websites and content, to re-route traffic to a country-specific or local website or to apply different pricing or other practices according to the consumer’s nationality or residence. Although the technology itself is not problematic—for example, it can be used to ensure that national rules regarding copyright and restrictions on gambling are applied in a jurisdiction—it can sometimes be detrimental to online consumers trying to get a better deal in another country.

6.2In May 2016, as part of its wider e-commerce package aimed at breaking down barriers to cross-border online trade, the Commission proposed a Regulation (9611/16)24 to address unjustified geo-blocking and discrimination based on nationality or place of residence. The draft Regulation imposes an obligation on companies to ‘sell like at home’ and not discriminate against non-home EU Member State consumers in terms of access to prices, sales or payment conditions, unless justified for certain ‘objective’ legal reasons.

6.3The Government submitted an Explanatory Memorandum25 on 15 June 2016, in which the Parliamentary Under-Secretary of State and Minister for Intellectual Property at the (then) Department of Business (Baroness Neville-Rolfe) indicated that the Government welcomed the proposed Regulation, but indicated a number of changes the Government would like to see made to the proposal.

6.4During the negotiations, the UK managed to secure text in line with its policy position, including an exemption for certain microbusinesses related to thresholds for registration for VAT, and ensuring that the geo-blocking Regulation did not undercut existing European Consumer Protection law. On this basis, on 23 November 2016, the Committee granted the Government a scrutiny waiver to vote for a General Approach at Competitiveness Council on 28 November 2016. The General Approach was agreed, with the UK voting in favour. The General Approach extended the transposition period for the Regulation to eighteen months, which means that it will apply to the UK for a shorter period before it leaves the EU.

6.5Since the Committee’s last meeting it has received a number of formal and informal updates from the Government. On 27 June 2017 the (former) Parliamentary Under-Secretary of State for the Department for Business, Energy and Industrial Strategy (Lord Prior) informed the Committee that the major point of disagreement in trilogue negotiations concerned the scope of the regulation: “the European Parliament have made it clear that they want digital services which provide access to copyright protected works to be included in the Regulation”.26 He also provided responses to the Committee’s questions regarding the implications of withdrawal from the EU (see Conclusions).

6.6In a subsequent informal update, BEIS officials clarified that the European Parliament wanted to include in the scope of the Regulation services which provide access to non-audiovisual, copyright protected, works – i.e., e-books and online music (e.g. e-books and music, including Spotify, iTunes and online mp3 sales). They added that the UK was against the inclusion of these services, as it believed that a full impact assessment should be carried out to assess the business impacts of the proposal. However, because this was not a red line for the UK, and there was a need for a constructive and positive tone due to Brexit negotiations, the Government could be flexible regarding a potential compromise.

6.7On 7 November 2017 Lord Prior’s successor, Lord Henley, provided the Committee with a further update from trilogues.27 He reiterates that the inclusion of copyright protected content is the main sticking point in negotiations: he emphasises that, although the inclusion of non-audiovisual content is the scope of the Regulation is not something the UK supported in Council, it is also not a red line for the UK, and the Government welcomes the Estonian Presidency’s efforts to secure a compromise; the Government’s main concern remains to keep audiovisual content out of scope.

6.8On 21 December negotiators reached agreement on a package of amendments. Euractiv.com reported that the Member States succeeded in excluding copyright-protected content, including music, e-books and audiovisual content from the scope of the Regulation.28 However, the agreement reportedly includes provisions for a review to take place in 2 years’ time, which could reconsider whether these services should be included in the Regulation’s scope.

6.9We thank the Government for its responses to the Committee’s questions and note that trilogue negotiations reached agreement on a package of amendments on 21 November 2017. We ask that the Government provide a summary of this compromise text, particularly in relation to the chief points of disagreement between the European Parliament and the Member States that the Minister identified in previous correspondence.

6.10On Brexit, we note the Government’s comment that the proposed geo-blocking Regulation “includes a third country provision, whereby, a trader, based in a third country, who ‘directs activities’ to consumers based in the European Economic Area (EEA), will be bound by this Regulation. Therefore the Regulation will apply equally to all traders (whether established in a Member State or those established in a third country) operating within the European Union”. The Government also clarifies that, post-Brexit, the Regulation “will only apply to UK businesses to the extent they operate within the European Union”.

6.11The Government has also said that it “will consider whether an agreement between the UK and EU is needed for this Regulation to benefit UK consumers”. We ask the Government to clarify its findings on this point. Will the UK, after it leaves the EU, be able to retain the beneficial effects of the geo-blocking regulation through domestic rules alone, or will a bilateral UK-EU agreement be necessary to retain these effects?

6.12We grant the Government a scrutiny waiver to vote for the proposal in Council. We also request a response to the above question and a summary of the compromise text by 11 December 2017. In the meantime, we retain this file under scrutiny.

Full details of the documents

Proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market: (37818), 9611/16 + ADDs 1–2, COM(16) 289.

Background

6.13The European Commission published its proposal for a Regulation on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market on 25 May 2016.29

6.14The main provisions of the Regulation are as follows:

6.15In its most recent report in relation to this proposal, the Committee said that it was concerned by the Minister’s initial assessment that UK businesses trading in the EU would continue to be constrained by the proposed Regulation post-Brexit while EEA businesses would be remain free to use unjustified geo-blocking techniques in relation to UK consumers. It therefore requested that the Minister clarify:

The Minister’s letter of 27 June 201730

6.16The Minister informed the Committee that the Maltese Presidency [now succeeded by the Estonian Presidency and had identified geo-blocking as one of their main priorities during their Presidency. Two trilogue meetings (29 May and 13 June) took place at which the Regulation was discussed, with the next meeting planned for the 27 June.

6.17The Minister said that the remaining issue left to be resolved involved the scope of the regulation: “the European Parliament have made it clear that they want digital services which provide access to copyright protected works to be included in the Regulation”.

6.18In response to the Committee’s question as to whether UK businesses would continue to be constrained by each of the main provisions in the Regulation in the same way as when the UK was a Member State, the Minister said that:

“The proposed geo-blocking Regulation includes a third country provision, whereby, a trader, based in a third country, who ‘directs activities’ to consumers based in the European Economic Area (EEA), will be bound by this Regulation. Therefore the Regulation will apply equally to all traders (whether established in a Member State or those established in a third country) operating within the European Union.”

6.19Seeking to provide further clarification on how this would affect the UK post-exit, he said:

“The Regulation will only apply to UK businesses to the extent they operate within the European Union. During exit negotiations we will work to achieve the best possible deal for the UK. The UK has a strong track record of protecting consumers, and this will continue.”

6.20The Committee also asked whether the Government could prevent unjustified geo-blocking practices from being applied to UK citizens after the UK has left the European Union through domestic legislation, or whether a bilateral agreement with the EU would be necessary. The Minister replied:

“The Government will consider whether an agreement between the UK and EU is needed for this Regulation to benefit UK consumers.”

Informal update (5 September 2017)

6.21In September, BEIS officials provided the Committee with an informal update of progress in trilogue negotiations. They noted that, although the Maltese Presidency had identified geo-blocking as one of their main priorities during their Presidency, and three trilogue meetings had taken place, a compromise had not yet been reached regarding the scope of the Regulation.

6.22Officials reiterated that the European Parliament had made it clear that they wanted digital services which provide access to non-audiovisual, copyright protected, works to be included in the Regulation. The UK was against the inclusion of these services, as it believed that a full impact assessment would need to be carried out to assess the impacts of this proposal. However, because this was not a red line for the UK, and there is a need for a constructive and positive tone as the UK are in Brexit negotiations, the Government is willing to be flexible regarding a potential compromise.

The Minister’s letter of 7 November 201731

6.23The Parliamentary Under Secretary of State at the Department of Business, Energy and Industrial Strategy; Lord Henley (Lord Prior’s successor) – wrote to the Committee to provide an update from trilogue negotiations.

6.24The Minister states that the major outstanding issue left to be resolved concerns the scope of the Regulation, specifically whether it should include non-audiovisual, digital services which provide access to copyright-protected works, such as eBooks and online music services. The European Parliament wants these services included, whereas the Council’s position was to exclude them. The Minister explains:

“If these services are included in scope, the proposal would prevent a retailer holding the copyright for a particular service in several territories from distinguishing between consumers in those territories.”

6.25The Minister informs the Committee that:

“The Estonian Presidency is working to agree a compromise before the end of the calendar year. While the non-audiovisual scope issue is not a red line for the UK, we welcome the Estonian’s efforts to secure a compromise. As set out in previous correspondence from my predecessor, our main concern is to keep audiovisual copyright services out of scope.”

6.26The Minister anticipates that it is possible that an agreement may be finalised in November.

Previous Committee Reports

Twenty-eighth Report HC 71–xxvi (2016–17), chapter 1 (25 January 2017); Nineteenth Report HC 71–xvii (2016–17), chapter 2 (23 November 2016); Seventh Report HC 71–v (2016–17), chapter 3 (6 July 2016).


26 27 June 2017 Prior-Chair ESC.
Twenty-eighth Report HC 71–xxvi (2016–17) chapter 1 (25 January 2017).




28 November 2017