Spotify spared from Commission’s geoblocking plans for now

The European Commission has narrowly avoided a showdown with the music industry and e-book publishers over its new plans to stop e-commerce firms charging buyers more if they live in certain EU countries.

Under the rules proposed today (25 May), e-commerce companies based in one EU country will have to sell their products or services to customers in other member states.

The Commission wants to get rid of what it calls unjustified geoblocking, when websites block or reroute users because they’re in another country.

Online businesses use geoblocking to hike up prices for shoppers from other countries. According to the executive, the practice is rampant: nearly two thirds (63%) of websites block consumers in other member states.

The executive had plans to outlaw geoblocking for copyrighted media like music and e-books – which could mean prices for services like Spotify would be raised in poorer EU countries.

That is now on the back burner, at least until the Commission reviews the law to determine whether the new rules should apply to those copyrighted works.

Andrus Ansip, the Commission vice-president in charge of the EU’s digital policy, told journalists last week that he wanted to end geoblocking for online music services like Spotify.

“Do we integrate music in the single market in the EU or not?” Ansip told journalists last Friday (20 May).

“If we do not include music we all lose, including musicians,” he said.

A version of the proposal leaked before today’s announcement indicated that online retailers would be required to sell copyrighted material across EU borders starting in 2020.

Dropping the plans suggests Ansip may have been overruled at today’s meeting of the College of Commissioners, which was held before today’s launch.

During a press conference this afternoon (25 May), he conceded that the Commission’s final bill is a compromise and “not the most ambitious proposals in the world”.

But he said he wants to start a review of current rules now—meaning e-books and music streaming websites may still have to sell across the EU, but not within the next two years.

“We will start with this review immediately and hopefully we can make those proposals very soon,” Ansip said.

Ansip’s plans prompted nervous hand-wringing among music and publishing industry lobbyists.

They said getting rid of national barriers online would make it impossible for streaming and e-book services such as Amazon’s Kindle to be profitable.

Spotify, for example, offers different prices around the EU and would likely raise fees to have one price that applies in every member state if music streaming services were no longer allowed to apply geoblocking.

Some music industry lobbyists said they were still concerned the Commission would drop the axe on streaming websites after the review.

Helen Smith, executive chair of the Independent Music Companies Association, said if the Commission applied geoblocking to copyrighted media, it “would create a hindrance to cross-border activity”.

Services such as YouTube and Netflix would not be hit by the plans because they are defined as audiovisual. Netflix, however, faces a rule forcing it to have a quota of 20% European content on the service.

 

Under the new rules, the Commission will prevent websites selling e-books and music streaming services from blocking access or rerouting customers if they’re in another EU member state. But since companies won’t be required to sell across the EU, the effects are limited.

Consumers will be able to see offers even if they aren’t allowed to purchase them.

“You can access the offers but you can’t buy them, it’s like ‘look and don’t touch’,” said Agustín Reyna, legal advisor on digital policy at the European Consumer Organisation.

“Why do we have to wait five or six years to fix the problem of geoblocking in the creative sector?” Reyna said.

Once the European Parliament and Council approve the law to stamp out geoblocking for e-commerce, websites will have to sell products like printed books, clothes and electronic devices regardless of where in the EU their customers are located.

Starting in mid-2018, the regulation will also apply to electronic services like cloud computing, data storage or website hosting.

While e-commerce websites will have to sell to consumers regardless of where they live, businesses won’t have to ship products if they don’t already offer cross-border shipping.

“The obligation to sell like at home does not mean there will be an obligation to deliver,” Ansip said.

That could mean consumers arrange their own shipping or pick up a purchase in person.

The Commission proposed a separate bill today that would reign in postal operators and force them to disclose prices for shipping between EU countries. The executive dismissed postal companies’ fears that transparency requirements in the new law would end up regulating prices.

But postal operators have pushed back against the new rules.

“Additional administrative burden could be a barrier to the further development of the e-commerce market,” said Botand Szebeny, secretary general of Posteurop, an umbrella organisation that represents public postal operators.