New law on sanctions against geo-blocking discriminations

Regulation (EU) 2018/302  on addressing unjustified geo-blocking and other forms of discrimination ("Geo-blocking Regulation”), applicable as from 3 December 2018, sets out rules prohibiting discrimination against consumers, and, as the case may be, undertakings, based on their nationality, place of residence or establishment when they purchase goods or services.

As a matter of general principle, the Geo-blocking Regulation prohibits any EU trader from discriminating customers from EU countries other than the one in which it is established on the basis of their nationality, place of residence or establishment. However the Geo-Blocking Regulation (i) does not prevent traders from making specific offers only to a specific territory within a Member State or other targeted offers to certain groups of customers on a non-discriminatory basis and (ii) does not order traders to deliver goods or services in other (EU) countries.

Therefore, a Luxembourg trader is, for example, allowed to restrict its deliveries of goods to Luxembourg only but cannot refuse a sale to a non-Luxembourg EU resident who organises the pick-up of the product in Luxembourg.

Furthermore, the non-discriminatory obligations to be borne by traders due to the Geo-blocking Regulation may have, under certain circumstances, tax implications, such as the relevant VAT rate to be charged. In this respect, the Geo-Blocking Regulation states that traders subject to Chapter 1 of Title XII of the VAT Directive 2006/112/EC (i.e. SMEs) are exempted from the prohibition of applying different general conditions of access for reasons related to customers' nationality, place of residence or place of establishment, when providing electronically supplied services, as such prohibition would require them to register in order to account for VAT of other Member States, which would be a disproportionate burden, considering the size and characteristics of such traders.

Audiovisual services, including services for which the main purpose is the provision of access to broadcasts of sports events and which are provided on the basis of exclusive territorial licenses, are excluded from the scope of the Geo-blocking Regulation.

In terms of infringements of the provisions set out under the Geo-blocking Regulation, it is stated that Member States shall lay down the rules for the measures applicable to such infringements.

In this respect, the Luxembourg Law of 26 June 2019 on certain modalities of application and sanctions in relation with the Geo-blocking Regulation was published in the Mémorial on 28 June 2019 (“Geo-blocking Law”).

The Geo-blocking Law states that the European Consumer Centre is the entity in charge of providing assistance to consumers in the event of a dispute with traders arising from the application of the Geo-blocking Regulation.

In terms of legal proceedings, the Geo-blocking Law establishes that the President of the Tribunal d’arrondissement (Commercial Chamber) may, upon request from any person, professional association, or consumer organisation, order the suspension of the acts in breach of the Geo-blocking Regulation. Appeal against such a court order can be lodged within 15 days.

The law further states that any failure to comply with a binding court order shall be punished by a fine of EUR 251 up to EUR 120,000.

As stated during the parliamentary debates leading to the adoption of the Geo-blocking Law, 68% of Luxembourg residents purchase goods and services online from traders located in other EU countries, so that they are more likely to be subject to discrimination practices.