Geo-blocking of copyright protected content: the elephant in the room

“I, for one, cannot understand why I can watch my favourite Danish channels on my tablet in Copenhagen – a service I paid for – but I can’t when I am in Brussels”
- Commissioner Margrethe Vestager, 2015.

E-commerce remains a priority sector on the European Commission’s enforcement agenda.

One practice prevalent in e-commerce that still concerns the EC is geo-blocking, i.e. the use of technology which restricts access to internet sales or internet content based on the country in which the user is located. It is problematic if carried out within the EU because of the single market imperative guaranteeing the free movement of goods and services between Member States. It can infringe EU competition law when it results in market fragmentation or makes the trade between national markets more difficult.

The EC has pro-actively sought to tackle geo-blocking over the last five years. However, this practice continues to exist and the Commission remains particularly concerned when it comes to geo-blocking of copyrighted online content. Indeed, on one hand copyright laws protect content on a country-by-country basis, conferring a form of territorial exclusivity to the right holder. On the other hand, there sits a vast body of EU competition law which prohibits the creation of barriers between national markets within the EU. So which trumps which?

A chronicle of enforcement against geo-blocking

The EC looked closely at the practice of geo-blocking during its e-commerce sector inquiry and launched three investigations into these practices in the clothing, videogames and hotel booking sectors. In 2018, the EC fined Guess €40 million for restricting online out-of-territory sales of its authorised retailers, among other things. Just last week, in the hotel booking case, the hotel chain Meliá received a €6.7 million fine for applying different tariffs on the basis of a customer’s country of residence. The videogames investigation is still ongoing (see below).

On top of its enforcement activity, the EC in 2018 also adopted the Unjustified Geo-blocking Regulation, which seeks to prohibit traders from impeding access to their websites on the basis of the customer’s nationality or place of residence, imposing  a non-discrimination obligation.

Still an open question

Imagine that you move to a foreign (EU) country and you want to continue watching the next season of your Netflix binge. Only to discover, with horror, that you can’t access it. This territorial restriction on access to content would be “justified” on the basis of national copyright laws. But is it ok from a competition law perspective?

Finding a balance between the territorial exclusivity of national copyright protection and the single market imperative is a tough riddle to solve. The limited precedents of the EC and the EU Courts reinforce the legal uncertainty for content providers active across Europe.

In the early 80s, the Court ruled in Coditel II that territorial exclusivity granted by the exercise of copyright does not constitute “as such” an object restriction. More recently in relation to pay-TV, the EC investigated licensing practices between Sky UK and six US film studios. The online streaming clauses contained in the agreements prevented the broadcaster from displaying the licensed online content in other EU Member States, conferring absolute territorial exclusivity. The EC eventually settled the case by accepting commitments from Paramount (in 2016) and from Sky and the rest of the US Studios (in 2019) so that they would abolish these clauses. Although this ended in a settlement decision and there was no finding of infringement, the EC’s preliminary conclusion was that the contested clauses may have infringed EU competition law.

This was an important decision for industry players. So much so, that Groupe Canal+ joined the EC’s proceedings as an interested third party and then appealed the EC’s settlement decision to the General Court. The GC ruled that the absolute territorial protection conferred went beyond the limits of copyright protection. However, the GC did not address the most important issue: how do we reconcile this conclusion with the fact that online cross-border transmissions are effectively illegal under national copyright rules?

The game is not over

In March 2019, Groupe Canal+ appealed to the CJEU against the GC’s judgment and in June 2019 filed an action of annulment against the second EC commitment decision in the pay-TV case.

Furthermore, in April 2019, the EC set out its objections in the videogames probe against Valve (owner of the Steam game platform) and five PC videogame publishers. More specifically, the EC’s objections concerned bilateral agreements using geo-blocked “activation keys” to restrict video-gamers from playing games acquired outside their country of residence. The EC is investigating whether the use of “activation keys” deprives consumers of the option to buy cheaper games available in other Member States.

The Valve investigation will offer the EC another opportunity to clarify the application of competition law to the licensing of copyrighted content. Indeed, while the use of “activation keys” would lead to market fragmentation, in practice it also safeguards the copyright of the games.

From a policy standpoint, the EC’s challenge is to explain how the abolition of geo-blocking restrictions will play out in practice. Bearing in mind that a response to an unsolicited request from out of territory customers may give rise to a copyright violation. It also remains to be seen whether and how these cases might impact the future review of the Geo-blocking Regulation.