19 November 2018

Do you operate an e-shop in Hungary, but you refuse to sell your products to a German customer? By doing so you might be noncompliant with the EU law, more specifically with the Geo-blocking Regulation which prohibits certain forms of discrimination in cross-border sales. In this article we explain you the key elements of the new law which will be applicable from 3rd December 2018.

What is geo-blocking?

Geo-blocking takes place when an online seller denies access to his website (eg. to his e-shop) or otherwise prevents purchasers from buying the offered goods, purely based on the customer’s nationality, residence or place of establishment.

This is the case if a Hungarian e-shop is only available from a Hungarian IP address, but not from a German one. Or if the e-shop is available from a non-Hungarian IP address but the foreign (non-Hungarian) customer shall provide a Hungarian home address to place an order.

A similar situation occurs when the customer is being asked to pay with a credit card issued by a Hungarian bank which is less likely possible for a non-Hungarian customer.

What is basically forbidden by the Geo-blocking Regulation?

The Regulation expects you not to make any difference between customers based on their nationality, place of residence or place of establishment in the below situations:

  1. Sale of goods without delivery: for example, if you operate a Hungarian e-shop and only deliver in the territory of Hungary, you shall provide the possibility to a Slovakian buyer to order from you with the same conditions as Hungarian buyers. So, you will not be expected to deliver the purchased product to Slovakia, but you shall deliver it to the Hungarian address (eg. pick-up point) provided by the buyer the same way as you would do in case of a Hungarian buyer.
  2. Sale of electronically supplied services: for example, if an Estonian customer wishes to buy cloud services from you, you shall provide the service for him with the same conditions as for your Hungarian customers, so eg. without extra fee.
  3. Sales of services provided in a specific physical location: for example, if you operate an escape room in Budapest and provide discount for families, you cannot refuse the discount from a French family and they should be entitled to the discount such as a Hungarian family. So, this point applies to offline transactions, as well.

What are further prohibitions?

Besides the above prohibitions, the Geo-blocking Regulation forbids the blocking of access to websites and the redirecting to a different “language” version of the website without consent. The aim of the provision is to avoid that you offer different prices on the different language versions of your website.

For example, if you operate an e-shop selling shoes and a German customer types in the URL of the Hungarian version of your website, you cannot redirect him to the German version of your website without his consent. Further, even if he gives consent to the re-direction, the Hungarian version shall remain still accessible for him so that he can compare the prices if he wants.

Another prohibition is that you cannot discriminate between your customers within the range of payment methods that you accept. For example, if customers can pay in your Hungarian e-shop with a Mastercard, you cannot refuse the payment with a Mastercard issued by a Bulgarian bank.

When is geo-blocking not considered as discrimination?

In certain situations, geo-blocking can be legal, actually required. This is the case if the EU-compliant national law of a state prevents the trader from selling certain products to his citizens or to its territory.

To tell you an example, e-cigarettes in Hungary can only be marketed by the national tobacco shops and Hungary prohibits the online sales of e-cigarettes. Thus, if you operate an e-shop selling e-cigarettes in Slovakia but you refuse to sell to a Hungarian buyer, you will not infringe the Geo-blocking Regulation.

Nevertheless, in those cases you must provide a clear explanation why you refuse your products or services to the customer.

Are B2B transactions concerned?

You might be surprised but the Geo-blocking Regulation does not apply only to B2C transactions but in certain cases to B2Brelations, too.

This is the case when your business customer order from you on the basis of general conditions (so the transaction is not individually negotiated) and your customer is an end-user (he does not re-sell the product).

For example, if our Hungarian law firm orders paper books from your e-shop based in Germany and we accept your GTC and obviously do not sell the books to a third party, you cannot refuse to sell us the books if we deal with the delivery.

Based on the above, you should think over whether your e-shop is compliant with the new law. Especially you need to remove all measures that unjustifiably block or limit a customer’s access to your e-shop based on his nationality or residence.