Selling online abroad: applicable law, geoblocking and antitrust law.
The purpose of this article is to provide the reader with ideas for structuring an online sales strategy aimed at foreign markets, taking into account the EU regulations on geoblockingregulations of the countries to which one intends to export and, last but not least, antitrust law.
1. Geoblocking: what is it and when does it apply?
Firstly, one must
analysing the recent European discipline, introduced with Reg.
28 February 2018, No 302/2018in force since 3 September 2018, containing
measures to prevent unjustified geographical blockades (also known as
as "geoblocking").
The geoblocking was introduced by the EU with
to ensure that it is also correctly applied to the market
one of the founding principles of the European Union: free movement
of goods.
The new Regulation, si
therefore proposes to prevent unjustified geographical blockades or other forms of
discrimination based, directly or indirectly, on nationality, place
of residence or establishment of customers.
Article 3 of that regulation states
in fact that:
"A professional [i.e. an entrepreneur/company].
cannot block or restrict through the use of technological tools or
otherwise, a customer's access to its online interface for
reasons related to nationality, place of residence or place of establishment
of the customer."
This article continues:
"A professional
cannot for nationality reasonsplace of residence, or to the
place of establishment of a customer, redirect that client to a version
of its online interface other than the one the customer wanted
log in initiallybecause of the structure of the language used or of
other features that make it specifically intended for customers with
a particular nationality, place of residence or place of establishment, a
unless the customer has explicitly consented thereto. "
From a concrete point of view, the
Rules prohibits the practice whereby a user is prevented, to
French example, to buy a product on an Italian site, as it is redirected
automatically to another site designated to handle French customers.
Warning, this does not mean
intends that the professional may not use different versions of its
interface onlinein order to address customers from
Different Member States[1]
(e.g. the German language version, for the German market, the
French for France, etc.), but requires that the different versions designed for the
different markets, be accessible from all EU countries (a
French, you can see the Italian site and the conditions of sale there).
On this point, Art. 3(2),
point 2 of the Regulation makes it clear that:
"in case of redirection with the explicit
consent of the client, the practitioner's version of the online interface
which the customer initially wished to access must remain easily accessible
to the customer in question."
As a result, the professional will not only be free to use different versions of their interface online to address customers from different Member States, but also to automatically redirect the customer to a certain version of the interface if the user has given his or her explicit consent[2] and provided that the user is still free to access all other versions of the same interface.
2. Does geoblocking mean that I have to sell everywhere?
One point must be clarified: the new Regulation
clears the block, but does not oblige you to sell outside your country.
The geoblocking does not limit the possibility of deciding
to market their products online in certain countries, but prohibits
that if the site only provides for delivery to certain countries (for
simplify, in Italy), the customer from another EU country (Germany) is prevented
to buy online that product if you accept delivery in Italy.[3]
Furthermore, if marketing is envisaged
price differentiation is allowed in several countries to take into account, for example,
of the different costs to be incurred for the delivery of the goods, as long as the choice
does not take place in a discriminatory manner.
In fact, Art. 4(1) of the Regulation
provides that the geoblocking:
"does not prevent traders from offering general terms and conditions, including net selling prices, that differ between or within Member States and that are offered to customers in a specific territory or to specific groups of customers on non-discriminatory basis. "
3. Who do I sell to?
Given that the proposal of
sale entered online on its website implies that it is visible
by all users of the network, in the absence of clarification, it is
would apply the general rule that if the professional directs
its sales activity in a given foreign country, implicitly makes
assume that the sale is also aimed at customers domiciled in that particular
Country.
It follows that if the site is
translated into German it is implied that the sale is directed against Germany,
Austria, Lichtenstein and Luxembourg, as well as if it is translated into English, that the
same is promoted to (almost) the whole world.
Although the choice of 'maximum
opening' may seem very commercially viable, we invite you to evaluate it
prudently, as it has considerable legal repercussions (mainly
related to the law applicable to individual sales contracts and the
violation of any foreign rules), tax (in particular with
reference to the transaction being subject to VAT in the purchaser's country of domicile)
and customs (in the case of non-EU sales).
Therefore, for the avoidance of doubt, once you have assessed which countries you actually intend to sell to, it is advisable to state this directly on the site and in the general terms and conditions of sale.
4. By what law is the sale regulated?
If sales are only aimed at
to a market (e.g., to simplify, Italy), with delivery of the goods
in the territory of that country and the purchaser is a consumer domiciled in a different
country (e.g. Germany), which requires the delivery of the goods to take place in
Italy, such a sale will be governed by Italian law, without the need to worry about
to provide in the general terms and conditions of sale for compliance with any regulations
imperative provided by Germany. [4]
A different matter, however, if the order originates in Germany and the delivery of the goods takes place on German territory, in which case the law applicable to the contract of sale will be German law and, if the end user is a consumer, this may not be derogated from, even with the written consent of the parties.[5]
5. Violation of information obligations and foreign regulations.
If the site provides for the sale
also in countries other than Italy, it will be necessary to organise it by ensuring
that:
- the general sales conditions respect the obligations of
consumer information, as referred to in Art. 6, para. 1 of the Directive
2011/83/EU;[6] - the general terms and conditions of sale comply with any mandatory regulations
of the countries to which they intend to export, different and/or additional to those
provided for by Italian law; - commercial information required by the
State of export.
With reference to the above
disclosure obligations, it should be noted that:
- the restriction on delivery of the goods must be clearly stated
since the beginning of theprocedure leading to the conclusion of the contract, formerly Art. 8(3) of the
Directive 2011/83/EU;[7] - must be in the language of the consumer (Art. 8 para. 1 of the Directive
provides for the obligation to 'inform the consumer in plain and intelligible language').[8]
The penalty in case of
breach of consumer information obligations consists in the extension of
of the right of withdrawal from fourteen days to twelve months and fourteen
days.[9]
In addition to the risk of such a sanction, in some European countries there is also the risk of being subject to a warning and, in the most serious cases, an injunction action before the competent court: German law, for example, provides that in the case of ineffective clauses in the general terms and conditions of sale and violation of consumer protection rules, the warning and/or injunction action may be brought not only by the consumer, but even by a competitor, i.e. a consumer protection association.[10]
6. Can distributors and retailers sell online?
In the event that the manufacturer also makes use of third-party distributors and resellers to market its products, it is worth briefly recalling what are the powers of control over these entities, referring, for further details, to the section antitrust of this blog.
The Vertical Sales Regulation 330/2010 and recent judgments of the European Court of Justice[11] provided that a manufacturer may not prohibit its distributor/reseller from sell purchased products through their own websitenor market through the digital platforms of third parties.
The only way to limit this possibility by third parties is (for high-end, luxury and technically developed products) to create a selective distribution networkin which the distributors and resellers undertake to sell the contract goods only to distributors selected on the basis of objective criteria of a qualitative nature established indiscriminately and non-discriminatorily for all persons belonging to the network.
In that case, according to the most recent case law of the Court of Justice,[12]a manufacturer is authorised to impose a clause on its distributor allowing it to sell products via internet, but on condition that such sales activity online is realised through an 'electronic shop window' of the authorised shop and that the aura of luxury and exclusivity of these products is thereby preserved (on this point, see the Amazon Case e The mixed system: when the manufacturer chooses to adopt both exclusive and selective distribution).
[1] Compare recital 20
of the Regulation on geoblocking.
[2] Consent, once given, may be considered valid
even for subsequent visits by the same customer to the same interface
online, provided that the customer is given the opportunity to revoke it when he or she considers
appropriate. On this point, see recital 20 of the Geoblocking Regulation.
[3] On this point, see Stefano
Dindo, E-Wine, Legal-economic aspects of wine communication and distribution
online, G. Giappichelli Editore, p. 41, 2018.
[4] According to Art. 6(1),
(a) and (b) of Regulation 593/2008.
[5] See previous footnote.
[6] Directive 2011/83/EU of
european parliament and the council of 25 october 2011 on the rights of
consumers. Importantly, since this is a Directive (and not a Regulation), the
it must be transposed by national laws, while leaving the
Member countries free to choose the most appropriate regulatory path to achieve the
objectives set therein; it follows that each country is free to insert
information obligations in addition to those set out in the directive itself.
[7] Art. 3 Directive 2011/83/EU:
"E-commerce sites shall indicate clearly and legibly, at the most
late at the beginning of the ordering process, if restrictions apply
delivery and which means of payment are accepted."
[8] Attention! These parameters
language must also be complied with for the application of the provisions
of the GDPR. On this point, see Recital 20 of that Regulation.
[9] Art. 10 para. 1 of Directive 2011/83.
[10] Cf. Robert Budde, E-Wine,
Legal-economic aspects of online wine communication and distribution, G.
Giappichelli Editore, p. 51 ff., 2018.
[11] See judgment of the Court of
Justice in the Pierre Fabre case C-439/09.
[12] Judgment of 6 December 2017, C-230/16 Coty Germany GmbH.
Exclusivity clauses and vertical economic agreements in the European context: e-commerce and territorial exclusivity
Territorial exclusivity clauses, constituting a pactual limitation on free competition, are subject, in addition to Italian law, to the strict European rules on the subject.
In particular, theArticle 101(3) of the Treaty on the Functioning of the EU (TFEU) sets a general ban concerning all agreements and concerted practices of undertakings "chand may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market".
Among prohibited agreements, this provision mentions in particular those aimed at
- directly or indirectly fix the prices of purchase or sale or other terms of transaction;
- limit or controlling productionoutlets, technical development or investment;
- share markets or sources of supply;
- apply, in trade relations with other contractors, dissimilar conditions for equivalent performance;
- make the conclusion of contracts conditional on the acceptance by the other contracting parties of additional benefitswhich, by their nature or according to commercial usage, have no connection with the subject matter of the contracts.
From this framework, European legislation derives specific exceptions which, as far as we are concerned, are set out in the Regulation No 330/2010 (in force since 1 June 2011 replacing the previous Reg. No 2790/1999) concerning so-called 'vertical agreements', i.e. agreements for the distribution and supply of goods or services concluded between undertakings each operating at a different level of the production or distribution chain.
The regulation, in essence, draws the boundaries within which a distribution agreement between undertakings may be exempted from the general prohibition of restrictive business practices and must be interpreted and supplemented in the light of the Commission's Guidelines (LGC), published on 20 April 2010, which among other things expand on the subject of restrictions on e-commerce.
The Regulation No 330/2010 (in force since 1 June 2011 replacing the previous Reg. No 2790/1999) relating to so-called "vertical agreements", i.e. agreements for the distribution and supply of goods or services concluded between undertakings each operating at a different level of the production or distribution chain, essentially draws the boundaries within which a distribution agreement between undertakings may be exempted from the general prohibition of commercial agreements. It must be interpreted and supplemented in the light of the Commission's Guidelines (LGCs), published on 20 April 2010, which, inter alia, expand on the subject of restrictions on e-commerce.
Regarding specifically the Restrictions to share the market by territory group of customers by guaranteeing the exclusive use of certain distributors, they are only allowed when they restrict
i) so-called 'active sales' (defined below) in the exclusive territory or exclusive customers reserved to the supplier or allocated by the supplier to another buyer, but without imposing any limitation on sales by the buyer's customers;
(ii) sales to end users by wholesalers;
(iii) sales by members of a selective distribution system to unauthorised distributors in the territory that the supplier has reserved for that system; and
(iv) the buyer's ability to sell components, supplied for the purposes of incorporation, to customers who would use those components to manufacture goods similar to those produced by the supplier (Article 4 of the Regulation).
In the case before us, the first of the four cited exceptions, which introduces the distinction between so-called 'active' sales e 'passive'allowing territorial restrictions to be negotiated only with regard to the first of the two categories.
According to the Commission Guidelines, the active' sales designate practices of direct solicitation aimed at a specific territory or group of customers through mailings or the use of targeted advertising and promotions; they are defined as 'passive'on the other hand, sales in response to unsolicited orders from individual customers or the use of general advertising and promotions which constitute a reasonable way to reach customers also outside one's own territory (even in territories entrusted to the exclusivity of other distributors), provided that the customers in one's own territory remain the main and sufficient objective to justify the investment (para. 51 LGC).
As for the online salesthe Guidelines specify that they are generally to be regarded as 'passive', with the consequence that, in principle, no distributor may be prevented from using the Internet to sell its products.
In particular, it is made express prohibition to negotiate agreements whereby the distributor agrees to:
(a) redirect consumers to the website of the manufacturer or other distributors with territorial exclusivity;
(b) interrupt consumers' online transactions as a result of ascertaining their geographical area of residence through their credit card data;
(c) limit the proportion of total sales made via the Internet.
(d) pay a higher price for products intended for resale online than for traditional outlets (para. 52 LGC).
Here are some examples of such as contents can validly form the subject matter of vertical agreements:
- the restriction of practices categorised as 'active sales', including, in particular, the electronic commerce,
- the online advertising specifically targeted at certain customers,
- i banner showing a territorial link to third-party Internet sites online,
- the payment of a fee to a search engine or to an online advertising provider to present advertisements specifically directed at users located in a particular territory
- more generally, any effort made to be found specifically in a given territory or by a particular group of customers (para. 53 LGC);
- the publication on the distributor's website of a series of link to the Internet sites of other distributors and/or the supplier;
- the fixation of an absolute minimum quantity (in value or volume) of products to be sold off-line to ensure the efficient operation of its traditional point of sale. This absolute amount of required off-line sales may be the same for all buyers or may be set individually for each buyer on the basis of objective criteria, such as the size of the buyer in the network or its geographic location;
- the setting a fixed fee (i.e. not a variable fee that increases according to the turnover achieved off-line as this would indirectly represent double charging) to support the buyer's off-line or on-line sales efforts;
- the possibility for the supplier to demand compliance with quality standards in connection with the use of Internet sites for the resale of its goods (as it may do in connection with a point of sale or catalogue sale or advertising and promotional activity in general). As regards selective distribution, the supplier may for instance:
- require its distributors to have several 'non-virtual' points of sale or showrooms as a condition for becoming a member of its distribution system (this must not, however, lead to an indirect restriction of online sales),
- agree with their distributors terms and conditions of use of third-party distribution platformse.g. by preventing access to a distributor's site through another site bearing the name or logo of the third party platform (para. 54 LGC).
In conclusion, it can be said that the manufacturer/supplier, once it has authorised a distributor to handle its goods, may not prevent the latter from using e-commerce to sell them also beyond the pre-established boundaries, invading the exclusive territory reserved for other distributors, provided that the end customer's request can be considered as spontaneous and not specifically solicited by the distributor.
On the other hand, limitations aimed at regulating the possibility of the distributor using e-commerce to carry out promotional activities or direct solicitation within an area exclusively entrusted to other purchasers or reserved to the supplier are permissible.
There is also the possibility for the supplier to impose, in any case, on its distributors certain quality standards for the presentation of the products, or specific sales methods consistent with its own distribution system, provided that these conditions do not directly affect the quantity of goods tradable via the Internet or the prices practicable on that platform.