EUROPEAN COMMISSION Brussels, 25.5.2016 SWD(2016) 173 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on adressing geo-blocking and other forms of discriminiation based on place of residence or establishment or nationality within the Single Market {COM(2016) 289 final}

{SWD(2016) 174 final}



1.Context and scope Policy context The Single Market and the Digital Single Market represent two of the Commission's top-ten priorities. On 6 May 2015, the Commission presented the Digital Single Market Strategy to make the Single Market fit for the digital age. On 28 October 2015, the Commission presented the Single Market Strategy to create more cross-border opportunities for business and consumers. Both strategies consider that Europe's growth is restrained because businesses and consumers cannot fully exploit the economies of scale which are offered in principle by the Single Market. Where buying online has become normal for consumers, buying online cross-border remains the exception. Only half of the companies selling online do so cross-border. When consumers face restrictions linked to nationality or residence in over the counter transactions, this creates mistrust in the Single Market. The two strategies thus announced legislative action to put an end to and prevent unjustified "geo-blocking", i.e. practices used for commercial reasons by online sellers that result in the denial of access to websites based in other Member States, or to the products or services sought for; or where different prices or conditions are automatically applied on the basis of geographic location. These strategies also announced several legislative actions to address the major remaining barriers which still restrict cross-border transactions so as to make it easier for businesses to sell goods or services to nationals or residents from other Member States: the two proposed Directives on certain aspects concerning contracts for the supply of digital content and on certain aspects concerning contracts for the online and other distance sales of goods will remove barriers due to consumer contract law differences by fully harmonising the law applicable to defective goods and digital content . an initiative to extend the Single Electronic Mechanism for VAT registration, declaration and payment to all ecommerce supplies, allowing companies to handle all VAT affairs with their home country administration when selling to multiple Member states. the VAT Action Plan adopted on 7 April 2016 envisages ways to simplify VAT rules for e-commerce in the context of the Digital Single Market (DSM) Strategy . a proposed Regulation on cross-border parcel delivery, which will include measures to improve price transparency for European deliveries, including for prices of small shipments and to enhance regulatory oversight of the cross-border parcel markets. a copyright reform that includes inter alia a proposal for a Regulation on ensuring cross-border portability of online content services , which allows users to access the services they have subscribed to in their MS of residence while temporarily abroad, and an upcoming update of the copyright framework in order to facilitate online distribution of TV and radio programmes across the EU. a reform of the Consumer Protection Cooperation Regulation in order to strengthen enforcement for problems regarding cross-border services. Nevertheless, companies may also refuse to sell cross-border for other reasons. In some cases, geo-blocking appears to be linked to agreements between suppliers and distributors. Such agreements may restrict competition in the Single Market in breach of EU competition rules. The Commission presented initial findings on geo-blocking of a competition sector inquiry into e-commerce relating to the online trade of goods and the online provision of services, identifying practices where companies geo-block as a result of (vertical) agreements. For those cases where companies unilaterally and not based on the occurrence of additional complexities and cost refuse customers' access to commercial offers based on the residence of the customer and otherwise discriminate based on nationality or place of residence or establishment ("unjustified geo-blocking and other geo-discrimination"), the two strategies announced specific legislative action, because it will not be reduced by any of the other initiatives. It is also foreseen in the Commission Work Programme 2016. The present impact assessment relates to this legislative action. Scope of this impact assessment This impact assessment will examine geo-blocking and discrimination based on nationality or place of residence or establishment. Its scope is driven by two factors: a) in which services sectors do companies already benefit from a more integrated market, but nevertheless geoblocking occurs frequently and b) which cross-border transactions are already facilitated in the EU for the benefit of customers? 1. The choice of the sectors: Major steps have already been taken to remove regulatory and administrative barriers for service providers across Europe, moving towards a truly integrated Single Market. The Services Directive and the E-Commerce Directive are the key instruments at European level facilitating cross-border trade for service providers in a large number of services sectors. The Directives cover online and, as regard the Services Directive, offline retail of goods and services, tourism services, entertainment, business services, construction services, etc. Both Directives contain lists of activities which are excluded from the scope, mainly because they are covered by sectors-specific legislation or are either non-economic or economic activities, which are not easily traded across borders. The E-Commerce Directive introduced the country of origin principle for providers of information society service. The implementation of the Services Directive has removed thousands of disproportionate requirements imposed on service providers and it aims to prevent the introduction of new ones if discriminatory or disproportionate. As a result, for the services covered by those two Directives cross-border transactions are already facilitated in the EU. The scope of these two Directives is the result of a carefully reached political balance between Member States and the European Parliament. However, facilitating the provision of services across national borders is not enough for the establishment of a genuine Single Market. It is equally important to ensure that those who purchase such services as customers for their final use (end-users) can make full use of the opportunities of the Single Market. Article 20 of the Services Directive expressly imposed the respect of the principle of non-discrimination on companies to the benefit of service recipients. To complete the aim of the two Directives the initiative will cover the issue of discrimination based on nationality, place of residence or place of establishment inter alia for services covered by the scope of these Directives. The analysis of the complaints indicates that the majority of the reported situations of alleged discrimination occur within a few sectors covered by the scope of the Services Directive and, to some extent the e-Commerce Directive - retail of tangible goods (39%) and accommodation and leisure services (16%).

The current EU passenger transport legislation already explicitly prohibits discrimination based on nationality and place of residence for three modes of transport (air tickets, bus and coach transport and waterborne transport). The Rail Passenger Rights Regulation does not contain such a provision, but the Commission intends to insert in it a new provision on the prohibition of discrimination with the similar content as the non-discrimination clauses in the other passenger rights regulations, in the context of the on-going revision. Thus the national authorities in charge of passenger rights which are already operational for all modes of transport will be able to prevent carriers and travel agents from resorting to unjustified geo-blocking and discriminatory payment. Other sectors are too specific or too sensitive in order to be included into this initiative. This concerns in particular health for which payment of health care services is subject to the 2011 Patients' Rights Directive clarifying under which conditions social security institutions would pay. This also concerns financial services and audiovisual services (media) for which supervision by public authorities in Member States is foreseen and such supervision set a different context compared to services which can freely be provided under the Services Directive and the E-commerce Directive . As for gambling, Member States are only bound by the Treaty (freedom to provide services) and might under certain circumstances even prohibit consumers to access such service. These examples explain that the rationale for excluding sectors and activities from the Services Directive should be the same as for excluding those from the initiative for which this impact assessment is prepared For provision of retail financial services, where the location of collateral and the assessment of risks create important national specificities, issues of discrimination when accessing the service (mortgage, opening of bank account, cross-border insurance) will be addressed in the follow-up to the Green Paper on retail financial services from December 2015. However, payment difficulties related to the purchase of goods and services are addressed under this impact assessment. Regarding audiovisual services, for which the issue of territoriality of copyright is particularly relevant, a specific framework exists in the form of the Audiovisual Media Services Directive and the Satellite and Cable Directive, both of which are currently under review. Non-audiovisual content services (e-books, music, software, games etc.) also raise some questions. On the one hand, there is evidence that geo-blocking of these services occurs. Including these services within the scope of the measure could therefore enhance consumer benefits. Moreover, the different treatment of the sale of the same content on physical carriers (physical books, CD, DVD, etc.) and their digital equivalent (i.e. e-books, music, etc.) would mean that the geo-blocking initiative covers traditional physical carriers, while not addressing similar problems existing with their digital equivalent. On the other hand, their coverage might raise some complex legal issues that need to be considered. For music, for example, providers will typically have obtained multi-territorial licenses which allow them to serve the European market. Nonetheless, for some of the music in their catalogues, they may only have national licenses, in which case they would not be able to give full access to their repertoire to consumers from other Member States. In the case of e-books, a number of Member States have implemented fixed e-book price laws. Providers of e-books, when selling to residents in those Member States, would have to respect the regulated e-book prices. In order to take these specific aspects into account, while such services should be included in the scope the proposed legislation, their inclusion should not apply to the equal treatment obligation at this stage. The possibility of its extension to these services will be subject to a review. As a conclusion, the impact assessment is limited to the intersections of the sectorial scopes of the Services Directive and the e-commerce Directive. 2. The geographical and thematic scope of the transactions between companies and end users In terms of potentially discriminated parties, this impact assessment covers both private individuals (consumers) and businesses when they act as end-users of a given product or service. The impact assessment excludes, however, transactions where goods and services are purchased by businesses for resale. Including agreements that cover sales of goods and services for resale in this initiative would effectively touch upon widely used distribution schemes between companies in a B2B context, such as selective and exclusive distribution, which generally allow for manufacturers to select their retailers and to incentivise retailers to investment. These distribution systems are implemented through vertical agreements between undertakings which fall under EU competition law . However, in order to avoid circumvention by means of vertical agreements the initiative addresses restrictions in agreements which prevent traders from responding to unsolicited customer requests (passive sales) within the scope of the application of this Regulation, building on existing EU competition law concepts. The initiative applies to all traders operating within the EU, in parallel with existing consumer protection laws such as the 2011 Consumer Rights Directive and the 2006 Consumer Protection Cooperation Regulation (CPC Regulation). Remuneration for the purchase of goods (retail) or services where the payments are already regulated under EU law for the benefit of payees (traders) and customers is also covered by this initiative. This implies that traders established in non-EU countries but providing their services within the Single Market would be equally concerned. This is in line with legislation concerning the protection of consumers and payment services, which apply irrespective of where the trader is based, and creates a level playing-field between EU companies and non-EU companies. Furthermore, from a customer's perspective it can be difficult to determine whether a company is established and excluding non-EU trader could result in relocation of activities in order to circumvent the rules proposed under this initiative. To avoid an extra-territorial application of EU law, the legislative initiative would clarify that it only applies to transactions for goods and services offered and supplied and paid within the EU: consumers must receive the service or the good in the EU. For instance, the initiative would not apply to an EU consumer renting a car in the US, or to an EU consumer ordering a product to be picked up in Morocco. Legal context Direct discrimination based on nationality, as well as indirect discrimination, such as discrimination based on the place of residence or establishment or similar criteria are, in principle, contrary to the principles of the EU Treaty, as recognised by the settled case-law of the Court of Justice. The same goes, therefore, for unjustified geo-blocking and other forms of geographically-based discrimination. The principle of non-discrimination has been implemented on cross-sector level by Article 20(2) of the Services Directive. It obliges Member States to ensure that companies do not treat service recipients differently based on their place of residence or establishment or nationality, unless justified by objective criteria. Recital 95 of the Directive refers to a long list of generic justifications which companies may be able to invoke. In 2012, the Commission issued guidance on the application of Article 20(2) of the Services Directive The e-Commerce Directive (2000/31/EC) lays down the country of origin principle for information society services and providers of such services. Member States may not create barriers for the taking up and pursuit of information society services by companies if provided from another Member State. It does not include a non-discrimination provision creating obligations for service providers themselves. The concept of an information society service, under the e-Commerce Directive, and as interpreted by the Court of Justice means any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. Therefore the concept of information society service covers a considerable part of today's e-commerce. The e-commerce Directive however does not include a non-discrimination provision creating obligations for service providers themselves. The Consumer Rights Directive has fully harmonised certain aspects of consumer and contract law applicable to online sales by traders to consumers. According to Article 8(3) of the Directive, the trader selling through websites shall inform the consumer at the latest at the beginning of the ordering process about delivery restrictions and which means of payment that are accepted. In general, European consumer law covers traders established in third countries directing their activities to the EU. Under the current EU competition law framework with regard to vertical agreements passive sales restrictions (i.e. provisions in agreements which restrict a retailer from responding to unsolicited requests from individual customers) are generally considered restrictive of competition pursuant to Article 101(1) TFEU and cannot normally be exempted under Article 101(3) TFEU. Accordingly the Vertical Block Exemption Regulation qualifies passive sales restrictions as "hardcore" restrictions which do not benefit from a block exemption on the basis of the nature of the restrictions and the fact that those restrictions are likely to produce negative effects on the market. Those so called "hardcore" restrictions are generally restrictions "by object" when assessed in an individual case under Article 101 TFEU. Practice shows that restrictions by object are unlikely to fulfil the four conditions set out in Article 101(3) TFEU. As a result, the vast majority of passive sales restrictions in vertical agreements are unlawful under EU competition law. Only in very exceptional circumstances can passive sales be lawfully restricted in an agreement under EU competition law. 2.Problem definition 2.1.The overall challenges of a Single Market without borders The creation of the Single Market is one of the cornerstones of European integration. In it, more than 500 million citizens and more than 20 million companies of the EU should benefit from free access to goods and services from anywhere in the Union, with increased choice and lower prices. To date, efforts to complete the Single Market have been mainly focused on ensuring that companies are free to sell goods and services cross-border. Thus the Single Market has widened the choice for customers who are increasingly searching cross-border for goods and services. Many buyers, for language, cultural and proximity reasons, still mostly buy goods and services in their country of residence. Despite this, they make use of the Single Market by travelling cross-border or by ordering from distance sellers, nowadays mostly online. As far as travelling cross-border is concerned, 35% of EEA citizens travel at least once a year abroad , either for tourism, business or (if living close to a border) in search of better offers. However, thanks to the Internet, purchasing at a distance has rapidly increased, with online sales reaching EUR 200 bn for goods, with consumer electronics and appliances, clothing and footwear and media products the most popular items, and another EUR 70 bn for travel and tourism in 2014. Of this, on average 20% cross a border. 53% of EU citizens buy online, but only 16% do so cross-border.

When travelling abroad, customers would be surprised if they walked into a shop only to find that the trader refuses to sell to them or only at a different price because they are foreigners. However, in the online world, a trader refusing to sell to foreigners or only doing so at a different price is relatively common. IP-tracking allows websites to identify the provenance of the visitor, as do delivery addresses or payment system information, since there is no cash payment. As shown in the evidence below, customers frequently experience that traders based in other countries simply refuse to sell to them or change their price because of the country where they live or from where they want to access the service. Most recently, a large mystery shopping survey (MSS) analysed approximately 10,500 websites in the EU, which were visited first by mystery shoppers as domestic users and subsequently as cross-border users from another Member State. It found that only 37% of websites actually allowed cross-border EU visitors to reach the stage of successfully entering payment card details, i.e. the final step before completing the purchase (see annex 6). Equally in the second half of 2015, an e-commerce sector inquiry conducted within the framework of EU competition law found that 36% of online retailers (out of more than 1000 online retailers in the EU who participated in the inquiry) stated that they do not sell cross border in at least one product category in which they are active. This inquiry also showed that geo-blocking was practiced by companies of all sizes, although larger ones were more likely to do so. Regarding consumer experiences, in 2014 a representative survey of final consumers found that 19% of cross-border online shoppers had experienced restrictions at one stage or another of the purchasing process. Similarly, 2015 Eurostat figures show that 10% of cross-border online shoppers were restricted based on their nationality or place of residence in the last twelve months. These orders of magnitude of the problem are confirmed by a number of other sources (see annex 5). Moreover, the Commission services established and analysed a database of over 1500 discrimination-related complaints or enquiries received between 2008 and 2015 through internal channels. They reflect complaints and enquiries online and over the counter and mostly concern the sectors of retail (39%) as well as accommodation and leisure services (16%). Problems have also been found with regard to firms purchasing goods and services cross-border. A 2016 B2B Eurobarometer survey of 4.200 companies across 15 Member States reveals that firms face restrictions as well, which is why 68% of firms interviewed are not purchasing from abroad. Among the companies having purchased goods and services cross-border (online and offline) as end-users during the last 12 months on average 10% have experienced problems carrying out these purchases. Smaller firms have experienced more problems than larger firms and microenterprises are the most affected. 2.2.Unjustified geo-blocking and discrimination based on nationality, place of residence or place of establishment 2.2.1.Situations concerned by unjustified restrictions Geo-blocking and other restrictions based on nationality, place of residence or place of establishment can be justified or unjustified. If they are based on businesses incurring significant extra complications and costs, for example because of the existence of additional regulatory or other obstacles for cross-border sales, they are likely to be considered justified where ther are proportionate. Otherwise, they constitute "unjustified geo-blocking and other types of geo-discrimination". In many instances, it is impossible without a case-by-case investigation into the specific circumstances whether such restrictions are justified or not. However, there are several situations where local and foreign customers are in a very similar, if not identical, position (i.e. the trader does not bear any specific cost linked to the nationality, place of residence or place of establishment of the customer; he does not have to arrange for cross-border delivery, pay VAT in another country or apply another Member State's consumer legislation): (1) Foreign customers are sometimes prevented from buying a physical good even if they are willing to pick up the product in the country of the trader or arrange themselves for the cross-border part of the delivery. For example, according to a recent survey, 32% of Western European international online buyers have – for a variety of reasons including but not limited to unavailability of shipping to home address - used a forwarding address to get goods delivered, indicating significant demand. Yet according to the Mystery Shopping Survey 26% of websites do not allow foreign customers to proceed to the stage where they could organise such forwarding. (2) Foreign customers are sometimes prevented from buying electronically supplied services, such as cloud services, even though delivery costs cannot be an argument for not selling cross-border and the taxation implications of cross-border sales have already been subject to the facilitation mechanism of the VAT mini-one stop since the beginning of 2015. (3) Despite the trader having the required rights for the relevant territories, foreign customers are sometimes prevented from accessing electronically supplied non-audiovisual copyright protected content services. A study of the largest provider of downloadable music revealed that cross-border access was not or only to a very limited extent possible. In the recent Commission's competition inquiry, 44% of music providers respondents answering stated that they are required to geo-block. The reasons behind these restrictions (e.g. availability of licences) are yet to be analysed by the inquiry. According to a recent study on the geographical market segmentation in the EU e-books market, European consumers face different access restrictions based on their residence. Overall, these differences in access mainly seem not to be driven by objective legal reasons related to the EU copyright regime. (4) Customers moving to another country to receive the service at the location where the trader operates are sometimes charged prices which differ from those applied to domestic customers, such as when staying at a hotel, renting a car, going to a sport event or shopping in a cross-border region. Large-scale web-scraping studies showed that European consumers continue to face price discrimination when booking rental cars across the EU. For example, consumers from Germany accessing the non-country specific EU website (.com or .eu) of the car rental company got offered in 13% of cases higher price than consumers from Italy with no possibility to see the lower price available to other consumers. On average, the difference in price is 11€, but can get up to 134€. Similar effects can be observed on the same website when comparing consumers in the UK and Netherlands to those in Germany: 16% of prices are higher for the UK consumers, with the average price difference being 8€, and 13% of prices are higher for the Dutch users, with the average difference being 32€, although the exchange rate is the same in both situations. Overall, the study detected price differences on the non-country specific EU website against users in all Member States, ranging from 6% of prices for Austrian users to 16% for UK users, with most Member States falling around 10% of prices. Similarly, a citizen who moves temporarily to another Member State (without taking up residence there) may face higher prices or different conditions compared to local residents. In these cases, differences of treatment can be considered in principle as being unjustified. 2.2.2.Unjustified Restrictions at different stages of the purchasing process Unjustified restrictions based on nationality or place of residence or establishment of a customer take place at various stages of a purchasing process, presented below. The results of the public consultation conducted in autumn 2015, discussions organised by the Netherlands Presidency at the Informal Competitiveness Council at the end of January 2016, and the outcome of a stakeholder workshop held in Amsterdam on 18 February 2016 with more than 80 key stakeholders and representative organisations from consumers and from the business community (see annex 2) and many other stakeholder contacts underlined that it is important to assess each of these stages in order to fully comprehend the problem. 2.2.2.1.Lack of transparency Customers are particularly frustrated if they receive no information about restrictive practices. Under the Consumer Rights Directive, consumers should receive at the beginning of the purchasing process information about delivery restrictions and the accepted means of payment. However, the investigations regularly show that a large number of websites does not comply with this obligation. Furthermore, there is no obligation for traders to provide an explanation for such restrictions to consumers. The outcome of the public consultation shows that 27% of respondents who asked for an explanation have never received one from the trader about the reasons why they refused to sell or why they charged higher prices based on the place where the consumer lives (see annex 2). In all the complaints received directly or indirectly by the Commission services (see annex 8), 92% of cases do not mention any type of justification given by traders. 2.2.2.2.Lack of access to websites and rerouting

In the three situations mentioned above (see section 2.2.1), as well as in cases where geoblocking may be justified, customers are also confronted with the situation that access to the website or to an application is blocked or that they get automatically rerouted to another website. Geo-blocking of this type is often based on technological ways of using the location of the customer as a proxy, such as IP-tracking. The 2015 online mystery shopping survey found that only 2% of websites completely block access or automatically reroute visitors from another Member State, which however account for 7.5% of cross-border online traffic in the survey sample (see also annex 6 for more details). This hinders in particular the development of cross-border price comparison sites, as they are not able to scrape information on prices in other Member States. 2.2.2.3.Unjustified refusals to sell or selling under different conditions There are many examples where traders refuse to sell or charge higher prices depending on the customer's place of residence or establishment or nationality even though local and foreign customers are in a very similar, if not identical, situation (i.e. the trader does not bear any specific cost linked to the nationality or place of residence or establishment of the consumer; they do not have to arrange for cross-border delivery, pay VAT in another country or, if there is no directing of activities to consumers in that Member State, the trader does not need to comply with more stringent mandatory consumer contract rules of the consumer's Member State). Traders use different techniques to identify the place of residence or nationality of the customer through information on the delivery/billing address, but also information about passport, ID card or company registration number (VAT number), and the country of issuance of the payment card, the credit card number, the country where a bank account is based or again by the IP-address. It may simply be impossible for the customer to enter his complete details online – the postcode format may only accept a limited range of postcodes, or the country field may be a scroll-down list with a limited choice, etc. The 2015 online mystery shopping survey (see annex 6) found that 27,6% of websites do not allow foreign visitors to reach the stage of having successfully registered in order to initiate a purchase (including both justified and unjustified refusals). In three specific situations described below, differences of treatment based on residence or nationality can be considered to be unjustified: (1) When foreign customers are prevented from buying a physical good even if they are willing to pick up the product in the country of the trader or arrange for the cross-border part of the delivery. (2) When foreign customers are prevented from buying electronically supplied services, such as cloud services, even though delivery costs cannot be an argument for not selling cross-border and the taxation implications of cross-border sales have already been subject to the facilitation mechanism of the VAT mini-one stop since the beginning of 2015. (3) When customers move to another country to receive the service at the location where the trader operates, they are sometimes charged prices which differ from those applied to domestic customers, such as when staying at a hotel, going to a sport event or renting a car in a cross-border region. 2.2.2.4.Refusal of foreign means of payment The Mystery Shopping survey shows that for cross border shoppers who reached the payment stage, approximately a quarter of websites (26%) did not accept/offer their means of payment or it was not possible to successfully enter their payment card details. According to the 2016 B2B Eurobarometer companies facing problems did so when they indicated that they wanted to pay with a bank account located in another EU country (19%) or with a credit/debit card issued in another EU country (15%). This suggests that the payment element of a transaction is probably a regular source for transaction refusals. Internet retailers may refuse transactions based on considerations connected with the payment itself. However, they may use elements of the payment (country of issuance of payment card, IBAN number) as an 'indicator' of the location of the buyer to refuse a transaction on other grounds. 2.2.2.5.Refusal to deliver Even if consumers have managed to proceed in the purchasing process, they often fall at the last hurdle. The 2015 online mystery shopping survey showed that out of the 72% of websites which allowed visitors to register, approximately one third (32%) did not provide delivery options to country of the visitor(see also annex 6 for more details). Finally, the analysis of complaints collected by the Commission shows that 9% of consumers complained about non-delivery to their member state (see also annex 7 for details). The 2012 Guidance stated that "The lack of alternatives for delivery can rarely be invoked by a service provider to refuse supply to a given Member State. For parcel deliveries up to 20 kg, the Postal Services Directive imposes an obligation on Member States to ensure the provision of universal postal services, including cross-border. This obligation means that at least one delivery option in a cross-border context should be available in all Member States." 2.2.2.6.Conclusion Overall, two cross-border shopping attempts out of three fail (the following table synthetises the problems identified above). This is substantiated by the mystery shopping survey (see Figure 1), by the B2B Eurobarometer survey (see Figure 2) and by the responses to the public consultation. Figure 1: Failure rate (%) in a 2015 online cross-border mystery shopping survey Source: GfK Mystery Shopping Survey and JRC/IPTS calculations (forthcoming)

In theory, one would have to identify the motivation for each geoblocking situation in order to quantify how much it is based on objective barriers and how much is unjustified. This is not possible in practice. It implies a case-by-case analysis by enforcement authorities under the current legal framework (article 20). This could not be done with the studies carried out and the complaints received. It is not possible to conduct such additional studies, because, contrary to competition sector-specific enquiries, the Commission has no power to demand that companies explain in detail their pricing strategies. This could only be done in targeted cases attracting media attention (car hire, for instance). The complaints received, the responses to the public consultation and Eurobarometer surveys demonstrate that there is a significant degree of frustration on the side of consumers. However, other than in very exceptional circumstances, there are no costs or complications associated with permitting cross-border access to websites. As a general rule, automatic redirecting should thus be considered unjustified. On the other hand, while a refusal to deliver could be either justified or unjustified, depending on the motivation for such a refusal (see section 2.2), they are likely to be justified, given the objective complications of cross-border delivery, tax laws and, if the trader directs its activities to the consumer's Member State, differences in applicable consumer protection. Therefore, it is possible to estimate that unjustified geoblocking is practiced by between 2% and 27.6% of websites, keeping in mind that the 2% account for 7.5% of cross-border traffic. Even if to a smaller extent than for consumers, problems are also encountered at various stages of the purchasing process in B2B transactions. Among companies experiencing problems when purchasing goods and services cross-border issues related to VAT or payment where among the most cited (Figure 2). Figure 2: Step of the purchasing process during which the problems were experienced (B2B) Source: European Commission, Flash Eurobarometer 434, 'B2B Geoblocking', 2016 The significance of the issue is also reflected by the results of the public consultation on geo-blocking (annex 2). A vast majority (98%) of consumer respondents consider that consumers should be able to purchase and access services everywhere in the EU. They also think that geo-blocking and other geographically based restrictions create significant obstacles to the single market. Companies largely share the view that geo-blocking/discrimination is an issue and that consumer choice and competition are important. A large majority of consumer respondents (70-94% depending on the option) supports a legislative solution to tackle unjustified geo-blocking, while companies agree in principle (up to 50% agreement depending on the option) but stress respect for contractual freedom. 2.3.The drivers of the problem (underlying causes) There are different reasons why traders may not sell goods or services to customers in other Member States. They may not sell or provide access to customers from other Member States because the regulatory complications or language issues outweigh the benefits from additional sales, for example because the company would have to register for VAT in different Member States. This may even be the case if the company does not invest in commercial promotion in a foreign market but is approached by a customer from abroad. When the differences in treatment are thus based on objective and actual additionnal complications and extra costs for the seller and they are proportionate thereto, they may be justified. Otherwise, they are unjustified. Based on the evidence gathered it is not possible to provide an assesment of the relative importance of each driver, given that the prevalence will differ depending various factors. Taking the exampel of VAT differences, the relative importance will depend on the type of product and the Member State concerned. 2.3.1.Barriers leading to geoblocking and other types of discrimination Barriers which create significant additional complications and extra costs for the seller include the following: The complications of having to deal with many different national legal and tax systems represent a real obstacle for companies trying to trade cross-border both on and offline. The complexity of VAT for making intra-EU B2C supplies is cited by business as one of the top three barriers to cross-border e-commerce. Differences in national consumer laws may be a reason for refusing cross-border sales in a B2C context (this would not be relevant in a B2B relationship),. Technical specifications or rules on labelling and selling arrangements may also differ depending on where in the EU the trader has expressly chosen to supply products. They may require the trader to adapt their products and packaging accordingly, in particular concerning linguistic versioning. Beyond these objective differences, even the uncertainty as to whether the trader should apply foreign law or not may be a driver. Given the case-by-case assessment required under the Rome I regulation pursuant to the case law of the Court of Justice of as regards the applicability of national law, a company may very well prefer to forego the additional revenue rather than to face a badly understood legal situation. The lack of possibilities to arrange for good after-sales services can be a reason for traders to deny cross-border sales. Lack of affordable, high-quality delivery services is consistently cited amongst the top reasons mentioned by both e-retailers and consumers for not engaging in cross-border e-commerce. Until the implementation of the Payment Servuices Directive 2 in 2018, some operators may prefer not to sell to other Member States because their fraud prevention system is based on access to informational resources such as public registries which may not be available in other countries. Companies may refuse to sell to residents of other Member States because of legislation forcing them to do so (for instance a measure adopted by a local public authority which restricts access to coffee-shops to Netherlands residents).

Companies may in specific circumstances refuse to sell to residents of other Member States on the basis of lawful (vertical) agreements. For instance, paragraph 61 of the Vertical Guidelines acknowledges that there are situations in which territorial restrictions may be objectively necessary for an agreement of a particular type and therefore fall outside Article 101 (1) TFEU altogether. Agreements with territorial restrictions may also fulfil the conditions under Article 101 (3) and therefore be compatible with the internal market. For online content services, companies may in some cases only hold the rights (licences) for the use of copyright-protected content for a specific territory, which prevents them from providing such services to all Member States. Geoblocking or different treatment based on these issues can be considered justified (see annex 11). Some of these issues are addressed in the legislative proposals put forward as part of the (Digital) Single Market Strategy (see section 1) and not in this initiative. As a consequence, justified geoblocking can be expected to decrease in the future. 2.3.2.Drivers for unjustified differences of treatment: 2.3.2.1.Market segmentation along national borders Companies may prevent cross-border sales in order to enforce market segmentation. Such action may be based on a unilateral decision of businesses, or on contractual arrangements preventing resale of products (in a B2B context). If a supplier forbids a retailer from servicing an unsollicited request from another Member State ("passive sale"), is in principle against EU competition law. Other than in cases of abuse of dominance, EU competition law does not, however, address restrictions stemming from unilateral business decisions of non-dominant companies, including decisions taken and applied within a group of companies. In order to systematically analyse restrictions of competition that create barriers to cross-border e-commerce, the Commission launched a sector inquiry into the e-commerce sector in all Member States. The inquiry with respect to goods showed that most restrictions of cross-border sales are linked to unilateral decisions by traders, not by contractual arrangements with suppliers. Moreover, as the enforcement practice of national competition authorities demonstrates, such restrictions do not only take place for sales of goods, but also in other services sector, such as hotel bookings or package travel. Individual companies might find it profitable to segment the market. Market segmentation is often an issue where the trader has distinct operations in or targeting several Member States. This is typically the case of multinational companies, although it is also possible that SMEs can apply such restrictions. In certain cases it could be even beneficial for some customers i.e. depending on national demand and supply, certain goods and services may be sold for higher price in some countries than in others (see also section 2.3). The Study on business practices applying different condition of access based on the nationality or the place of residence of service recipients from 2009 highlighted a number of reasons for differences of treatment, which the Commission considers do not constitute objective criteria justifying a difference of treatment. Market segmentation in itself is a legitimate way to take into account different markets in a commercial strategy and can take many forms, for instance, special rebate add appearing only on French websites, a different presentation, a special price "train from Belgium+hotel" available on the Belgian version of a website, or even different prices of the packages/options on different national versions of the website etc. It is only a problem when the company refuses requests from consumers based in another country than the one targeted in order to enforce this market segmentation, when the foreign consumer is effectively in the same situation as the national consumer. Companies also sometimes rely on alleged legal uncertainty concerning the applicability of foreign consumer law, VAT, or labelling requirements etc, to apply different conditions on customers, when in fact these problems do not arise in the three cases mentioned above. 2.3.2.2.Ineffective enforcement of the existing legal framework Although it has been in force since 2009 in all Member States, the effectiveness of the current legal framework (Article 20 of the Services Directive) is hampered by a lack of proper application and enforcement on national level. One of the main reasons for the lack of enforcement is the legal uncertainty regarding justifications for differences in treatment based on customer's nationality or place of residence or establishment. Differences in treatment do not always constitute discrimination. According to Article 20(2) of the Services Directive, differences in the conditions of access are legitimate if directly justified by objective criteria. To determine whether a difference in treatment adds up to discrimination or not, it has to be assessed if the reasons invoked by the trader indeed constitute objective criteria justifying the difference in treatment. Recital 95 of the Services Directive provide for a broad list of possible objective criteria which makes it difficult to apply the provision in practice. At present, the assessment must always be made on a case by case basis, thus creating uncertainty for traders, customers and national enforcement authorities. Furthermore, some Member States even failed to identify clear enforcement authorities. The situations covered by Article 20(2) may require Member States's authorities to cooperate with each other in order to ensure an effective enforcement. Regulation (EC) No 2006/2004 on consumer protection cooperation (CPC Regulation) lays down the general conditions and framework for cooperation between national enforcement authorities in the EU. The cooperation is applicable to consumer rules in various areas, such as unfair commercial practices, distance selling and passenger rights which are listed in its Annex. However, Article 20(2) of the Services Directive is to date not included in the Annex. It means that there is currently no cooperation in terms of coordinated enforcement of Article 20 (2) by national authorities. The Commission has proposed to include Article 20(2) of the Services Directive in the Annex of the CPC Regulation. Adoption is planned for May 2016. Guidance on this Article 20 was issued by the Commission in 2012, but it did not lead to any clear improvement in terms of application and enforcement on this point. Although it is often stressed the need for a case-by-case analysis, the Guidance provided examples of situations (including those identified above) where it was difficult to find any justification for differences of treatment based on nationality or residence. -For instance, it said that "techniques allowing service providers to identify the location of the recipient and thus to direct the consumer to the offer adapted to the territory where he is resident are not per se indicators of discrimination" but that if "recipients in each of these countries are completely barred from accessing information on the conditions of access offered to recipients resident in other Member States", the situation may be very different. -It also stated that "the lack of alternatives for delivery can rarely be invoked by a service provider to refuse supply to a given Member State." All the more, if the consumer is prepared to organise delivery itself, this makes a difference of treatment even less justifiable. -Similarly, for services received on the premises of the trader (or outside of the country of residence of the consumer), such as hotels or car hire, the Guidance recognised that different pricing and marketing policies could be set up towards the various Member States, but that the objective is for consumers to "become more active in seeking out such favourable conditions offered online by service providers established in other Member States." Such an objective can be jeopardized, not only when consumers are prevented from accessing information, but also when they applied a higher price than the one announced on the website visited.

-As far as payments are concerned, the Guidance considered that refusals of foreign means of payment would become unjustified when the relevant barriers have been addressed, which they have. Despite this, the recurring complaints received from consumers, and the fact that the Guidance clearly encouraged Member State authorities to "take into account progress made in the completion of the internal market and the further elimination of barriers", the Commission is not aware of any trader having been sanctioned for infringing the non-discrimination provision of article 20 (2) of the Services Directive. Equally, no Member States took action and, based on the guidance, amended their national provisions transposing Article 20(2). For instance, the progressive entry into force of the Single Euro Payment area and of the Payment Services Directive 2 should have led to a more stringent application of rules against discriminations linked to means of payment. This was not the case. In specific cases, only the intervention of the Commission prompted the trader to give up its refusal of foreign credit cards or direct debits from SEPA-based bank accounts. This lack of enforcement action can partially be explained with reference to the low value involved in consumer disputes which deters consumers from pursuing legal action, but also by the low degree of priority given by national authorities to enforcement of article 20. Article 8(3) of the Consumer Rights Directive requires traders to indicate clearly and legibly at the beginning of the ordering process whether any delivery restrictions apply and which means of payment are accepted. The 2015 online mystery shopping survey showed that in 37% of all websites assessed, no information on delivery restrictions was clearly displayed on the starting page or during the ordering process. This was as high as 44% for those websites that were found to practice some kind of restrictions. If Article 8(3) was respected by all traders, consumers would at least be aware of delivery restrictions and the payment means accepted by trader before going through the ordering process. 2.4.Who is affected, in what ways and to what extent? Customers are often prevented from taking full advantage of the opportunities of the (Digital) Single Market. This has two main effects. Firstly, they are prevented from accessing a greater variety of products. For example, evidence shows that less than 7% of all smartphone models are available in all Member States; almost 50% are available in one Member State only. Secondly, customers face higher prices as competition is less intense than it would otherwise be; for some electronic goods, such as laptops, tablets, desk top computers or smart phones, customers in the most expensive Member State are paying between 30% and 60 % more than if they would be able to purchase from the cheapest Member State. In the previously mentioned web-scraping of car rental tariffs, customers were charged up to 53% more for the same car during the same period and on the same location due to the fact that they came from specific Member States. Whether customers realise that they are being discriminated or not depends on the technological means used to identify their residence: if IP-tracking or another technology of similar effect is used, customers will from the start only see the higher prices; if they suddenly face higher prices after entering address or credit card, they will notice. In 30% of the complaints received by the Commission, customers complained about such price discrimination (see annex 7 for details). This results in customer frustration, as they are largely unable to enforce their rights. Lodging a complaint or finding the appropriate enforcement body when facing different conditions either online or over the counter is often too burdensome compared to the detriment endured. Moreover, as a direct result of unjustified geoblocking, e-commerce and cross-border trade are lower than they would otherwise be, resulting in a loss of consumer surplus. For businesses as end-users, the B2B Eurobarometer undertaken in February 2016 gives evidence on problems experienced when purchasing goods and services cross-border. The results also showed that smaller companies, and in particular microenterprises, were most impacted. For companies buying goods and services cross-border as end-users, especially small ones who do not have a legal department, finding the right assistance body is a challenge, since it varies from country to country (sometimes it is the ministry of economy, the local Chambers of commerce, or the competition authority). For companies, the only enforcement bodies available are often national courts. Businesses may apply unjustified geoblocking through unilateral measures. If they are using this practice to maintain price segmentation between different national markets, geoblocking increases their benefits. Larger firms with presence in more than one Member States may target different markets with different offers and prices However, as shown by the mystery survey, 2% of websites, particularly those of companies active in several Member States, automatically send the customer to a different website (or block access) which in turn accounts for 7.5% of cross-border traffic. If companies do not sell to foreigners because they are afraid of ending up having to deal with the complications of selling cross-border (especially in the case of microenterprises) they are not benefitting; on the contrary, they would benefit from being able to sell more easily to a larger customer base. 2.5.How would the problem evolve, all things being equal? In case of no EU action unjustified geo-blocking practices would continue to exist segmenting the Single Market. Consumers will be prevented from making cross-border purchases or will be (unfairly) charged higher prices for the same good or service and consequently would not benefitting from increased availability of product and services and increased price competition. Traders could continue to deny access to certain services cross-border by applying territorial restrictions limiting the free movement of services. Companies would also continue to apply different conditions on the basis of residence without objective reasons. As described in previous sections, there are not only divergences in national legislation, such as consumer protection legislation and product labelling rules, having an impact on traders' choice of limiting cross-border trade. There is also pure market fragmentation based on unilateral decisions taken by companies without objective reason. The adoption and entry into force of the proposed legislation on digital contracts and parcel delivery will contribute (although not totally) to reducing the impact of some the drivers for justified restrictions, which could take away part of the justifications often invoked by companies. So would the announced initiative on extending the VAT Mini One-Stop-Shop to B2C supplies of tangible goods. Finally, following the entry into force of the revised Payments Services Directive, perceived risk of fraud should no longer be an objectively justifiable argument to geo-block. However, while due to these new legislation there will be less justified geo-discrimination they will not reduce unjustified geo-discrimination which is driven by the intent of business to artificially segment markets along national borders. So, as such, these legislative initiatives do not have an impact on unjustified geo-discrimination. On the contrary, for cases where traders currently use specific drivers as mere pretexts to explain plain market segmentation strategies, the removal of those objective barriers may even lead to an increase of cases of unjustified restrictions. The e-commerce sector inquiry launched by the Commission in 2015 unveils more in-depth information with respect to agreements between undertakings that impose territorial restrictions. These restrictions may be tackled by competition law enforcement. Restrictions based on agreements are not part of this impact assessment. Moreover, with the advancing technological sophistication of e-commerce providers, it is possible that unjustified geo-blocking might actually increase in the future. As the software used for tracking and identifying online customers gets better and cheaper, geo-blocking will become easier to implement. Furthermore, the rapid development of mobile e-commerce in conjunction with the abolition of roaming charges in 2017 will further exacerbate the problem, as consumers may well be geoblocked because of the IP-number of their device whilst they are in the country of the trader. Consumers would therefore remain unable to enforce their rights despite the revised Regulation on consumer protection cooperation. There also would be no solution for B2B transactions. While the inclusion of Article 20 of the Services Directive within the scope of the CPC Regulation would be beneficial to ensure coordinated enforcement across the EU, it would not be sufficient on its own to resolve the problems described in this impact assessment. In fact, while the revised CPC Regulation would provide additional powers for authorities to cooperate and would strengthen cooperation for widespread infringements, the fact would remain that the principle of non-discrimination laid down in Article 20(2) of the Services Directive is to be understood in light of the (numerous and not always very precise) possible justifications listed in its recital. 2.6.Evaluation of existing policy framework The objective of the non-discrimination principle in Article 20 of the Services Directive is to enhance the rights of service recipients and strengthen their confidence in the Internal Market by ensuring that service recipients are not subject to discriminatory practices based on their place of residence or establishment or nationality when shopping across the EU. However, the objective of Article 20(2) of the Services Directive has not been fully effective as demonstrated in Annex 8.

The assessment of Article 20(2) of the Services Directive has shown that it is at present not an effective or efficient EU intervention to achieve the pursued objectives. On 8 June 2012, the Commission published guidelines on the on the application of Article 20(2) Service Directive. The guidelines provide clarification on the interpretation of the relevant article, in particular its scope, and demonstrate typical situations of discriminations. Awareness-raising activities are regularly conducted, at national level by consumer associations and European Consumer Centres, and at EU-level by the Commission (for instance through the issuance of a Practical Guide for consumers in 2014 and communication activities such as press releases in the car hire sector). As a follow up, no Member State started changing their national rules or practices. To the Commission's knowledge, only Malta issued its own Guidance on discrimination, which essentially reproduces word by word the 2012 Guidance. This did not have any noticeable result, since the Guidance can only be based on the broad and vague wording of article 20. An approach based on voluntary agreements had been attempted with respect to the car hire sector, with a publicity campaign by the Commission in 2014 leading to commitments by some companies. The most recent web-scraping study of March 2016 demonstrated the several companies nevertheless continued to apply unjustified differences based on the place of residence or establishment of consumers and the Commission still receives complaints. One of the main reasons seem to be the broad list of possible objective criteria justifications mentioned in Recital 95 of the Services Directive. However, the objectives of the non-discrimination principle remain highly relevant, and coherent with other EU policy actions, such as the Digital Single Market Strategy and the Single Market Strategy for goods and services. The introduction of Article 20(2) of that Directive has not brought any substantive added value due its lack of effectiveness, but the evaluation shows that EU intervention to address the issues concerned is necessary to reach the objectives. 3.Why should the EU act 3.1.Does the EU have the right to act? Traders are free to make contracts with any customer in the EU. Nevertheless, Article 18 of the TFEU establishes the general prohibition of discrimination between persons on the grounds of nationality. Articles 34 and 56 of the TFEU provide for the free circulation of goods and the freedom to provide services. The Court of Justice further clarified the implications of the non-discrimination provision in Article 56. It said that Article 56 TFEU gives rights not only to the provider of services but also to the recipient. It also added that the abolition of State barriers to freedom to provide cross-border services would be compromised if it could be neutralised by obstacles resulting from publicly announced decisions of private operators (for instance publically available terms and conditions) or private associations. In those situations, decisions of such private entities might have effects equivalent to those of public authorities. The Court judged that equality of treatment between nationals and non-nationals prohibit not only overt discrimination based on nationality but also discriminations linked to the place of residence. It held that even a measure putting at an advantage only residents of a specific region or area may be considered discriminatory; it does not have to disadvantage only nationals of other Member States. Article 20(2) of the Services Directive does not prevent the Commission from adopting a proposal going beyond the current legislation. A new legislative initiative addressing discrimination based on residence or nationality could complement Article 20(2), which would remain applicable insofar as it is compatible with any new instrument. Even though Member States have transposed the entire Services Directive, including this provision, national laws and regulations remain little specific on this point and lack any clear criteria which justifications are acceptable or not. As a result, customers do not only lack a clear framework at European level but when it comes to exercising their rights under national law, they have no clear way forward how the principle of non-discrimination is actually applicable and effective in practice. Geo-blocking of customers based on their nationality or country of residence applies by definition only to transactions between nationals or residents of two different Member States. The initiative complies with the subsidiarity principle as due to the cross-border nature of the problem, it can be more effectively and efficiently tackled at EU level. At a workshop on 18 February 2016, participants discussed the possible value added of an initiative at EU level. The business community stressed that barriers to cross-border transactions (cross-border parcel delivery problems, payment issues, applicable law, VAT) should be addressed in tandem with efforts to improve the effectiveness of the non-discrimination principle. Consumer representatives stressed that failing action opportunities to serve wider markets would continue to be lost and frustration amongst citizens interested in shopping cross-border would only increase. 3.2.What would be the added-value of action at EU-level? Differences of treatment based on residence or nationality are experienced by citizens of all EU member states. In 27 out of 28 member states, more than 10% of consumers report having been geo-blocked in the last year (see annex 5). Although some differences of treatment can also apply within one Member State (with more favourable conditions for residents of a specific town or region), the Court of Justice underlined that a measure can be discriminatory as soon as it affects residents of other Member States, even if it does not affect only them. The transposition of Article 20 of the Services Directive and the subsequent guidelines issued by the Commission have not led to better application and efficient and consistent enforcement. Member States authorities cannot rely on a sufficiently clear legal framework to ensure such enforcement, as Article 20 is not sufficiently specific. Even if they were to enforce Article 20 more strictly, this would lead to an uneven application of this provision, since it would probably be interpreted in a variety of ways. This suggests that a better and stricter application of the non-discrimination principle, where that is justified and required in certain specific situations, cannot be sufficiently achieved by Member States acting alone. By reason of the scale and expected effects, this action can be better achieved at the EU level. EU aAction would create equal rights and obligations for businesses and consumers across the Single market, thus simplifying the current legal framework and creating a level playing field, thus allowing both customers and traders to benefit from the internal market. It would give enforcement authorities the means to act effectively against discriminatory practices. 4.Objectives 4.1. General policy objectives Better access to goods and services for customers in the Digital Single Market Prevent unjustified discrimination of customers in the Single Market.

4.2. Specific policy objectives The following objectives are cumulative. -To improve transparency for customers by enabling access to websites/applications throughout the Single Market; -To prevent unjustified differences of treatment in access to goods and services for customers throughout the Single Market; -To improve public enforcement in relation to unjustified geo-blocking and other discriminations based on the place of residence or establishment or nationality. -To increase legal certainty for business for cross-border transactions. 5.Policy options 5.0 Baseline scenario - no EU policy change The base-line scenario implies implementing Article 20 of the Services Directive, the current provisions of the Consumer Rights Directive and the 2012 Guidance document on Article 20 of the Services Directive. It also assumes the adoption of the proposed Directive on certain aspects concerning contracts for the supply of digital content, the Directive on certain aspects concerning contracts for the online and other distance sales of goods, the revision of the Consumer Protection Cooperation Regulation (among other changes, including Article 20 of the Services Directive in the Annex of the CPC Regulation) and the proposed regulation to improve cross-border delivery of parcels. However, Article 20 of the Services Directive has proven to be ineffective and difficult to enforce by national authorities, mainly due to the broad list of possible justifications for differences in treatment. The inclusion of Article 20 within the scope of the CPC Regulation would be beneficial to ensure coordinated enforcement across the EU in B2C-situations. However, it will not improve legal certainty or cover enforcement in B2B-situations. 5.1.Option 1: Improving transparency and enforcement In order to improve transparency on the reasons for unjustified geo-blocking and other types of discriminations, this option would be based on the following principles: 1) transparency in cases of justified restrictions for accessing the service, applied by a trader. A trader could for instance refer to unsatisfactory delivery conditions, need to register for VAT purposes in the country of the consumer, lack of knowledge about labelling rules and consumer laws applicable in the country where the consumer resides. 2) no obligation for a trader to explain price differences (if access to the best possible price in any EU member State is no longer restricted for consumers). The trader would be given the choice between two ways of implementing the transparency principle: 1) As a principle, traders would to provide an explanation for justified differences of treatment upon request of the customer if such differences are not otherwise covered by the legal instrument. In that case, companies should react within a reasonable timeframe to be set in a legislative proposal. 2) In order to avoid dealing with constantly incoming requests from customers, the trader could also provide justifications upfront. Pursuant to the Consumer Rights Directive, traders are under the obligation to inform consumers about only possible delivery or payment restrictions; a general disclaimer or an entry in the general sales conditions could be provided on the website about the justifications for access restrictions applied on customers from other Member States (such as cost of registering for VAT purposes in another country). In order to limit administrative burden, the company will be obliged to provide a reply only in the language(s) announced in the general terms and conditions. If a Spanish consumer intends to buy a product on a Swedish website, written only in Swedish, he should not expect to receive a reply in Spanish. In order to ensure enforcement, the legislative act resulting from the proposal that is now being considered would be added in the annex to the Regulation on Consumer Protection Cooperation. This would not apply to B2B issues for which Member States could designate enforcement authorities, if they consider it appropriate. This option would apply to all companies including SMEs and micro-enterprises. For the transparency obligation there would be no difference in treatment depending on whether the explanation is requested by a consumer or by a business (B2B), but in line with above the enforcement mechanism would vary depending on the situation. In a B2C context, enforcement would include strengthened co-ordination between national authorities under the CPC Regulation. In a B2B context, only the general enforcement rules would apply.

5.2.Option 2: Banning blocking of access This option would make the denial of access to a website based on nationality or place of residence or establishment illegal, with a very limited set of exceptions (only if required by EU law or national law in accordance with EU law, e.g. e-commerce Directive). Rerouting would be subject to the customer's consent. Even after the expression of consent to rerouting, the original website targeted by a customer should always remain accessible and the customer should be informed about this at the time of giving his/her consent to rerouting. If blocking of access of automatic rerouting is required by EU law or national law in accordance with EU law, the customer should be informed about it. In order to ensure enforcement, the legislative act resulting from the proposal that is now being considered would be added in the annex to the Regulation on Consumer Protection Cooperation. This would not apply to B2B issues for which Member States, in line with the principle of subsidiarity, could designate enforcement authorities, if they consider it appropriate. This option would apply to all companies including SMEs and micro enterprises. The option would not entail a difference in treatment based on if the goods/services are purchases by a consumer (B2C) or by a business (B2B). It would also apply to websites of third country traders targeting the European Union and aiming at providing services within the Single Market. 5.3.Option 3: Option 2 + equal treatment in specific situations ("shop like a local") This option aims at ensuring non-discrimination on the basis of nationality or place of residence or establishment in well-defined situations where no or only minimal additional costs associated to cross-border sales are created, either because the situation is akin to a national sale or because the trader has already taken the decision to incur the costs of selling abroad independently of the purchase request, or at least been able to take account of the possibility of such costs occuring (e.g. a large company operating in several Member States). Traders could recoup incurred additional costs in transparent manner to the extent to which they are objectively justified. The option covers online and offline sales of tangible goods without obligation on the trader to organise cross-border delivery as well as services such as online digital services, tourism services, leisure and accommodation services. Traders would not be obliged to contract under this option. For example, if a product is "out of stock" or if a certain service is unavailable at a specific point of time, traders can refuse to contract. However, traders should provide equal treatment in different steps of the sale process for foreign and for local customers. a) Sales of goods For sales of tangible goods, non-residents should have the possibility to contract under the same conditions as residents of the country where the trader is operating. Given the objective constraints to cross-border delivery, the trader would not be obliged to deliver the ordered tangible good to the country of the customer but the customer would be provided with the same delivery options as national customers, residing in a country in which the trader is operating. This includes delivery to an address provided by the customer within that country, as well as all other delivery options (e.g. pickup at a collection point, delivery through an intermediary, etc.) available for the consumers residing in the country. Tangible goods include inter alia books (on paper). This option would not preclude traders from applying different prices to customers in certain territories in so far as they are required to do so under the laws of Member States in accordance with Union law (e.g. book price regulations). The customer could only rely on the after sales service in the country where the good was delivered by the trader. In B2B situations in particular, this should exclude transactions involving products intended for resale, in order to avoid interfering with the competition law framework. For businesses as end-users, VAT is due in principle in the country where the goods are transported to. It would also apply to third country traders already offering delivery or pick-up in at least one Member State of the European Union. If a Brazilian company offers to deliver a product to Portugal, a consumer residing in France should be able to pick it up in Portugal. b) Sales of electronically supplied services Customers should be entitled to purchase electronically supplied services such as cloud services, data warehousing, website hosting, remote system administration, installation of filters, firewalls, banner-blockers etc., from any trader. In these situations, physical delivery does not take place. There is therefore no objective reason to advance delivery problems against foreign customers. Traders could use the VAT mini one-stop shop for VAT clearance, but would still need to find out the applicable rates in the country of destination. Traders exempted from paying VAT under national special schemes for small enterprises are not subject to the non-discrimination obligation. Traders would not be obliged to contract but only justifications unrelated to nationality or place of residence or establishment could be invoked (out of stock, suspicion of fraud based on individual circumstances etc.). In order for traders to adapt to the new situation, this part of the option will be phased in progressively. B2B transactions for such online services are taxed at the customer's place of establishment, pursuant to VAT rules. The trader does not charge VAT; it is the customer who pays VAT on the services received at the applicable rate in their country (using the reverse charge procedure). It would also apply to third country traders providing services in the EU. c) Sales of electronically delivered non-audio-visual content services

Similar considerations could apply to digital content services which give access to non-audiovisual content subject to copyright protection such as music, e-books, software and games delivered online, provided that the trader has the required rights for the relevant territories. However, their potential inclusion within the scope of the non-discrimination obligation has to be analysed further. d) Supply of goods and services in the premises of the trader or in a physical location where the trader conducts its business, outside the customer's home Member State Traders would not be allowed to refuse to sell or differentiate prices at the same point of sale/website between customers based on the place of residence or establishment or nationality if the service is used or consumed by the customer at the place of establishment of the trader or the location where the trader provide the services outside the home Member State of the customer (e.g. buying tickets to a concert, sales of products (retail), visiting a leisure park, rental of summer accommodation, car hire, etc.). Traders would still have the freedom to set different prices across different websites/applications (including country-specific websites) but customers would be free to choose from which country website they wish to buy. In the case of online sales, it will be up to the trader to ensure compliance so that customers can place orders on the online interface, e.g. through amendments to the lay-out of the web site if necessary or providing for taking orders by an alternative means such as e-mail. Traders would remain free to deny sales on grounds not related to the nationality or residence of the customers, for example running out of stock or not selling below a certain age. B2B services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment and similar events, restaurant and catering services, short-term hire of means of transport will be taxed at the place where those events actually take place. It would also apply to third country traders providing their services within the European Union. A US company selling tickets for a large music festival in Europe would be subject to this provision. An Australian car hire company offering rental of a car in Australia to European consumers would not be subject to it. Non-discrimination in the means of payment. By 2018, all Member States must transpose the second Payment Services Directive. As a consequence, traders will have no reason to refuse transactions in the EEA or impose additional conditions based on the country of origin of the payment provided that the retailer adopts strong customer authentication and the payments are in a currency that the trader accepts. The present proposal would not force any trader to accept any specific means of payment, but it would imply that traders who can request strong customer authentication by the payer cannot refuse payment because of the country of origin of the payment within the EEA. Traders would for instance not be allowed to reject consumer credit or debit cards issued in another country if they accept the same debit or credit card issued to customers in their country. They could, however, charge any extra costs occurred for transactions with cards of which the interchange fees have not been capped. Restraints on passive sales As a complementary element, the option would also clarify the situation as regards vertical restraints. It would declare agreements imposing on traders obligations, in respect of passive sales, to act in violation of the proposed Regulation automatically void. This would in some case go beyond the current competition law framework and is necessary in order to avoid the rules of the proposed Regulation from being circumvented through contractual arrangements. Under the current EU competition law framework with regard to vertical agreements passive sales restrictions (i.e. provisions in agreements which restrict a retailer from responding to unsolicited requests from individual customers) are generally considered restrictive of competition pursuant to Article 101(1) TFEU and cannot normally be exempted under Article 101(3) TFEU. As a result, the vast majority of passive sales restrictions in vertical agreements are already currently unlawful and therefore automatically void (Article 101(2) TFEU under EU competition law. Only in very exceptional circumstances can passive sales be lawfully restricted in an agreement under EU competition law. The option would only bring a change for those exceptional cases where passive sales restrictions can lawfully be implemented in agreements in the scope of the application of this option. Those agreements would now be declared to be void. This change would however be justified under internal market rules to achieve the objectives of the legislation. The legislative proposal does not affect active sales restrictions governed by competition law (in particular by the Vertical Block Exemption Regulation), according to which the supplier can designate exclusive territories to one or more retailers under certain circumstances. These exclusive distribution agreements may lead to efficiencies, especially where investments by the distributors are required to protect or build up the brand image. This option would apply to all companies including SMEs and micro enterprises other than companies selling electronically supplied services which are exempted from paying VAT under the national special schemes for small enterprises.. 5.4.Option 4: Option 2 + list of justifications deemed not to be based on objective criteria In some cases differences of treatment based on residence or nationality can be justified by objective criteria. This option, however, would set out arguments that cannot be accepted as being based on objective criteria for traders to justify a difference in treatment, for example: "Lack of delivery options" in the following cases: owhen the customer arranges for delivery or takes over the risk of delivery ofor parcels up to 20 kg oif the trader has a physical branch or subsidiary selling the same products in the country of residence of the customer.

"Cost for shipment (for refusals to deliver/to sell)" if the customer is willing to pay the additional cost linked to delivery. "Cost of adapting to mandatory provisions of the law of the country where the consumer has its habitual residence" when the trader does not direct its activities to this country "Cost or difficulty of bank transfers" in the Single Euro Payment Area. "Difficulty to recover debts from service recipients based in other countries", when the service provider can use the European Payment Order Procedure and the European Small Claims Procedure. "Risk of fraud for electronic means of payment" if the transaction can be authenticated by using strong customer authentication pursuant to the Payment Services Directive. The option would cover all services, on-line/off-line sales (including delivery), as well as on-line services that has a physical dimension. This option would apply to all companies including SMEs but exempting micro enterprises. The option would cover all purchases by customers and thus not entail a difference in treatment based on if the goods/services are purchases by a consumer (B2C) or by a business (B2B). In B2B situations in particular, this should expressly exclude transactions involving products intended for resale, in order to avoid circumvention of the competition law framework. The justifications that could or could not be invoked would depend on whether the customer is a individual consumer or a company, since the applicable VAT legislation is different in both cases, and depending on whether the transaction concerns a provision of service, a distance sale of goods, whether it involves delivery, etc. 5.5.Option 5: Option 3 + obligation to serve customers across the EU In a Single Market with few remaining barriers for cross-border trade, customers have an expectation to be served across borders. Under this option, companies that already deliver within their own country could not, as a general rule, refuse to deliver to another Member State. They could, however, charge any extra delivery costs. This option goes thus further than option 3, where the trader would not be obliged to deliver the ordered tangible good to the country of the customer but where same delivery options as national customers would be given, for example delivery to an address in the country of the trader. Responding to customer concerns about the availability for after-sale services, 2this option would also create an obligation for traders to provide similar after-sales services for a given product/service in all EU Member States in which the traders is present through its own branches and/or subsidiaries and through which the trader already offers the same product/services for which after-sales services are sought, regardless of the EU Member State in which the customer originally purchased the product/service. The trader in the country of the customer would however only be obliged to provide the minimum harmonised after-sale services as foreseen under EU law. For instance, if a Polish citizen living in Germany buys a product in Poland and the trader has a branch or a subsidiary in Germany where the same product is offered, the Polish customer should not have to go back to Poland to benefit from after-sales services. In order to provide for level-playing field for companies irrespective of their business model, the concept of "trader" should include all branches or subsidiaries of a given company. Given the burdens that this option may create, SMEs and micro enterprises should in any event be exempted from this option. The option would cover all purchases by customers as end-users and thus not entail a difference in treatment based on if the goods/services are purchased by a consumer (B2C) or by a business (B2B). 5.6. Other policy options As mentioned in section 2.6 above ("Evaluation of the existing policy framework"), the published guidelines based on existing legislation did not succeed in ensuring consistency in the application of the non-discrimination clause of the Services Directive across Member States. Based on past experience, it is possible to conclude that publishing other kind of 'soft-law', such as additional guidelines or a non-binding recommendation would not be effective and not make any difference. As mentioned in section 2.6, promoting voluntary agreements of traders/providers failed to enforce a legally binding non-discriminatory provision, although this took place in a context where the Commission managed to attract substantial media coverage, with large international market players. Such an approach does not seem likely to be effective or appropriate if it is to be extended to all players. The Commission would also be seen as intervening directly in individual enforcement cases, which are the responsibility of national authorities. Finally, it does not seem appropriate to make the respect of the fundamental principle of non-discrimination enshrined in the treaty dependent on “voluntary” agreements. Amending the Services Directive was also considered inappropriate. The Directive is the result of very complex negotiations resulting in a delicate political balance, and both the European Parliament and the vast majority of Member States already indicated that they were opposed to any amendment to it. 6.Analysis of impacts

6.1. Option 0 – baseline scenario- see section 2.5 6.2. Option 1. Improving transparency and enforcement Impact on the policy objectives Requesting companies to provide an explanation to customers why they refuse them access to a particular website or redirect them automatically to another one or informing customers that they will not sell cross-border could discourage them from doing so, because it may generate negative publicity for their business model. However, the mechanism is very indirect, and by providing a valid justification, companies can avoid negative publicity. Requesting companies to provide a justification upon request would be meaningful for the concerned customer, but not necessarily induce – directly or indirectly - companies to abandon geoblocking. Thus, the positive impact could be very small. Similarly, improved enforcement of an unclear provision is unlikely to ensure non-discrimination, since enforcement authorities would not know how to enforce the rule. On the other hand, the public consultation showed that more than eight out of ten of respondents from the consumer group are in favour of companies having the obligation to explain - either before the transaction or upon request - the reasons for the difference in treatment of customers based on residence/nationality. Between a third and half of the business respondents also agree to more transparency as a policy option in the sense that companies should explain their different treatment, either before or after the transaction. Economic Impacts Operating costs and conduct of business The option would entail administrative costs. For the explanation of access refusal or automatic redirecting, this would concern only a small share of total websites (around 2%, see annex 6), which however have a disproportionately large share of cross-border traffic (around 7.5%, see annex 6) and who are already present on several national markets through a multiplicity of websites, and already have carried out significant IT investments for that purpose. On the other hand, the cost of providing explanations to customers if restrictions are justified would concern a very large share of companies. It could be done either upon request, or provided upfront. The cost for handling a request can be estimated to €2.05. For a standard company which does not target foreign consumers and does not aim at delivering cross-border, one request a week seems a high assumption, which would result in a cost of up to 100 euros per year. Some providers would find it less profitable and more time-consuming to edit a cost estimate and an invoice than to add the information to the legal notice of the website, if it does not involve development or coding costs. In case of billing, assuming that adding a few lines to a webpage (without coding) would involve at most 4 hours of work, the low estimate of the one-off cost for a simple operation would be around EUR 100. In relation with the EU cookie notification policy, which involved higher development costs, a higher estimate of adapting of websites was of EUR 900 - this would then include the provision of an explanation when re-routing (as well the ban on the block of access – as under Option 2). For the explanation of discrimination or refusal to sell/deliver when requested, this would represent a cost which is proportional to the number of websites operated. For SMEs and micro-enterprises having to explain why they will not sell/deliver to other Member States would constitute an administrative burden, the size of which will depend on the number of inquiries received. Impact on the Single Market Given the indirect mechanism by which this option would reduce discrimination, the impact of this option in addressing the problem will be very small. It will therefore not increase market integration or trade flows to any significant extent. However, transparency may reduce customer frustration who want to buy everywhere in the Single Market but not necessarily increase their satisfaction. Transparency, however, matters in a context where trust in the Internet relies on appropriate information of customers. Competitiveness of business This option is not expected to affect competitiveness of European businesses, because it applies to European and non-European companies alike. Impacts on SMEs and microenterprises SMEs and microenterprises would face administrative costs for providing the information (see above). These costs would occur to a large share of these enterprises and would be relatively more important for SMEs and especially microenterprises than for large companies, thus putting them at a disadvantage. Nevertheless, they could provide information in their language. SMEs, and especially microenterprises, operating in a purely national environment, with a limited number of products in catalogue, are unlikely to run multiple websites. The possibility given to companies to choose between an upfront explanation and explanation upon request would enable them to opt for the less invasive transparency measure, in line with their business model. In line with the Consumer Rights Directive, a small company selling one product on its website already has the obligation to inform consumers about delivery or payment restrictions. It could adapt its website to the new obligation by explaining, for instance, that the company does not sell in a given Member State because of the costs linked to registration for VAT purposes there. As explained above the cost of such a change would depend on whether or not the website is managed internally. In addition, the trader would remain totally free, as it is today, to reply to requests in any language it wants. This option would not impose any translation obligation. During the stakeholder consultation, more individual business expected a positive than a negative impact, but a clear majority of business associations expected a negative impact. In so far as customer willingness to purchase cross-border increases thanks to better information, SMEs which are prepared sell cross-border might profit from increased sales. However, this effect is likely to be very small. Specific enforcement provisions will enable SMEs as purchasers to seek redress in case their rights have been violated. Consumers and households Consumers would benefit by being better informed about reasons for discrimination, assuming the reasons given by traders are correct. Nevertheless, providing information in relation to delivery restrictions and means of payment is already mandatory under the Consumer Rights Directive. Moreover, improved enforcement mechanisms will also benefit consumers. First they will have an incentive to claim respect for their rights towards traders, knowing that they could be effectively enforced. Second, they will be encouraged to lodge a complaint, knowing precisely which the enforcement authorities (endowed with the necessary powers to act) are. A very clear majority of consumers and of consumer associations who responded to the stakeholder consultation believe the impact of transparency requirements to be positive or very positive. One of the main conclusions of the workshop with stakeholders organised on 18/2/2016 in Amsterdam has been that addressing information shortcomings in isolation would not address the underlying problems. Macroeconomic impact This option does not have any macroeconomic impact. Impact on Member States For enforcement purposes, no new administrative arrangements are required, as the CPC network is already active. There might be an increased workload, but there is no data available to estimate this increased workload. However, the information on reasons for blocking access and rerouting concerns a very small share of websites. The additional costs due to the present proposal is, therefore, likely to be small, including with respect to third-country traders. Social Impacts This option does not have any social impact. Environmental Impacts This option does not have any environmental impact. 6.3. Option 2 Banning of blocking access to websites Impact on the policy objectives Requesting companies to refrain from blocking access and automatic rerouting will enable customers to compare offers on different websites of the same seller. They may well resent it if they are forced to use a website offering less advantageous conditions. As a result, some companies may start to allow visitors from other Member States to buy from any of their websites. Some may even offer identical conditions on all websites if there is a business case to do so. However, the mechanism by which discrimination in terms of access to goods and services is reduced is very indirect since most companies will likely continue discriminating when selling. In the public consultation, four out of five respondents from the consumer and consumer organisations group agree that the forms of geoblocking such as blocking access to websites create significant obstacles to the single market, and a large majority of the respondents from the consumers and consumers' organisations group favour a ban on discriminatory blocking of access to websites. Around half of the business respondents agree. Economic Impacts Operating costs and conduct of business Companies currently blocking access and practicing automatic rerouting would have either to abandon automatic rerouting or to change their websites to request approval of the customer for rerouting (except for the small number of websites for which geoblocking remains permitted because of legal obligations, such as sales restriction on Swedish tobacco "snus"). Abandoning automatic rerouting (basically, disabling the IP filtering) is inexpensive. Requesting approval from Website visitors before rerouting them entails some compliance costs but this would concern only a small share of total websites (around 2%, see above), which however are typically larger websites – they have a disproportionately large share of cross-border traffic (around 7.5%) and they are only concerned if they have at least two different websites addressing two different Member States (see annex 6) and already have carried out significant IT investments for that purpose. Informing customes when they are rerouted for reasons of EU law or national law in accordance with EU law will concern only exceptional cases. Impacts on the Single Market Blocking access to websites and automatic rerouting is practiced only by 2% of websites, so even if all of them disabled blocking and accepted cross-border customers, the impact on trade would be very small. If those websites accepted cross-border customers with the same ratio as websites overall (49.2%), the impact would be smaller still (1% increase in successful cross-border shopping attempts). Since these websites are distinguished from websites in general by having actively implemen