Geoblocking: A Turning Point for the Digital Single Market?

Introduction

Geoblocking is a complex but highly relevant issue that affects not only online stores, but also a wide range of other players such as esports teams, games providers, streamers and influencers. It’s a topic I’ve covered extensively in the past. In particular, the EU Commission recently fined game publishers for violations of the Geoblocking Regulation. Read more in this article. Interestingly, I already reported on the case in 2019, as you can read here.

The case in detail

Following an in-depth investigation by the European Commission, Steam, the platform operated by Valve, and five PC video game publishers (Bandai, Capcom, Focus Home, Koch Media, and ZeniMax) were found to have violated European Union competition law. The violations took place in the period between 2010 and 2015 and were mainly concentrated in countries in the Baltic region and certain Central and Eastern European countries.

Geoblocking was used to prevent parallel imports. This means that games sold at low prices in some countries could not be bought by users in countries where prices are higher. This practice led to fragmentation of the internal market and was contrary to the principles of the European Union.

Valve had filed an action against the Commission’s decision, but the action was dismissed by the ECJ. The court found that the Commission had provided sufficient evidence of the anticompetitive agreements.

This ruling is particularly noteworthy as it is one of the first to directly address the issue of geoblocking in the context of digital goods. It could serve as a guide for future cases involving similar practices.

Legal perspective and copyright

Interestingly, the court found that geoblocking did not serve to protect copyrights, but only to protect the high royalties and margins of Valve and the publishers. The court emphasized that copyright law does not serve to create artificial price differences between foreclosed national markets, which is contrary to the goal of a single internal market. This finding could have far-reaching implications for the interpretation of copyright in the digital world.

It also raises the question of how far the rights of copyright holders really go, especially in the context of digital distribution. The ruling makes it clear that copyright holders cannot use their rights to segment the market and thereby impose higher prices in certain regions.

Furthermore, this ruling could serve as a basis for future cases in which the tension between copyright and competition law is once again put to the test. It suggests that consumer interests and free market principles may take precedence over the interests of copyright holders in such cases.

Impact on gamers

For gamers, this ruling could mean that games will have to be offered at the same price throughout the EU in the future. This sounds positive at first, but it could also lead to prices rising overall to make up the difference. It remains to be seen how prices will develop and whether there will be a price adjustment that is fair for all EU countries.

Impact on developers

For game developers, the question is how to adjust their pricing strategies. The different economic conditions in the EU countries make it difficult to set a uniform price that is fair for all. Developers must now consider how they can adapt their business models to meet the new legal framework.

The implications of the ruling for the digital landscape

The ruling could have far-reaching implications for other digital services and platforms, including not only PC gaming platforms like Steam, but also SaaS providers, mobile gaming providers, and even streaming services. It sets a precedent that could fundamentally change the way digital products and services are distributed in the EU.

This ruling sends a clear message to the market: geoblocking practices that restrict the cross-border sale of digital products and services within the EU will not be tolerated. Other platforms could expect similar legal challenges if they adopt similar geoblocking practices.

SaaS providers offering their services in various EU countries could be particularly affected. They must now carefully examine whether their current business practices are in line with EU competition law. Similarly, mobile game providers and other digital service providers should reconsider their geoblocking strategies to minimize potential legal risks.

Conclusion

Geoblocking is a complex issue that affects a wide range of stakeholders and presents potential legal pitfalls. The EU Geoblocking Regulation aims to end unjustified discrimination in online purchases based on nationality, place of residence or place of establishment. It already entered into force on March 23, 2018 and has been applied since then. The conduct prohibited by the regulation is to be regarded as a market conduct rule and is thus subject to warning by competitors. Further details can be found in this article.