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Switzerland's Ban on Geoblocking Enters into Force on 1 January 2022

22.09.2021

On 1 January 2022, a new Article 3a of the Swiss Unfair Competition Act (UCA) will enter into force, aiming to prevent unfair geoblocking and price discrimination practices against Swiss customers in distance commerce offers.

Background of this provision is the so-called "Fair Price Initiative", which was submitted as a federal popular initiative in 2017. The initiative sought to prevent that Swiss customers have to pay significantly higher prices for goods and services compared to customers in its neighboring countries. The initiative suggested, among other measures, a ban on geoblocking to ensure that Swiss customers are not discriminated against when purchasing goods and services online ("shop like a local"). In response to the initiative, the Federal Council drafted an indirect counter-proposal. This indirect counter-proposal, as amended and adopted by Parliament, entails revisions to the Swiss Cartel Act and the UCA.

Under the new Article 3a(1) UCA, a person acts unfairly "who, in distance commerce, without objective justification, in relation to a customer in Switzerland, on the basis of his nationality, place of residence, place of business, the location of his payment service provider, or the place of issue of his means of payment: (a) discriminates regarding price or payment terms; (b) blocks or restricts access to an online portal; or (c) redirects a customer, without his consent, to an online portal version other than the one initially accessed". This provision does not apply to specific service offers listed in Article 3a(2) UCA, such as financial services, healthcare services, gambling services and lotteries, private security services, and audiovisual services (e.g. streaming services).

Furthermore, the use of geoblocking and price discrimination practices shall not be considered unfair if there is an "objective justification". It remains to be seen how Swiss courts will interpret this term in the context of geoblocking practices. A price discrimination may be justified, for example, if higher shipping fees or customs duties apply when selling to a Swiss customer. Also, geoblocking may be justified if a seller or service provider has (objective) reason to believe that its offering to Swiss customers would infringe a third party's intellectual property rights in Switzerland, or other rights of a third party (e.g. under a trademark co-existence agreement). Geoblocking measures may also be permissible if an offer to Swiss customers (e.g. online offers of pharmaceutical products) would violate Swiss law (e.g. regulatory law).

It is noteworthy that the new Article 3a UCA only seeks to prevent discrimination against Swiss customers, but it does not impose a duty to actually ship goods to, or provide services in, Switzerland. It also does not apply in relation to discrimination of customers outside of Switzerland.

The EU already implemented a ban on private geoblocking practices back in 2018 (EU Geoblocking Regulation), which served as an inspiration for Article 3a UCA. However, there are differences between the two legal frameworks. For example, the EU Geoblocking Regulation aims to protect consumers and companies only to the extent such companies can be considered end users of the offered goods or services. The wording of the new Swiss UCA provision does not contain such limitations, but rather applies to all "customers" in Switzerland. This includes consumers and companies as end users, but also individuals and companies procuring goods and services for further distribution or processing.

Whether or not the new Swiss ban on geoblocking will have a significant impact in practice remains to be seen in the future. Article 3a UCA will have to be enforced before civil courts. In many instances, however, a Swiss customer will likely not initiate such civil enforcement action, especially against businesses domiciled abroad. While also Swiss consumer organizations or the Swiss government could seek injunctive or declaratory relief, it may be expected that they will only do so in selected cases.

Nevertheless, international businesses offering goods and services to Swiss customers are well advised to verify their compliance with the new rules under Swiss law.

 

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