Cosmetics Europe response to open consultation on Geo-blocking and other geographically-based restrictions when shopping and accessing information in the EU

Introduction

Cosmetics Europe[i]thanks the European Commission for the opportunity to present its position on geographically-based restrictions on-line in the European Union. It has taken note of the format of the questionnaire developed by the Commission’s services and would like to emphasize that the proposed format makes it hard for a trade association to provide a true response that reflects accurately the view of the overall industry.Thebelowanswer represents the position of the industry.

Cosmetics Europe Position on geo-blocking and other geographically-based restrictions when shopping and accessing information in the European Union

  • Embrace the digital age while maintaining business freedom to meet consumer needs

From being traditionally operating through brick and mortar shops, many of the members of Cosmetics Europe and of its national associations are today fully embracing the new digital area and are developing their marketing and sales activities in an omni-channel and cross-border environment. The position below reflects the positions of companies that sell both off-line and on-line (via their own web-sites and/or through on-line retailers).

The cosmetics industry supports the objective of the Digital Single Market initiative to give better access to goods and services on-line across Europe by addressingunjustified barriers and by increasing the confidence of customers and businesses when they buy or sell cross-border in the single market.The industry fully recognizes the opportunities raised by the development of a digital single market. However, it also notes the importance for business to remain free to decide how it should itself best meet the consumers’ needs and to organize its distribution in a way compatible with individual business structures.

  • Take un/justified geo-blocking situations on a case by case basis

Geo-blocking is defined as business practices resulting in different treatment –in terms of price or other conditions – grounded on the recipient’s residence or nationality. Whilst geo-blocking may on a case-by-case basis be considered as an unjustified technical measure to block or limit access to a certain service, or to re-direct the consumer to an alternative web-site on a discriminatory basis, the targeted offers by suppliers to their consumers may be objectively justified. No specific situations should be considered as de facto constituting unjustified geo-blocking. Possible discriminatory practices must be addressed on a case-by-case basis and are best tackled by enforcing the existing single market acquis, or at least based on principles which allow taking into account economic market realities.

  • One size does not fit all: Uphold fundamental principles of contractual freedom, rights to pursue economic activity and the possibility for business to ensure consumer needs and expectations can be satisfied in accordance with national and EU laws

Cosmetics Europe considers that there are justifications to targeted on-line trade and that any action by the legislator to prevent geo-blockingcould not touch upon the fundamental principles of contractual freedom and the manufacturers’ rights to freely pursue an economic activity[1]. There is not a “one-size fits all” solution and companies should remain free to adopt the business model of their own choice, depending on the type of products sold. Companies when making the business decision whether, or how, to target customers will take business driven decisions, depending on market conditions, and considering overall operational or compliance costs as well as costs due to the location, such as delivery or VAT costs. Consumer preferences or expectations are weighed in when making the cost-benefit analysis. The consumer experience is paramount to industry. Cosmetics companies want to be close to their consumers and the consumers shall feel comfortable that they can approach the manufacturers and distributors in a way that meets their expectations. Business anddistribution models will additionally need to integrate regulatory requirements and any potential liabilities that may be triggered in connection with the use of the products.

Moreover, and taking into account the above,compliance with the requirements of the Cosmetics Products Regulation[2] doesnot always enable companies to adopt an EU-wide approach for the distribution of theirproducts.This can be illustrated by the following examples:

  • The harmonized Cosmetics Product Regulation imposes specific language labelling requirements (Article 19.5 CPR) on the products sold.Therefore, to remain compliant with the Regulation, companies will need to organize business in order to provide for the logistics to label (or overlabel) products in the appropriate language in case of cross-border sales. To that effect and for some national markets, the cost of distribution/re-labellingfor the purpose of on-line sales may not be economically justified. In addition, in the case of a complete prohibition of geo-blocking, companies could not anticipate on which markets their products would end up. Arguably, companies would have to label products in all 28 EU languages which is not possible out of practical (i.e., products are kept as small as possible out of sustainable considerations) and economic reasons. Consumers would then be confronted with health and safety labels in different languages, and companies considered as non-compliant with EU law. Whether or not such sales can be considered as passive sales and would therefore not be a problem for producers has become more and more unclear recently.
  • Further, Article 23 of the Cosmetics Product Regulation imposes a strict cosmetovigilance system whereby the Responsible Person[3] shall report the occurrence of any serious undesirable effect in a country to the competent authority of that specific country.For their off-line and on-line sales, companies need to put in place relevant notification systems. Therefore, to be able to enforce an efficient cosmetovigilance notification system and ensure the highest level of consumer confidence,companies may choose national on-line approaches to ensure that the appropriate national services are available and customized to these specific consumers (for example the need to be able to communicate withthe consumers on an undesirable effect in their national language).
  • Cosmetic companies make claims on their products that may vary between member states. As recognized by case law of the Court of Justice of the European Union companies when making claims shall take into account specific linguistic, cultural and socio-economic factors that may justify national approaches[4].
  • The general principle of the manufacturers’ right to freely pursue their activity (recognized by case law of the CJEU and the Charter of Fundamental Rights) implies that marketing strategies and advertising campaigns sometimes vary in timing and from country to country. To that effect, targeted approaches that may also involve specific Intellectual Property Rights may justify national wide approaches by the manufacturers, to ensure consistencyin the on-line and off-line environments.

Therefore Cosmetics Europe calls on the European Commission to:

  • Uphold the fundamental principles of contractual freedom and the rights to pursue an economic activity to enable companies to satisfy consumer needs and expectations while remaining in compliance with EU and national legislations; and
  • Consider that unjustified geo-blocking can only be tackled on a case-by-case basis.

1

[1]The Fundamental Right to conduct one’s business is set out in Article 16 of the Charter of the Fundamental Rights of the European Union

[2] Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on cosmetics products, OJ L 342/59, of 22.12.2009

[3]The Responsible Person as defined in the Cosmetics Regulation is responsible for each cosmetic product placed on the market and ensures its compliance with the obligations set out in the regulation. Typically, companies will designate one single entity in the European Union as the Responsible Person.

[4]Case C-220/98, Estée Lauder Cosmetics vs. Lancaster [2000] ECR I-00117, paragraph 29.

Cosmetics Europe – The Personal Care Association is the trade association representingEurope’s EUR 70 billion cosmetic, toiletry and perfumery industries since 1962. Cosmetics Europe membership includes international companies and national associations of the European Member States and beyond. Cosmetics Europe represents directly and indirectly the interests of more than 4000 companies ranging from international cosmetics manufacturers to small family-run businesses operating in niche markets. Cosmetics Europe is based in Brussels, Belgium and registered in the EU Transparency Register (No: 83575061669-96).