Geo-blocking and price discrimination by online marketplaces in the EU The document discusses geo-blocking practices by online platforms that can lead to price discrimination. It analyzes these practices in the context of the EU digital single market. The author conducted an empirical study analyzing prices of music albums on platforms like iTunes, Amazon and Google Play across 5 EU countries. The study found evidence of price differences across countries that are not fully explained by tax regimes or GDP differences. Platforms like iTunes charged consistently higher prices. The document discusses the relevance of addressing geo-blocking and price discrimination to achieve the EU's goals for its digital single market.

1. Geo-blocking and price discrimination
by online marketplaces in the EU
Laurea magistrale in Economia e Management delle
Amministrazioni Pubbliche e delle Istituzioni Internazionali
Università Bocconi
Relatore: Carlo Altomonte
Controrelatore: Mariateresa Maggiolino
ANTONELLA ZARRA
matr. 1495852

2. Introduction
Context
Demand side
consumer
empowerment
search costs
Supply side
wider access to
data
information on
consumers’ behaviour
 The “death of distance” in the digital economy has given rise to the
feeling that everything is just a click away;
 The rise of the Internet as a pivotal driver to foster the achievement of a
Single Market:
 Evidence of geographic barriers in the e-commerce that might enhance
the fragmentation of online markets;
 Concerns by European Commission about those business practices, such
as price discrimination, which might hamper EU market integration.
2

3. Introduction
Contribution of my work
 This thesis aims at analyzing to which extent, in the digital economy,
territorial restraints (in particular geo-blocking), leading to price
discrimination, affect competition and the pursuit of a Single Market.
 Twofold purpose of the research:
 Providing a methodology to classify geo-blocking techniques
carried out by online platforms;
 Detecting the existence of price discrimination based on user’s
location due to geo-blocking restrictions and identifying the
components of the prices, contributing to assess whether price
differentials should be attributed to exogenous variables.
3

4. Geographic price discrimination
An economic perspective (1)
4
 Price discrimination: price differences that do not reflect differences in
costs. In order to maximize their profits, firms charge customers different
prices according to their willingness to pay;
 Geographic price discrimination is a form of third degree price
discrimination: customers’ characteristics are studied to extract the
entire surplus;
 Assumptions:
 Constant marginal costs,
 The producer knows the demand curves,
 Firms must be able to prevent arbitrage (resale by low value consumers
to high-value consumers).

5.  Effects on welfare (compared to uniform pricing): ambiguous a priori
5
QB
MC
P
QA
Country A Country B
pB
pA
qAqu
pU
qu qB
DBDA MRA MRB
-∆ in consumer surplus +∆ in consumer surplus and
and + ∆ deadweight loss -∆ deadweight loss
Geographic price discrimination
An economic perspective (2)

6. Price discrimination
The EU legal framework
 Non-discrimination is one of the pillars at the heart of the EU. It is strictly related
to the “four freedoms” of the Single Market (free movement of goods, capital,
services and people).“Similar situations shall not be treated differently unless
discrimination is objectively justified” (European Court of Justice);
 EU Competition Law: Articles 101 and 102 TFEU
 Case law:
 United Brands case: geographic price discrimination in the cross-border distribution of
bananas,
 iTunes case: it breaks new ground in attempting to transpose to on-line distribution
legal principles on cross-border trade that were developed for physical distribution.
In the iTunes case, geographic price discrimination was feasible thanks to “facilitating
practices” such as the use of credit cards details. In fact, the billing address can be
deemed as a “technological green banana clause” to the extent that it eliminates any
possibility of arbitrage.
6

7. Geo-blocking
The EU legal framework
 Geo-blocking, by preventing consumers in one country from purchasing in other
countries, is a tool used by firms to limit arbitrage across countries, engage in
price discrimination and thus maximizing profits. This is a well-known practice
used in the offline markets, where firms try to obstacle parallel imports.
 Geo-blocking as a result of vertical restraints: restrictions affecting online
market resulting from contractual agreements between digital content owners
and distributors fall within the scope of Article 101 TFEU.
 EU Competition law: Vertical Restraints Block Exemption Regulation (VRBER) and
Commission’s Guidelines on Vertical Restraints;
 Geo-blocking as anti-competitive by object: the Commission is concerned about
the potential competitive harms of geo-blocking, which could be due to vertical
restraints that prevent passive sales;
 Case law on passive sales in the audiovisual sector: the Murphy Judgment and the
Pay TV Case.
7

8. Geo-blocking
Definition and types of geo-blocking
 Types of geo-blocking:
 Blocking measures,
 Rerouting measures,
 Restrictive measures.
 Technical means of geo-blocking:
 IP address-based,
 Payment system-based,
 Personal information-based.
8
“Geo-blocking refers to practices used for commercial reasons, when online sellers either
deny consumers access to a website based on their location, or re-route them to a local
store with different prices” (European Commission).
Source: European Commission

9. Geo-blocking
Levels of geo-blocking
9
Access Choice Purchase After-sale
Goods
Access denied
Re-routing
Different interface
Different prices
Refusal to accept
payment
Refusal to delivery
Refusal to provide
additional services
Refusal to provide
customer service
Refusal to provide
maintenance
support or repair
Digital
Content
Access denied
Re-routing
Restriction on take out a
subscription
Restriction on sign-up for
an account
Different interface
Different
catalogues
Different prices
Refusal to accept
payment
Refusal to
play/stream
content
Refusal to
download content
Ban on playing
content previously
downloaded

10. Geo-blocking in the Single Market
Evidence of g-b on online platforms
10
Barriers
Access Denied
Re-routing
Restriction on subscription/
sign-up
Choice Different interface
Different catalogue
Different prices
Purchase Refusal to accept payment
Refusal to
play/stream/download content
After-sale Ban on playing content
previously downloaded
The Spotify Pricing Index
Netflix vsVPN
Pandora

11. Geo-blocking in the Single Market
The relevance of g-b in the EU political
agenda
One of the priorities of Juncker’s Commission is the establishment of a Digital Single
Market (DSM), which “aims to open up digital opportunities for people and business
and enhance Europe's position as a world leader in the digital economy”.
The first pillar of the DSM aims at removing the barriers to cross-border online
activities, including geo-blocking.
Initiatives
 Public consultation: more than 80% of respondents have faced geo-blocking,
 Sector inquiry on e-commerce: it aims at reducing information asymmetries and
understanding the dynamics that are occurring in the EU e-commerce,
 Consumers protection: reformulation of the e-Commerce Directive and the
Services Directive,
 Copyright reform: proposal for cross-border portability of online content services
and an action plan for updating copyright rules.
11

12. Empirical Analysis
Methodology and data
Web scraping: I ran a two months experiment collecting data with the help of the
web scraping technique on three platforms, iTunes, Amazon and Google Play;
Analysed products: I collected the prices of a sample of six albums. I chose audio-
visual content (music) instead of physical goods, as they do not involve logistics costs
and/or national-based standards that could influence the price;
Bias removal: the experiment was carried out in a controlled system by checking
for any inconsistencies and removing possible sources of noise.
Once a day at the same time, a simulation
of the purchasing experience in five EU countries:
 France
 Italy
 Germany
 Netherlands
 United Kingdom.
12
32
days
of price
collection
3 platforms
5
countries
6
albums
6720
observations

13. Search
Collection
Monitoring
3 stages
OnlineVPN
Browser’s plug-in
Cloud software
(PriciusTM )
3 tools
Empirical Analysis
The experiment
13
The use of PriciusTM
An open source software conceived to help European Commission to detect
and monitor price discrimination through the use of big data.
1. 2. 3. 4.

14. Empirical Analysis
Results
14
Germany France Italy Netherlands
United
Kingdom
Mean
Platform
Artist
Adele
9,99 9,99 11,99 9,99 9,99 11,99 10,09 9,99 11,99 10,01 9,74 11,99 10,45 13,07 13,07 10,11 10,56 12,21
Coldplay
9,09 7,79 10,99 10,99 8,49 10,99 10,99 8,49 10,99 8,64 9,99 10,99 13,07 13,07 13,07 10,56 9,56 11,41
David Bowie
8,09 7,99 9,99 10,99 6,27 9,99 10,99 7,99 9,99 9,10 7,99 9,99 10,45 10,45 11,76 9,92 8,14 10,34
Debussy
7,39 9,49 8,99 7,99 9,49 8,99 8,09 9,49 8,99 6,37 9,12 8,99 7,18 12,41 10,45 7,40 10,00 9,28
Rolling
Stones 18,29 16,99 19,99 23,69 16,99 19,99 25,09 16,99 19,99 17,29 16,99 19,99 22,22 18,95 26,15 21,32 17,38 21,22
The Blues
Brothers 9,79 8,71 11,99 11,99 8,71 11,99 11,99 8,71 11,99 8,64 7,96 11,99 4,57 11,39 11,76 9,40 9,10 11,94
Mean
10,44 10,16 12,32 12,61 9,99 12,32 12,87 10,28 12,32 10,01 10,30 12,32 11,32 13,22 14,38 11,45 10,79 12,73
• On average, iTunes, which is the market leader, charges higher prices
• Evidence of dynamic pricing on Google Play Store

15. Empirical Analysis
Country-based price differentials
 The graphs show the deviation of the mean for
each product’s price using the average price
across countries as reference (the “0”);
 Amazon: on average, Italian and French users
pay respectively 10% and about 12% more than
other users; buying from the Netherlands
ensures savings of almost 12%;
 iTunes and Google Play: UK users face higher
prices (+11,60% and + 24,54% ).
15
-7,28
10,06
11,55
-11,39
-2,94
-15
-10
-5
0
5
10
15
DE FR IT NL UK
Pricedifferential[%]
-2,90 -2,90 -2,90 -2,90
11,60
-5
0
5
10
15
DE FR IT NL UK
Pricedifferential[%]
-6,23 -8,52
-5,00 -4,79
24,54
-10
-5
0
5
10
15
20
25
DE FR IT NL UK
Pricedifferential[%]
Amazon
iTunes Google Play

16. Empirical Analysis
Impact of different tax regimes on prices
16
9,98 9,86 9,61 9,74
11,50
2,34 2,46 2,71 2,59
2,88
0
5
10
15
DE FR IT NL UK
Price[%]
NET PRICE VAT
8,46
10,09 10,04
7,91
9,06
1,98
2,52 2,83
2,10
2,26
0
2
4
6
8
10
12
14
DE FR IT NL UK
Price[€]
NET PRICE VAT
8,23 7,99 8,02 8,13
10,58
1,93 2,00 2,26 2,16
2,64
0
2
4
6
8
10
12
14
DE FR IT NL UK
Price[€]
NET PRICE VAT
By removing theValueAddedTax (VAT) from the
average price per country, net prices are not
equalized.Thus, different tax regimes do not explain
different prices.
Country VAT
France 20%
Germany 19%
Italy 22%
Netherlands 21%
United Kingdom 20%

17. Empirical Analysis
Comparing differentials in GDP per capita
and price
17
-30
-20
-10
0
10
20
30
DE FR IT NL UK
Differential[%]
Amazon iTunes Google Play GDP per capita
Amazon: Users that try to download from Italy and France face higher prices (+11,55% and
+10,06%) although the GDP per capita are the lowest (-24,36% and -4,39%).

18. Thank you!