As the world economy becomes more integrated, it is increasingly common for the same product to be offered in many different national markets, often with very little or no local modification. Despite the sameness of the product, however, its price can vary, sometimes significantly, depending upon the country in which it is purchased, a process known as geoblocking.
For the most part, customers understand and accept these variations. But their understanding may be challenged when the goods are purchased on-line. In that case customers often believe that they should be quoted the same price absent charges for shipping and tax wherever in the world they order from, since the product is presumably being shipped from the same location and the seller cannot tell where the customer is located. Their acceptance may become even more strained when purchasing digital goods because in this case the production cost is basically the same no matter where the good is made and, if the product is downloaded, “shipping” costs are close to zero.
As it turns out, neither of the above assumptions is true. Companies can tell, with a fair level of precision, exactly where a customer is located when he or she purchases a product online. In addition, there a number of legitimate reasons why a company might logically vary its prices by region, even for digital goods.
Still, geoblocking for digital goods has sometimes generated opposition as customers (and policymakers) in high priced locations complain that they are paying too much. Why shouldn’t the same digital products be available at the same price to all locations in the world? Are these complaints legitimate? Why do companies need to track the location of their customers? Are there valid reasons why companies may tailor their sales strategies geographically? Does the practice raise anticompetitive concerns? Should governments attempt to fashion a remedy? This report answers these questions by explaining some of the v