CJEU in surprise judgment: zero rating is illegal under EU law

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Contribution by: Jesper Lund, Chairman EDRi member, IT-Political Association of Denmark

Europe’s highest court has put an end to a long-standing legal battle around the EU’s Net Neutrality Regulation. In a landmark judgement published last week, the Court of Justice of the European Union (CJEU) confirmed what EDRi and its members have argued for years: that zero rating is illegal under EU law because it violates the neutrality obligations of internet access providers.

Zero rating is a widely used commercial practice which exempts certain online services from data caps of Internet Access Services, especially on mobile networks. This is considered a violation of basic net neutrality principles by digital rights organisations because of the incentives for using specific services invariably created by zero rating.

The Net Neutrality (Open Internet) Regulation (EU) 2015/2120 does not directly mention zero rating. Article 3(2) only requires that agreements on price, data volumes and speed shall not limit the exercise of end-users’ right to net neutrality set out in Article 3(1). The official regulatory guidelines to the Regulation have a lengthy and very complex section on zero rating, arguably to compensate for zero rating being completely absent in the Regulation text itself.

Long-standing legal battle

This complex legal setup has set the scene for four CJEU judgments on net neutrality thus far, all relating to disputes about zero rating.

The first judgment on 15 September 2020 in the case Telenor Magyarország concerned a practice where the zero-rated services are not throttled when the data cap has been exceeded. This involves a direct technical discrimination of internet traffic. As expected, the CJEU ruled that the practice of the Hungarian provider violates the prohibition on discriminatory traffic management in Article 3(3) as well as Article 3(2).

On 2 September 2021, the CJEU delivered its latest judgments in three cases where German administrative courts had asked detailed questions about the legality of zero rating when combined with limitations on roaming in other countries, tethering (smartphone as WiFi hotspot) and speed restrictions for all video streaming.

A bombshell judgement

Instead of examining the specific questions put forward by the German courts, the CJEU succinctly remarks that those questions were all based on the false premise that zero rating would itself be compatible with EU law. In three word-for-word identical short judgments the CJEU then explains that zero rating is not compatible with EU law, and this incompatibility remains irrespective of any limitations on zero rating, e.g. when using roaming or tethering.

The critical aspect of the three judgments is that zero rating, being based on commercial considerations, does not satisfy the general obligation in Article 3(3) of the Net Neutrality Regulation on equal treatment of all traffic without discrimination or interference. This failure stems from the very nature of zero rating, which means that there is a violation of Article 3(3) even without the selective throttling after exceeding the data cap in the earlier case, simply because of the incentives for using specific services that arise from zero rating.

Agreements with end-users under Article 3(2) cannot derogate from the obligation of equal treatment of all traffic in Article 3(3). As also established by the CJEU in the Telenor Magyarország judgment, there is no need for examining the compatibility of a conduct with Article 3(2), such as a case-by-case assessment using the BEREC Guidelines on zero rating, when a violation of Article 3(3) has already been determined.

A big win for users

With this line of reasoning, the CJEU effectively turns three cases about ostensibly minor aspects of current zero rating practices into one bombshell judgment which authoritatively says that zero rating as such is incompatible with EU law (the Net Neutrality Regulation).

It is highly perceivable that Internet Access Providers will do their utmost to get this interpretation reversed in a future CJEU judgment. However, until that happens, the judgments of 2 September 2021 will be binding on regulatory authorities when assessing the many zero-rating practices currently in use throughout the EU. This will have profound implications for the protection of people’s rights under European net neutrality law.

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