"The issue of intellectual property (...) was discussed during the visit and a number of concerns were raised regarding
the adoption of additional measures for the protection of copyright at the
expense of freedom of expression. For the Special Rapporteur, the establishment
of norms protecting intellectual property should remain exclusively within the
purview of the Parliament.
The Special Rapporteur also underlines that, although AGCOM may by law apply some limitations on online content, the removal of online content should be decided by the Court on a case-by-case basis."
From a more evolutionary perspective, it is also noteworthy
that in an era of big data firms at the different levels of the value chain have the potential to constantly gain better market insights.
Based on the results of data analysis, both producers and intermediaries may experiment by way of fine tuning their marketing
practices. In some respect, the uninterrupted and abundant flow of real-time, potentially
insightful data makes it imperative for every market participant to continually experiment and adapt.
Finally, and more generally, it would be unreasonable to turn a blind
eye to the fact that the economic value extracted from consumers’ personal data is
essential to many Internet entrepreneurs. Safeguarding competition in an era of
big data requires a detailed understanding of how exactly user information fits
into these firms’ business models.
This is the comment I left on the Economist's website: "As possible game changers, also worth mentioning are the investigations and decisions by competition authorities in the online hotel booking sector.They could make advertising in Google less crucial..."
This and other anticompetitive potentials of retail-price MFNs may be strengthened in the presence of a network of such clauses. Thus, the German Competition Authority found that the vast majority of hotels in Germany was under a retail MFN obligation with at least one of the three most popular hotel booking platforms, and this made practically impossible for an entrant platform to pursue a “consumers’ side” initiation/growth strategy based on commission-cuts and lower display prices.
(Previous installments here)
The danger of anticompetitive foreclosure just mentioned should deserve a high level of attention by competition policy enforcers dealing with these and other practices involving online platforms. In fact, the successful market entry and expansion of this type of Internet entrepreneurs critically depend on their ability to attract two sufficiently sizeable groups of customers.
(Previous installments here)
First, we have seen that there are “spillover” effects from retail
MFNs for other platforms and channels. In a context of seller-imposed retail
prices, or “agency” model, a single
wide MFN clause between a seller and a platform effectively prevents any other
platform from displaying prices lower than the MFN’d price (e.g. cheaper hotel
room rates, lower insurance premiums, etc.), thus creating a floor – or minimum
By contrast, agency pricing as such is not necessarily conducive to rate parity, or price
fixing, since it could well be in the seller’s interest to display different prices
on different platforms. Thus, for instance, the mobile game Hundreds is priced CHF5.00 on iTunes and CHF4.75 on Google Play, while the price of the racing
game Impossible Road is the same on both platforms.
Actually, competition authorities in the UK and Germany have
expressed serious concerns exactly because
retail MFN clauses prevent expansion and entry strategi…
In conclusion, and based on the above reflections, some
tentative answers to the central question of this serial: What is really new about retail MFN clauses?
For years already, competition/antitrust circles have discussed
whether anticompetitive motives and efficiency justifications underlying the
adoption of vertical restraints in the off-line world equally applied to
on-line sales. Thus, for instance, most participants in an OECD roundtable on vertical
restraints for on-line sales agreed that “a new economic and regulatory
framework was not needed to assess the competitive implications of vertical
restraints” in the Internet economy. After all, as recently argued by Alexander
Italiener, the EC Director-General for Competition, some of the actual issues emerging
from e-commerce, such as how to deal with on-line resellers accused of
free-riding on others’ promotional efforts, are hardly a novelty. Differences
in scale and speed notwithstanding, mail orde…
Notwithstanding, the Competition Commission validly argues that narrow MFNs are much less a cause for concern than wide MFNs. Generally, under narrow MFNs, competition between PCWs is not critically restricted, since PMI providers can quote different premiums on different PCWs. Nor is entry to the PCW market substantially hampered, since insurers can pass through to lower prices the smaller CPA fees required by new entrants. Moreover, an innovative PCW can still be “rewarded” by the insurer by quoting a lower price on the PCW’s platform.
The Commission also recognizes that, under specific circumstances, there might still be some tangible anticompetitive effects. However, as seen above, the Commission maintains that, at present, narrow MFNs impose significant network effects only in very few instances, and, therefore, their overall impact on the market is much limited. The Commission’s reasoning is not totally convincing, though. In particular, the widesp…
Europäischer Gerichtshof bekräftigt "Recht auf Vergessenwerden" , S. 1: Die Welt ist keine Google, S. 1; Im Netz verweht, S. 2; Strassburger Applaus, S. 2; Ehrverletzende Vorschläge, S. 2; Leben, um es auch wieder vergessen zu können, S. 9; Internetnutzer können persönliche Daten löschen lassen, S. 15; Daten wie Wasser, S. 15.
It can be argued, however, whether the Competition
Commission’s strong concern with PCWs’ survival in the interest of consumers,
and supporting the defense of narrow MFN clauses, is really warranted. First, and contrary to the Commission’s
allegation, it would seem that PCWs can thrive also without narrow MFNs, as the
experience in other industries shows.
Thus, for instance, PCWs in the air travel sector exist and prosper despite the
fact that the prices of flight tickets advertised on the airlines’ own websites
are often lower than the rates displayed on some PCWs.
Furthermore, investing in PCWs despite potential “consumer
leakage” to the insurers' websites could still be worthwhile because of the economic value of personal
data. Typically, a consumer visiting a
PCW in search of a PMI policy has to answer a long list of rather detailed questions
which in particular aim at identifying the consumer’s risk profile. Thus, in
the process of searching a…
(Previous installments here)
Because of convincing evidence that interbrand competition, here
competition between insurance brands measured by the rate of consumers’ price-based
switching, is very effective when exercised on PCWs, the Competition Commission
can be legitimately concerned not to hamper the attractiveness of these
platforms’ business model. However, while the direct anticompetitive effects of
narrow MFN clauses may appear limited, their cumulative, or “network”
effect could still have momentous consequences for competition in the PMI
Once wide MFNs are prohibited, an insurer is able to agree
different PMI premiums with different PCWs. If a PCW retains, or introduces, a
narrow MFN, the insurer will be constrained not to offer on its own website a
premium lower than the price agreed with that PCW. When the same insurer agrees
on a narrow MFN clause with a number of PCWs, the cumulative effect is that the
insurer's directly offered price cannot be lower than t…
The Competition Commission, as part of its investigation
into the PMI industry, found that retail MFN provisions were present in the
contracts between platforms and PMI providers covering the vast majority of
policies sold in 2012 via the four largest PCWs in the UK. In this sector, a retail
MFN clause aims at avoiding that, based on an identical consumer proposition
and risk profile, either an insurer can provide a lower price on any other online sales
channel than it is advertised on the PCW’s website, so called wide (or online-sales) MFNs, or the
insurer can provide a lower price on its own website than it is advertised on
the PCW’s website, so called narrow (or
own website) MFNs.
While narrow MFNs are slightly more widespread than wide
MFNs in the PMI sector, the Competition Commission maintained that wide MFN
clauses have a very significant impact because of what the Commission called a “network
effect:” when a PMI policy sold through PCWs is covere…
(Previous installments here).
It is not difficult to predict a growing attention by
competition enforcers towards vertical restraints involving online platforms active in other industries. In the UK, the Competition Commission found that retail
MFNs are very common also in the motor insurance sector, where buying policies
online through price comparison websites (PCWs) is increasingly popular. The first
PCWs gathered prices visiting private motor insurance (PMI) providers’ websites and extracting
information from those pages algorithmically (so called screen-scraping), also
despite insurers’ widespread opposition to the practice. With time, PCWs were able to
develop stable commercial relationships with PMI providers, who now make
available directly to the PCWs detailed information concerning actual premiums
In order to be survive, PCWs must be attractive to both customers and insurers. To consumers, PCWs offer tools to compare premiums and
policies; to insurers,
1. Should Article 101(1) of the Treaty on the Functioning of the European Union be interpreted as meaning that, in a situation in which economic operators participate in a common computerised information system of the type described in this case and the Competition Council has proved that a system notice on the restriction of discounts and a technical restriction on discount rate entry were introduced into that system, it can be assumed that those economic operators were aware, or must have been aware, of the system notice introduced into the computerised information system and, by failing to oppose the application of such a discount restriction, expressed their tacit approval of the price discount restriction and for that reason may be held liable for engaging in concerted practices under Article 101(1) TFEU?
2. If the first question is answered in the negative, what factors should be taken into account in the determi…
(Previous installments here)
The German competition authority also
noted that there are alternative ways to achieve some of the benefits HRS
ascribes to the retail MFN clause which do not carry the same serious anti-competitive
consequences, such as, by way of example, monthly listing fees, or cookie-based
marketing fees, paid directly by the hotels to the OTAs. These alternative
business models would ensure HRS a direct financial reward for the services it
provides to hotels, irrespective of the actual sales it generates. Another
possibility would be combine a fixed rate, such as a listing fee, with a
variable look-to-book conversion rate.
At any rate, the Bundeskartellamt expects that, once the conditions
for healthy competition in the industry are redressed, business models will develop
that are attuned to the modified market conditions and demands. Interestingly,
the “natural experiment” conducted since April 2012, when HRS pledged not to
enforce the retail MFN clause in its co…
(Previous episodes here) Still,
the protection of sunk and fixed cost investments, a generally accepted benefit
of many vertical restrictions, could potentially apply also to retail MFN clauses. In
the hotel onlinebooking decision, the German competition authority discussed
at length whether the MFN clause employed by HRS, the investigated OTA, aimed
at protecting the investments required for a high-quality online booking offering,
such as a fruitful search experience, and the provision of extensive, and reliable,
information sources, by that promoting quality competition among OTAs. HRS made
the case that it invested heavily in producing a good-quality service in
order to attract customers, and that the employed retail-price MFN limited the diversion
of consumers from HRS’ platform to the hotels’ own websites and to other OTAs. If
consumers discovered that they could find cheaper hotel rates elsewhere, they
might still use the hotel search and other facilities developed by HRS but n…
(Previous installments here)
Allegedly, between the investigated parties there is a “traditional” RPM clause in place, providing that the hotels would establish the room-only rate. Booking.com and Expedia are obliged to use the published rates when offering the hotels' rooms to consumers. Basically, what the former British competition agency declined to analyse was the related restrictive clause in the agreement between hotels and OTAs, i.e. the hotels' obligation that the published rates offered by Booking.com and Expedia would be as favourable as the rates offered to any competing OTA and the rates operated by the hotels themselves.
Tentatively, one of reasons explaining the OFT’s focus on the vertical price fixing element of the investigated practices could be that retail-price MFN clauses stand for largely uncharted terrain, both in economic and legal terms. Another, more consequential reason could be that the effective operation of a retail-price MFN under certain circ…