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Showing posts from May, 2014

UN Special Rapporteur's concerns regarding Italy's online copyright enforcement

F. La Rue, here (Word file), p.13 f.

"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."

Old friends in new frocks? MFN clauses in the online hotel booking sector/19

(Previous installments here)

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.

Old friends in new frocks? MFN clauses in the online hotel booking sector/18

(Previous installments here)

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.

Does Google want to own the online travel-booking market?

TheEconomist, here.

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..."

Old friends in new frocks? MFN clauses in the online hotel booking sector/17

(Previous installments here)

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.

Old friends in new frocks? MFN clauses in the online hotel booking sector/16

(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.

Old friends in new frocks? MFN clauses in the online hotel booking sector/15

(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 - price.
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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/14

(Previous installments here)

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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/13

(Previous installments here)

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…

FAZ: Ausgewogener Journalismus oder persönliche Kampagne gegen Google?

14. Mai 2014

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.

Old friends in new frocks? MFN clauses in the online hotel booking sector/12

(Previous installments here)

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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/11

(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 market. 
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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/10

(Previous installments here)

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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/9

(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 and policies.
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, also t…

Case C-74/14, Eturas – computerised cartels and limits on price discounts for travel package tours, here.

Official English version now available.

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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/8

(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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/7

(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…

Old friends in new frocks? MFN clauses in the online hotel booking sector/6

(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. 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 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…