(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.
Along very similar lines, the OFT noted that the restrictions on discounting as practiced in the online booking sector may have created barriers to hotel booking platforms’ entry and/or to their achievement of sufficient scale, and that the network of similar restrictions may have exacerbated those anticompetitive effects. It is not immediately clear, however, how the investigated parties’ commitments as accepted by the UK competition authority are going to soothe these specific concerns.
As seen above, eligibility for discounts is limited to those consumers who have joined a closed group and made a previous purchase. Arguably, the prior booking requirement in particular might dissuade consumers from using an entrant hotel booking platform, also taking into account that hotel room bookings might be infrequent. The fact that only purchases made after entry into force of the Final Commitments are considered would not seem to make much difference, given the currently entrenched market positions of the big OTAs. Furthermore, even if discount information can be made available to customers having joined a closed group, the new platform is at at some disadvantage vis-à-vis incumbents who already have access to an extensive customer base and, moreover, are likely to employ subtle data analysis skills in order to optimally focus discounting strategies. It can also be doubted whether informing the general public about the opaque availability of “discounting schemes” will provide enough incentives to overcome consumers’ penchant for single-homing (even if consumers might become more willing to shop around once aware of discounted offers).
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.
Along very similar lines, the OFT noted that the restrictions on discounting as practiced in the online booking sector may have created barriers to hotel booking platforms’ entry and/or to their achievement of sufficient scale, and that the network of similar restrictions may have exacerbated those anticompetitive effects. It is not immediately clear, however, how the investigated parties’ commitments as accepted by the UK competition authority are going to soothe these specific concerns.
As seen above, eligibility for discounts is limited to those consumers who have joined a closed group and made a previous purchase. Arguably, the prior booking requirement in particular might dissuade consumers from using an entrant hotel booking platform, also taking into account that hotel room bookings might be infrequent. The fact that only purchases made after entry into force of the Final Commitments are considered would not seem to make much difference, given the currently entrenched market positions of the big OTAs. Furthermore, even if discount information can be made available to customers having joined a closed group, the new platform is at at some disadvantage vis-à-vis incumbents who already have access to an extensive customer base and, moreover, are likely to employ subtle data analysis skills in order to optimally focus discounting strategies. It can also be doubted whether informing the general public about the opaque availability of “discounting schemes” will provide enough incentives to overcome consumers’ penchant for single-homing (even if consumers might become more willing to shop around once aware of discounted offers).
(To be continued)