(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 widespread use of retail MFN clauses in the MPI industry could have hampered the development of the insurer’s direct sales channel. This means that it cannot be excluded that, once any type of MFN clause banned, the insurer will have more incentives to invest in making her own direct online channel grow.
At any rate, when a narrow MFN clause produces anticompetitive effects, it might still be possible to demonstrate the occurrence of specific efficiencies outweighing the harm to competition. Thus, it could be alleged that narrow MFNs prevent the insurer from free-riding on PCW’s investments. However, there might be alternative, less restrictive mechanisms than a narrow MFN clause to prevent this from occurring. For instance, consumers that use the PCW’s facilities for search and then purchase on the insurer’s website are rather easily identifiable by way of cookies or other means, and the contract between the insurer and the PCW can require that also in this case a fee must be paid to the latter.
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 widespread use of retail MFN clauses in the MPI industry could have hampered the development of the insurer’s direct sales channel. This means that it cannot be excluded that, once any type of MFN clause banned, the insurer will have more incentives to invest in making her own direct online channel grow.
At any rate, when a narrow MFN clause produces anticompetitive effects, it might still be possible to demonstrate the occurrence of specific efficiencies outweighing the harm to competition. Thus, it could be alleged that narrow MFNs prevent the insurer from free-riding on PCW’s investments. However, there might be alternative, less restrictive mechanisms than a narrow MFN clause to prevent this from occurring. For instance, consumers that use the PCW’s facilities for search and then purchase on the insurer’s website are rather easily identifiable by way of cookies or other means, and the contract between the insurer and the PCW can require that also in this case a fee must be paid to the latter.
(To be continued)
