@WavesBlog: 20 May 2014

Tuesday, May 20, 2014

Big Bad Banks: Bid Rigging and Multilateral Market Manipulation

J. Connor, here.

Network Industries

R. Picker, Spring 2014 Course Slides (1264, pptx download), here.

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 strategies by platforms based on “selective” lower hotel prices and insurance premiums. In fact, due to the spillover effects of wide MFNs, an online retailer cannot use its ability to compete on commissions (or margins) in order to enter the market and try to achieve the critical mass necessary for the platform to survive and, possibly, to thrive. Instead, still under agency but without retail MFNs, the same retailer could pursue a strategy of lowering the commission rate applied to the seller with the expectation that the seller would then display lower prices on the more cost-effective platform.

(To be continued)