European Commission, Competition Policy Brief, here.
Monday, June 16, 2014
OLG Hamm: Keine Erschöpfung an digitalen Kopien von E-Books und Hörbüchern
Urteil v. 15.05.2014, Az. 22 U 60/13, hier.
Friday, June 13, 2014
Thursday, June 12, 2014
CMA proposes ban on "wide" retail price MFN between price comparison websites and insurers in the private motor insurance market (and ban on "narrow" MFN if "equivalent behaviour")
Provisional decision on remedies here.
See also Appendices 4.1 (Single-homing and the threat of delisting), 4.2 (Extending the remedy to narrow MFNs), and 4.3 (Effectiveness of advertising expenditure on PCWs), here.
Remedy proposed (para 4.71):
(a) A prohibition on PCWs and PMI providers entering into or performing agreements that include an MFN relating to the sale of PMI, except narrow MFNs, where ‘narrow MFNs’ are defined as covering the insurance provider website but excluding possible aggregator platforms.
(b) A prohibition on behaviours which have as their effect the elimination or reduction of competition between PCWs in a similar way to the harm identified by wide MFNs (namely, restricting entry to the PCW market, reducing innovation by PCWs and increasing premiums for motor insurance to the retail customer). This measure will apply to those PCWs which generate more than 300,000 PMI sales per year [this would mean that narrow MFNs which have the same anticompetitive effects as wide MFNs are also prohibited, SV ]
(d) In order to monitor equivalent behaviours, those PCWs above the 300,000 PMI sales per year threshold will be required to submit compliance statements to the CMA every quarter for the first two years following the order and then once a year. These compliance statements would need to list all delisting actions during the relevant period, setting out the reasons for the delisting.
See also Appendices 4.1 (Single-homing and the threat of delisting), 4.2 (Extending the remedy to narrow MFNs), and 4.3 (Effectiveness of advertising expenditure on PCWs), here.
Remedy proposed (para 4.71):
(a) A prohibition on PCWs and PMI providers entering into or performing agreements that include an MFN relating to the sale of PMI, except narrow MFNs, where ‘narrow MFNs’ are defined as covering the insurance provider website but excluding possible aggregator platforms.
(b) A prohibition on behaviours which have as their effect the elimination or reduction of competition between PCWs in a similar way to the harm identified by wide MFNs (namely, restricting entry to the PCW market, reducing innovation by PCWs and increasing premiums for motor insurance to the retail customer). This measure will apply to those PCWs which generate more than 300,000 PMI sales per year [this would mean that narrow MFNs which have the same anticompetitive effects as wide MFNs are also prohibited, SV ]
(d) In order to monitor equivalent behaviours, those PCWs above the 300,000 PMI sales per year threshold will be required to submit compliance statements to the CMA every quarter for the first two years following the order and then once a year. These compliance statements would need to list all delisting actions during the relevant period, setting out the reasons for the delisting.
Wednesday, June 11, 2014
Putting the right to data portability into a competition law perspective
I. Graef, J. Verschakelen, P. Valcke, here.
Tuesday, June 10, 2014
Sunday, June 08, 2014
Saturday, June 07, 2014
Friday, June 06, 2014
Key points in the Open Internet Project's legal action (Google Search)
OIP, here.
Refusal to provide referrer data evoking privacy reasons, as easily anticipated (page 27).
Refusal to provide referrer data evoking privacy reasons, as easily anticipated (page 27).
Thursday, June 05, 2014
No Market Power Needed In 2nd Circuit Vertical Restraint Cases
United States v. American Express Co, No. 10-CV-4496, May 7, 2014 order, here.
CJEU: The ‘temporary copies’ exception applies to on-screen and cached copies
C‑360/13 Public Relations Consultants Association Ltd v Newspaper Licensing Agency Ltd and Others, here.
AG: A Member State can authorise libraries to digitise books and make them available at electronic reading posts
C-117/13 Technische Universität Darmstadt v Eugen Ulmer KG Press Release here.
"...se contenter d’une simple offre du titulaire du droit d’auteur permettrait de subordonner l’application de ladite exception à des décisions unilatérales, ce qui, en conséquence, priverait l’exception d’effet utile pour les établissements concernés. L’interprétation téléologique, quant à elle, exige également, compte tenu de l’objectif d’intérêt général poursuivi par le législateur de l’Union, à savoir promouvoir la diffusion du savoir et de la culture, que l’utilisateur puisse invoquer cette exception (24).
"...se contenter d’une simple offre du titulaire du droit d’auteur permettrait de subordonner l’application de ladite exception à des décisions unilatérales, ce qui, en conséquence, priverait l’exception d’effet utile pour les établissements concernés. L’interprétation téléologique, quant à elle, exige également, compte tenu de l’objectif d’intérêt général poursuivi par le législateur de l’Union, à savoir promouvoir la diffusion du savoir et de la culture, que l’utilisateur puisse invoquer cette exception (24).
...
De la même façon qu’il est loisible à un utilisateur d’une bibliothèque, dans les limites posées par la législation nationale, de photocopier les pages des ouvrages physiques présents dans le fonds et à une bibliothèque de le permettre, l’utilisateur peut imprimer des pages d’une copie numérique et la bibliothèque peut le permettre (57)"
De la même façon qu’il est loisible à un utilisateur d’une bibliothèque, dans les limites posées par la législation nationale, de photocopier les pages des ouvrages physiques présents dans le fonds et à une bibliothèque de le permettre, l’utilisateur peut imprimer des pages d’une copie numérique et la bibliothèque peut le permettre (57)"
Wednesday, June 04, 2014
HRS Decision in English (retail MFN)
Bundeskartellamt, here. For "general" information purposes only.
Tuesday, June 03, 2014
Monday, June 02, 2014
Saturday, May 31, 2014
Friday, May 30, 2014
Wednesday, May 28, 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."
"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.
Tuesday, May 27, 2014
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.
Monday, May 26, 2014
Friday, May 23, 2014
Thursday, May 22, 2014
Making Your Privacy Practices Public
K. Harris, Attorney General, California Department of Justice, here.
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..."
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.
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.
Wednesday, May 21, 2014
Nespresso s'engage : le droit de la concurrence l'emporte-t-il ? Pas vraiment !
C. Bialès, M. Bechini, F.-X. Boudy, M. Carbonnel,G. de Boiscuillé, T. Schrepel, ici.
Old friends in new frocks? MFN clauses in the online hotel booking sector/16
(Previous installments here)
Tuesday, May 20, 2014
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)
Monday, May 19, 2014
Friday, May 16, 2014
Most-Favored-Nation Clauses Revisited: Legal and Economic Analysis and Proposal for a Guideline
G. Gürkaynak, A. Güner, J. Filson, S. Diniz, here (Word file).
Thursday, May 15, 2014
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 order companies in the pre-Internet
time were accused of doing broadly the same.
With regard specifically to retail MFN clauses as used by multi-sided platforms, before asking questions
about the suitability of our current economic and regulatory framework in order
assess them, it should be noted that this type of vertical restraint might raise some "original" competition concerns.
(To be continued)
Wednesday, May 14, 2014
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 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)
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.
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.
Tuesday, May 13, 2014
A New Privacy Paradox: Young people and privacy on social network sites
G. Blank, G. Bolsover, E. Dubois, here.
Monday, May 12, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/12
(Previous installments here)
Third, shifting the focus from the price to other elements of the offer could actually be in the interest of consumers. Economists have long recognized that boundedly rational consumers facing decisions on complex products and services might find it so difficult to compare the different offers available to them that they tend to inertia. The suppliers of products and services can reinforce consumers’ behavioural biases through the strategic adoption of over-complexity in pricing and/or qualitative characteristics of their offers, and may even try to hamper the development of new business models designed to overcome consumer inertia. However, there are products and services that are inherently difficult to compare, such as, possibly, insurance products. If the comparison website focuses on price, the offer at the top of the list, i.e. the cheapest insurance product, could well turn out to be of lower value to the consumer when the whole deal is taken into account.
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 and comparing the most suitable offers, even if consumers do not
“click through” to the insurers’ websites to finalize the purchase, PCWs gather
information, also in aggregated form, that can be of substantial economic value to
insurers and other market participants.
(To be continued)
Saturday, May 10, 2014
Friday, May 09, 2014
DRAFT UK COPYRIGHT REGULATIONS 2014
Secondary Legislation Scrutiny Committee, Report and Transcript.
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 the price it offers on
any of its partner PCWs’ websites. The end result is that the price displayed
by the insurer on its own website would be the same as the least competitive partner PCW.
Therefore, one unintended consequence of the cumulative
effect of narrow MFNs could be that the PMI providers with significant and
high-profit direct sales would still prefer charging the same price through all
PCWs in order to maintain the attractiveness of their own channel, so that the
narrow MFN clause becomes a de facto
wide MFN clause. Of course, this in turn will depend on a number of factors,
such as the strength of the PMI’s brand and the presence of alternative channels
to efficiently market PMI policies, which make direct sales less attractive to
the PMI.
(To be continued)
Thursday, May 08, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/10
(Previous installments here)
(To be continued)
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 covered by at least one wide MFN clause with one PCW, this stops any other PCW offering cheaper premiums for that policy. In other words, a wide retail
MFN clause with a single PCW constrains the pricing of the insurance policy at
issue on all PCWs. Significantly, the Competition Commission also noted that most
of the policies sold through PCWs are covered by at least one wide MFN clause
with one PCW.
Much in line with the Bundeskartellamt’s competition
assessment of retail MFN clauses in the hotel online booking case briefly
outlined above, the Competition Commission, in the provisional findings
published last December, found that wide MFN clauses reduce competition and
lead to higher premiums. Among
the possible remedies, the Commission envisaged a prohibition on wide MFN
clauses on price comparison websites. Narrow MFN clauses, however, according to the Competition Commission should not
be banned, because their anticompetitive effects are much limited. Apparently,
the Competition Commission took in some consideration the main argument put
forth by platforms in defense of narrow MFN clauses. Without some form of MFN, the
PCWs maintained that the end consumer would go to a price comparison site for
search, but then switch to the insurer in order to make the actual purchase, on the
premise that the insurer would be willing to pass on to the end consumer at
least part of the CPA fee. In the short term, the end consumer is better off
because she saves a small amount on her insurance policy premium. Longer term, however, the tangible benefits brought to consumers by PCWs would likely evaporate.
(To be continued)
Wednesday, May 07, 2014
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 to niche ones, PCWs offer an appealing shop window where to present their
products. In order to attract customers to their platforms, PCWs spend
substantial amounts of money in TV advertising, in adverts to Google,
etc. When a customer finds a PMI policy which she wishes to buy, she clicks
through to the insurer’s website and purchases the desired product. Typically,
the PMI provider pays the PCW a fee for every policy purchased (so called cost
per acquisition – CPA - fee), which is not based on the actual premium paid by the consumer.
(To be continued)
Tuesday, May 06, 2014
Case C-74/14, Eturas – computerised cartels and limits on price discounts for travel package tours
Eulawradar.com, 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 determination as to whether economic operators participating in a common computerised information system, in circumstances such as those in the main proceedings, have engaged in concerted practices within the meaning of Article 101(1) TFEU?
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 determination as to whether economic operators participating in a common computerised information system, in circumstances such as those in the main proceedings, have engaged in concerted practices within the meaning of Article 101(1) TFEU?
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 contracts with hotels, would seem to demonstrate
that OTAs are not doomed to develop into financially unsustainable “hotel
search engines.” In fact, despite the demise of the retail MFN provision, HRS
was able to safeguard its position as a leading OTA in the German market. However,
this can also depend on the consumers’ tendency not to switch between OTAs (“singlehoming”),
an attitude reinforced by the best price guarantee still dominant in the hotel
industry.
Possibly, given the German competition authority’s focus on the
retail MFN clause, it was not deemed
necessary to assess whether the vertical price fixing provision contained in
the “agency” agreement was by itself anticompetitive, or whether it could be justified
due to the efficiency benefits ascribed to it. While European competition law generally permits
a hotel to harmonize its distribution networks to avoid “free-riding” and to stimulate
interbrand competition, even if this might tend to eliminate intrabrand price competition,
in the on-line travel case investigated by the German competition authority there is clear evidence that the retail price MFN was actually requested by HRS, thus dictating to the hotels an essential element of their pricing policy.
(To be continued)
Monday, May 05, 2014
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 online booking 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 not
book the room through the HRS platform, by that undermining HRS’ and other OTAs incentives to
invest in quality competition among platforms.
Following detailed analysis, the
Bundeskartellamt was unconvinced by HRS' argument about the seriousness of the free-rider problem. First, the German competition authority noted
that only a very small amount of HRS’ investments goes into the promotion of single
hotels offerings; the largest part of HRS’ investments is devoted to the
promotion and the enhancement of the platform itself. In case consumers booked
hotel rooms directly via the hotels’ websites, the platform-specific investments
would not be significantly discouraged. The prohibition of retail MFN clauses
notwithstanding, the OTAs would continue investing in the quality of their services.
Moreover, the so-called billboard effect
(i.e. the additional reservations made through the hotel’s website after
inclusion in the OTA’s listing) is limited, especially due to the structure of
the hotel industry in Germany, where there are many small and medium
operators whose websites normally do not offer the same booking functionalities
and comfort available to consumers without charge on the HRS' platform (e.g. immediate booking). The
billboard effect in favour of the major hotel chains in the German market is also
bound to be relatively insignificant, in particular because consumers already tend
to seek out brand hotel chains’ websites directly.
Friday, May 02, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/6
(Previous installments here)
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 circumstances is predicated on the ability of the supplier, here the hotel, to control prices. If an OTA imposes a retail-price MFN clause on a hotel, the latter has to make sure that the “favoured” OTA is not undercut by the latter's competitors, or otherwise match the lower retail-price. The hotel may then be willing to resort to minimum resale prices with a view to ensuring that nobody offers lower room-only rates than the ones displayed on the website of the OTA imposing the retail-price MFN clause. In this case, it would be the retail-price MFN that leads to RPM.
An important consequence of the “MFN explanation” for the operation of RPM is that it might become even more difficult to rationalize (and exempt) the latter by pointing to commonly alleged efficiency reasons, such as safeguarding retailers (here, OTAs) against free-riding. Moreover, this would mean that only when the possibility of “transmission” between the retail-price MFN clause and RPM is explicitly ruled out, it would perhaps make sense to focus exclusively on the latter. Conversely, when it can be demonstrated that, in the context of a specific case, RPM provides a mechanism to ensure the effective operation of a retail-price MFN clause, the question arises whether efficiency benefits exempting the latter could also redeem RPM’s “own” anticompetitive effects.
Admittedly, this and a number of equally important questions are difficult to answer, at least for the time being. For once, the potential efficiency explanations for retail-price MFNs are still to be thoroughly analysed. Recently, economists writing in support of Apple’s appeal against a US District Court’s ruling finding that Apple and some book publishers had conspired to raise the prices of e-books, maintained that the MFN clause, a crucial element of the alleged conspiracy, under certain circumstances can facilitate entry.
Thursday, May 01, 2014
Wednesday, April 30, 2014
Resale Price Maintenance: A Review and Call for Research
AAI Working Paper (Authors: G. Grundlach, K. Manning, J. Cannon), here.
I couldn't agree more: we still know comparatively little about the economic effects of RPM, and additional research beyond orthodox economics is needed (the evolutionary economics research paper written together with Wolfgang Kerber in 2004, and quoted by the AAI Working Paper, hinted exactly at this; BTW, I authored also a rather voluminous piece on vertical restraints from an evolutionary perspective - much shorter here).
I couldn't agree more: we still know comparatively little about the economic effects of RPM, and additional research beyond orthodox economics is needed (the evolutionary economics research paper written together with Wolfgang Kerber in 2004, and quoted by the AAI Working Paper, hinted exactly at this; BTW, I authored also a rather voluminous piece on vertical restraints from an evolutionary perspective - much shorter here).
Tuesday, April 29, 2014
SCOTUS on the legal standard for shifting attorney's fees in patent litigation
Octane Fitness v. Icon Health and Fitness, here.
"We crafted the Noerr-Pennington doctrine—and carved out only a narrow exception for “sham” litigation—to avoid chilling the exercise of the First Amendment right to petition the government for the redress of grievances...But to the extent that patent suits are similarly protected as acts of petitioning, it is not clear why the shifting of fees in an “exceptional” case would diminish that right. The threat of antitrust liability (and the attendant treble damages, 15 U. S. C. §15) far more significantly chills the exercise of the right to petition than does the mere shifting of attorney’s fees. In the Noerr-Pennington context, defendants seek immunity from a judicial declaration that their filing of a lawsuit was actually unlawful; here, they seek immunity from a far less onerous declaration that they should bear the costs of that lawsuit in exceptional cases."
Comparative Analysis of National Approaches on Voluntary Copyright Relinquishment
WIPO Study, prepared by A. Guadamuz, here.
Monday, April 28, 2014
Un taxi pour l'avenir, des emplois pour la France
T. Thévenoud, Mission de concertation Taxis - VTC, ici.
Thursday, April 17, 2014
Wednesday, April 16, 2014
Tuesday, April 15, 2014
Declaration on Patent Protection - Regulatory Sovereignty under TRIPs
Max Planck Institute for Innovation and Competition, here.
Monday, April 14, 2014
Friday, April 11, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/5
(All Episodes here).
To the extent that the exercise of the newly granted discounting freedoms might be prevented by retail MFN clauses stipulated between IHG, Expedia, and Booking.com, the Final Commitments require the parties to the OFT’s investigation to amend those provisions. Moreover, the investigated parties must use “reasonable endeavours” to ensure that their current arrangements with other OTAs and other hotels do not contain provisions hampering those discounting freedoms, and are prevented from including such provisions in new arrangements. This means that retail MFN clauses should not be enforced against hotels in a way that prevents OTAs and the hotels themselves from offering discounts to their respective closed groups as covered by the Final Commitments. Those retail MFN provisions could still be enforced, however, in respect either of the offering of discounts to non-members or the publication of the details of such discounts outside of the closed group.
In sum, the Final Commitments would seem to endorse a level of minimum “retail” price fixing in the vertical relationship between hotels and OTAs to the extent that the room rates set by the hotels apply to the general public. Reductions off the headline room rates are reserved to “closed groups” under the terms of the settlement. It is also notable that only closed group members will be provided with detailed information concerning the specific level or extent of reductions offered by OTAs and hotels. Thus, for instance, consumers will be unlikely to find up-to-date, reliable information about the specific level of discounts offered by OTAs and hotels via price comparison websites or meta-search sites. In order to access that information consumers will have to join a number of “closed groups.” Furthermore, to be eligible for the discount, the consumer is required to have previously made an undiscounted booking with the same OTA or hotel.
(To be continued).
Study on the legal framework of text and data mining (TDM)
J.-P.Triaille, J. de Meeûs d’Argenteuil, A. de Francque for the European Commission, here.
Public Consultation on the review of the EU copyright rules: Contributions Posted
Three rather large zip files, here (text mining tools would be quite handy).
Thursday, April 10, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/4
(All Episodes here).
OFT’s investigation centred
on the arrangement restricting the online travel agents’ (OTAs) ability to discount “retail”
hotel rates to consumers. Expedia and Booking.com, in the context of the
proceedings, are described as being vertical distribution channels providing
hotel room booking services. More specifically, both Booking.com and Expedia
intermediate hotel accommodation bookings on a room-only basis, i.e. not as part of
a package including other travel products such as airline flights. Whereas
Booking.com operates under the same “commission based” model already analysed
by the German Competition Authority, Expedia utilises predominantly the “merchant
model.” Under this model, OTA’s revenue consists in the difference between the
‘net rate’ the OTA paid to the hotel and the room rate paid by the customer, either
at the moment the booking was made or upon check-out at the hotel. Expedia,
however, does not take title to the hotel rooms it offers.
Both Expedia and Booking.com
agreed to offer IHG’s hotel rooms at a rate set by the hotel group and not at a
lower rate, and the OFT provisionally indicated that the vertical price
agreement had as its object the prevention, restriction or distortion of
competition in breach of Article 101 TFEU. According to the British Competition
Authority, the arrangement restricts intra-brand price competition between the OTAs
and between the OTAs and the hotels’ direct online offerings via their own
websites, because OTAs cannot voluntarily sacrifice some of their commissions
or margins in order to offer discounted hotel rates to price sensitive consumers.
Moreover, due to the discounting restrictions, new entrants with potentially
more innovative or efficient business models are unable to display lower hotel rates
and, by doing that, achieve the scale necessary in order to establish
themselves and grow. Finally, the alleged anticompetitive effect is likely
to be amplified by the widespread adoption of similar discounting restrictions in
the market.
While the British investigation
focused on the alleged resale price maintenance, the OFT noted that vertical
agreements incorporating discount restrictions may also include a retail MFN
clause. As seen above, under the retail MFN provision it is the hotel that agrees
to offer its rooms via a specific platform at a booking rate which is no higher
than the rate displayed by other distribution channels. If the scope of the
obligation extends to all other distribution channels, both on- and offline,
including the hotel’s own website and physical desk, the effect is perfect “rate parity:” nowhere
the price sensitive and highly motivated consumer will be able to find a cheaper price than the one
displayed by the platform for that exact room. At first sight, however, a discounting restriction on top of a wide retail MFN clause would not make much sense. First of all, the
retail MFN clause would seem incompatible with Expedia’s “merchant model,” where
the booking rate is decided by the OTA itself and not by the hotel, alleged vertical price fixing aside. More importantly, under
the “commission based” model a platform is practically unable to sacrifice part
of the commission and obtain a cheaper rate from a hotel if that hotel has a binding, broad retail MFN in place with other distribution channels, because the price discount
will have to be extended to all these other distribution channels as well. If,
however, the provision has a much more limited scope, such as an “own-website
MFN” according to which the room rate made available on the platform will not be higher
than the price displayed on the hotel’s website, the discounting restriction would clearly affect "downstream" price competition between OTAs.
(To be continued).
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