@WavesBlog

At any rate, under the terms of the Final Commitments hotels will still be able to set room-only rates or “headline room rates,” while OTAs and hotels will be free to apply reductions (discounts, vouchers, cash back, etc.) off the headline rates. Those discounts, however, will not be offered to the mass of potential customers, but only to “closed group members,” for instance in the context of membership or loyalty schemes. This means that consumers will need to actively opt in in order to join the group, and membership will not be the result of some technological semi-automatism (such as a cookie dropped onto the customer’s computer) or implied behaviour interpreted broadly (e.g., registration with the OTA for booking management purposes). Moreover, in order to be eligible for the reduction, the customer will need to have made at least one prior undiscounted booking either with that specific OTA (in case of OTA’s discounts) or directly with that specific hotel (if the reduction is offered by the hotel). Finally, detailed restrictions relate to the ways in which OTAs and hotels circulate information regarding the availability of reductions. Communication regarding the specific level or extent of reductions offered by OTAs and hotels is restricted to “closed group members,” but OTAs will be free to openly publicise information regarding the general availability of reductions also to non-members, including to price comparison websites.

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).

Internet et concurrence: un couple à l’épreuve

Agefi.com, ici.

The Economics of Resale Price Maintenance & Implications for Competition Law and Policy

J. Wright, here.

Thursday, April 10, 2014

French antitrust watchdog probes Roche and Novartis over eye drug

Reuters.com, Here.

Mexico’s Proposed Reform of Competition Law: A Critique from Europe

A. Perrot, A. Komninos, here.

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).

CJEU: The amount of the levy payable for making private copies of a protected work may not take unlawful reproductions into account

Case C-435/12
ACI Adam BV and Others v Stichting de Thuiskopie, Stichting
Onderhandelingen Thuiskopie vergoeding, Press release here.

Wednesday, April 09, 2014

Antitrust issues abound as Comcast explains Time Warner Cable deal in the Senate

GigaOm, here.

The Rapid Evolution of Resale Price Maintenance Regulation in the United States and United Kingdom

B. Allen, S. Singleton, here.

More Inheritable Rights for Digital Assets

C. Phelps, here.

Primer Re Oracle v. Google and the copyrightability of certain API elements

Finnegan, here.

Lending a Hand to the Invisible Hand? Assessing the Effects of Newly Enacted Competition Laws

J. Gutmann, S. Voigt, here.

Norway: Publishers hit in competition probe

Newsinenglish.no, here.

Old friends in new frocks? MFN clauses in the online hotel booking sector/3

(All Episodes here).

Second, according to the German competition watchdog, the existence of the retail MFN clause enforced by HRS leads to foreclosure. Due to the already mentioned indirect network effects, a hotel booking platform entering the market must attract a critical mass of both hotels and hotel customers (chicken-egg problem) if it wants to succeed. The retail MFN adopted by HRS makes it practically impossible for a competing online hotel booking operator to adopt an aggressive, low-price commercial strategy in order to acquire customers, because hotels cannot charge lower prices on its platform.

Moreover, the existence of the MFN clause prevents sellers from rewarding more innovative platforms by agreeing on a different pricing model, thus reducing the incentives for incumbents and entrants to innovate. For instance, a specific platform could be in a position to offer cost-savings or other quality-based innovations to hotels, and this would justify a lower price for consumers using that platform than if they used another platform. This sort of innovation has the potential to offer customer benefits through lower hotel prices, with the prospect of generating more sales for the platform. Without MFN constraints, such innovation would lead to the seller offering lower hotel prices through that platform, reflecting the cost savings and the other benefits to the hotel due to the platform’s innovation. However, if the hotels cannot offer cheaper hotel rooms via innovative platforms because of the existence of retail MFN obligations with well-established platforms, this would reduce the incentive for a platform to innovate as the platform could not receive a greater market share from offering cheaper hotel rooms relative to its competitors. Hotels could still reward innovative platforms with higher commission fees in exchange for a better quality, but this would not lead to increased trade volumes and a higher platform’s market share. Put differently, the benefits of the platform’s innovation could be passed to the hotel partners but not to the users on the other side of the market, i.e. the consumers.

Finally, HRS’ retail MFN clause restricts competition among hotels. As already mentioned, lower commission fees are not passed through to consumers in the shape of lower hotel room prices and, more generally, hotels cannot engage in price differentiation strategies. Not only are hotels constrained by rate parity with regard to all of their online offerings, with the inclusion of their own website, but this obligation extends to the offline distribution of hotel rooms as well.

Whereas the German investigation specifically focuses on HRS’ contracts with its hotel partners, retail MFNs clauses are employed also by Booking.com and Expedia, the other two significant competitors in the hotel booking platform market. Not only the combined market share of the three platforms is around 90%, but most hotels “multihome”, i.e. make their offers available on more than one platform. The German Competition Authority considers that the broad adoption of similar rate parity policies by the three platforms amplifies the negative effects on competition seen above.

Interestingly, the Office of Fair Trading (OFT), one of UK’s Competition Authorities recently absorbed by the Competition and Markets Authority (CMA), has been investigating the same pricing policies practiced by online hotel booking platforms since 2010 as well. A small hotel reservation platform complained to the OFT that hotels prevented her from offering hotel rooms at discounted prices. Instead of assessing the anti- and procompetitive effects of retail MFN clauses, however, the OFT focused on whether an online hotel booking platform allowing hotels to set the room prices sold through that platform was engaging in resale price maintenance. The parties investigated are the InterContinental Hotels Groups (IHG), the largest international hotel chain measured by room numbers (675, 982 rooms world-wide, 41,340 in the UK), and two online travel agents, Expedia and Booking.com. According to the OFT, in separate arrangements with IHG it was stipulated that Expedia and Booking.com were prevented from discounting hotel rates set by IHG and displayed to customers via the platforms. The OFT provisionally concluded that such arrangements were potentially in breach of Article 101(1) TFEU. As a result, the parties gave commitments in order to remove the alleged anticompetitive effects, which the OFT accepted on January 31, 2014.

(To be continued)

EuGH beerdigt die Vorratsdatenspeicherung

P. Schaar, hier.

Retos y desafíos de la Ley de Federal de Competencia Económica (México)

Mesa de diálogo, Video aquì.

Tuesday, April 08, 2014

Death of the data retention directive could have implications for other data retention laws

Out-law.com, here.

Old friends in new frocks? MFN clauses in the online hotel booking sector/2

(All Episodes here).

Hotel booking services such as the one operated by HRS, and investigated in Germany, provide a web-based platform enabling customers to book hotel rooms directly with the hotels. In this respect, HRS serves as an intermediary between two different groups of “users”, the sellers and the purchasers, allowing them to find each other and to transact. HRS offers its own services to both groups of users (or market sides), and indirect network effects exist between the two groups. This means that the value of the services offered to one group of users increases with the number of members of the other group. In the case of a hotel booking platform such as HRS, the indirect network effects are likely to be reciprocal: a consumer that wants to make a reservation at a hotel benefits when that hotel makes itself available on a reservation platform and the probability of a successful match rises with an increase in the number of hotels and customers using a platform. While services are provided by the platform to both groups of users, in the case of HRS and other similar online hotel booking services, it is only the group of hotels that pays a commission fee to the platform if a contract is concluded with the customer.

Following a three-year long investigation, the German Competition Authority concluded that the retail MFN clause practiced by HRS in its contracts with hotels was a vertical agreement restricting competition in the sense of Article 101(1) TFEU, and that neither the Vertical Block Exemption Regulation applied, nor there were reasons to justify an individual exemption. The theory of harm put forth in the German decision is fourfold. First, in the absence of MFN clauses, hotel booking platforms are likely to compete with one another on the commission fees they charge to hotels. A hotel booking platform could thus decide to offer lower commission fees to its hotel partners, in the hope that hotels will be offering lower hotel room prices to consumers, and, as a consequence, the platform will grow its trade volume. Moreover, a platform is likely to be constrained in the commission fee it charges to hotels by the fear that a higher fee would lead to higher hotel room prices on that platform and therefore to a loss of market share. A retail MFN clause, however, lifts the competitive constraints on the inflation of commission fees paid by hotels. In fact, a platform wishing to gain sales has hardly any incentive to do so by lowering the commission fee charged to hotels, because the hotels are not in a position to lower hotel rooms prices offered to consumers (i.e. to "invest back" the commission saved into lower prices charged on that platform). Moreover, a platform with a retail MFN which is considering a rise in the commission fee will not have to worry that such a rise will make its offering less attractive to consumers, since any pass-through of the rise in commission fees will need to be applied to all other distribution channels covered by the retail MFN clause. In other words, the platform’s fear of the negative consequences of higher hotel room prices in terms of market shares and revenue is substantially reduced, since the platform knows that it will always be at least as competitive as any distribution channel included in the scope of the MFN (other web based platforms, hotel own-website, direct sale to customers at the hotel’s physical desk). Overall, competition among platforms is softened: there is less incentive to reduce commission fees, as there is less incentive not to raise them. The likely result are higher commission fees and, if these higher fees are passed through by hotels, higher hotel room prices available to customers.

(To be continued).

Monday, April 07, 2014

Copyright Office Begins Wide-Ranging Inquiry Into Music Licensing

Broadcastlawblog.com, here.

Old friends in new frocks? MFN clauses in the online hotel booking sector/1

Most-favoured-nation (MFN) provisions are found in vertical arrangements and stipulate some sort of preferential treatment in favour of specific market participants. Thus, an MFN clause widely used in industry and commonly analysed by competition authorities and courts imposes on a seller the contractual obligation to treat a customer that is party to the agreement no worse than all other customers. In this respect, the MFN clause at issue embodies the seller’s promise to treat a specific buyer as the seller treats her most-favoured customer (also called most-favoured-customer clauses - MFCs). Typically, these MFNs are employed in markets for intermediate goods, and ensure that the buyer at some stage of the supply chain will pay a specific input no more than the other customers of the same supplier. Some MFN clauses that have attracted the attention of competition policy enforcers concerned the sale of turbine generators, of lead-based anti-knock gasoline additives, of synthetic substances belonging to groups of vitamins, the distribution of digital music, of gas, and were found also in dental plan contracts between dental care service providers and dental practices and in healthcare contracts between a health insurance provider and hospitals.

While traditional MFNs ensure that one party to the agreement gets terms at least as favourable as any other party in an analogous position, a so called retail (price) MFN requires the seller to sell a good or service via a specific intermediary at a price that is not higher than the price the seller charges via other intermediaries (and/or direct). In this case, the end-buyer of the good or service is not a party to the agreement, as was always the case with the more traditional MFNs previously mentioned, and she may not even be aware that such an agreement exists between the seller and the intermediary. It follows that the buyer has no right to obtain redress if the seller does not satisfy the terms of the retail MFN clause.

Recently, adherence to retail MFN clauses has emerged as a popular pricing policy in the online world. Specifically, the seller undertakes not to charge on a specific electronic trade platform a price that is higher than the price that she charges on other platforms, creating “price parity” across platforms (Across-Platform Parity Agreement – APPA). National competition authorities in various countries have opened investigations into the price parity agreements commonly found in the online hotel booking sector. In December 2013, the German Competition Authority (German Federal Cartel Authority, Bundeskartellamt) issued a decision prohibiting HRS, leader in the German market for hotel bookings, from applying a retail MFN clause in its relationships with providers of hotel services, and ordered HRS to delete this clause from its terms and conditions. The clause investigated in the context of the German proceedings obliged providers of hotel services to offer their lowest room prices and other conditions, e.g. relating to cancellation policy, also through HRS’ platform. Moreover, the clause prevented hotels offering cheaper hotel rates and better conditions via their own websites - and even to customers directly at hotel receptions. Prior to the German Competition Authority’s decision, in February 2012, the Düsseldorf District Court of Appeal had already enjoined HRS from enforcing the retail MFN clause.

(To be continued).

Snake-Oil with Mathematics is Still Snakeoil: Why Recent Trends in the Application of So-Called “Sophisticated” Economics is Hindering Good Competition Policy Enforcement

S. Bishop, here.

Tuesday, April 01, 2014

Privacy and competitiveness in the age of big data:The interplay between data protection, competition law and consumer protection in the Digital Economy

European Data Protection Supervisor Preliminary Opinion, here

Saturday, March 29, 2014

Alice in software patentland: SCOTUS leading out of the rabbit hole?

T. Lee, here.

Cartel busting: boring can still be bad

TheEconomist.com, here.

Consultation on a proposal to make a market investigation reference in respect of the supply and acquisition of energy in Great Britain

Ofgem, here.

New EU Technology Licensing Rules

CliffordChance.com, here.

Wednesday, March 26, 2014

Commission antitrust investigation into Google

ConsumerWatch.org, here.

Tuesday, April 15, 2014

Monday, April 14, 2014

Friday, April 11, 2014

Thursday, April 10, 2014

Wednesday, April 09, 2014

Tuesday, April 08, 2014

Monday, April 07, 2014

Friday, April 04, 2014

Thursday, April 03, 2014

Wednesday, April 02, 2014

Tuesday, April 01, 2014

Monday, March 31, 2014

Saturday, March 29, 2014

Friday, March 28, 2014

Thursday, March 27, 2014

Wednesday, March 26, 2014

Tuesday, March 25, 2014

Monday, March 24, 2014

Friday, March 21, 2014

Thursday, March 20, 2014

Wednesday, March 19, 2014

Tuesday, March 18, 2014