Out-law.com, here.
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
Europe's creative sector highlights dangers of proposed new WIPO treaty: Letter to Barroso
International Publishers Association, here.
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."
Existing EU legal framework applicable to lifestyle and wellbeing apps
EC Staff Working Document, here.
Comparative Analysis of National Approaches on Voluntary Copyright Relinquishment
WIPO Study, prepared by A. Guadamuz, here.
Monday, April 28, 2014
Pilot field study on the functioning of the national judicial systems for the application of competition law rules
Study commissioned by DG Justice, here.
Un taxi pour l'avenir, des emplois pour la France
T. Thévenoud, Mission de concertation Taxis - VTC, ici.
Interim Report on the Status of the International Merger Enforcement Cooperation Project
ICN Merger Working Group, here.
New Developments in the COMESA Merger Control Regime – On the Path to Maturity
Kluwercompetitionlawblog, here.
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
Co-ordinated enforcement action leads to greater compliance with Consumer Rights on travel websites
European Commission, Press Release, here.
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).
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.
ACI Adam BV and Others v Stichting de Thuiskopie, Stichting
Onderhandelingen Thuiskopie vergoeding, Press release here.
Wednesday, April 09, 2014
The Rapid Evolution of Resale Price Maintenance Regulation in the United States and United Kingdom
B. Allen, S. Singleton, here.
Old friends in new frocks? MFN clauses in the online hotel booking sector/3
(All Episodes here).
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.
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.
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)
Retos y desafíos de la Ley de Federal de Competencia Económica (México)
Mesa de diálogo, Video aquì.
Tuesday, April 08, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector/2
(All Episodes here).
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
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).
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).
Friday, April 04, 2014
Old friends in new frocks? MFN clauses in the online hotel booking sector
New WavesBlog serialized research effort starting on Monday!
Text and Data Mining
Report from the Expert Group, EC Directorate-General for Research and Innovation, here.
Thursday, April 03, 2014
Wednesday, April 02, 2014
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
Procedural fairness in competition proceedings + Workshop on Competition Policy
2014 ASCOLA Conference, Warsaw, Preliminary Programme here (Docx download)
Are Restrictions of Competition by Sports Associations Horizontal or Vertical in Nature?
O. Budzinski, S. Szymanski, here.
Graf interviewing Wright: "Can antitrust authorities contribute to fixing the dysfunctional patent system?"
New Frontiers of Antitrust 2014 Conference, here.
Monday, March 31, 2014
Serious Invasions of Privacy in the Digital Era
Australian Law Reform Commission, Discussion Paper, here.
Saturday, March 29, 2014
Friday, March 28, 2014
Thursday, March 27, 2014
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Wednesday, March 26, 2014
Tuesday, March 25, 2014
Monday, March 24, 2014
Friday, March 21, 2014
Searching for Physical and Digital Media: The Evolution of Platforms for Finding Books
M. Baye, B. De Los Santos, M. Wildenbeest, here (pdf download).
Thursday, March 20, 2014
¿Habrá reclamaciones de daños por el cártel de las desmotadoras de algodón?
Wednesday, March 19, 2014
Tuesday, March 18, 2014
Verbraucher Tracking
J. Schallaböck im Auftrag der Bundestagsfraktion Bündnis 90/Die Grünen, hier (pdf download).
Monday, March 17, 2014
Enervit: impegni presentati all'AGCM
Testo degli impegni qui.
In merito alla distribuzione online: autonomia nel determinare i prezzi di rivendita ma necessità di rispettare l’immagine il valore dei marchi di Enervit.
In merito alla distribuzione online: autonomia nel determinare i prezzi di rivendita ma necessità di rispettare l’immagine il valore dei marchi di Enervit.
General insurance add-ons: Provisional findings of market study and proposed remedies
UK Financial Conduct Authority, here.
Friday, March 14, 2014
Making merger control simpler and more consistent in Europe – A “win - win” agenda in support of competitiveness
Thursday, March 13, 2014
Small Businesses As Consumers: Are They Sufficiently Well Protected?
ESRC, A Report for The Federation of Small Businesses, here.
Wednesday, March 12, 2014
Tuesday, March 11, 2014
Vertical agreements: a new priority in antitrust enforcement
Conference organized by the Italian Competition Authority (6 March 2014), Programme and Presentations here.
Distortions and Disincentives in Intellectual Property and Communications Law
Sixth Annual Conference on Innovation and Communications Law
Leeds, England - 2-3 July, 2014
Call for papers here.
Leeds, England - 2-3 July, 2014
Call for papers here.
King my Candy, Crush my Heart: The Weird World of Trademark Registrations
Aaronsanderslaw.com, here.
Monday, March 10, 2014
Friday, March 07, 2014
Thursday, March 06, 2014
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