Thursday, May 08, 2014

Old friends in new frocks? MFN clauses in the online hotel booking sector/10

(Previous installments here)

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

Economists disagree on net neutrality. What else?

IGMCHicago.com, here.

Opinion on Anonymisation Techniques

Article 29 Data Protection Working Party, here

Can economics be evidence-based?

M. Joffe, here

Google Maps intègre Uber

Numerama.com, ici

Those who steal movies are also happy to pay

Port.ac.uk, here

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.

Arguably, thanks to PCWs, consumers face lower search costs, with more switching between PMI providers and more potential savings on insurance premiums. As an OFT study into PCWs indicates, these platforms have been effective in promoting price competition among sellers. Along the same lines, the Competition Commission found that PMI providers are five to ten times more price sensitive when they are selling through PCWs than through different channels. According to recent UK market estimates, about 55 to 60 per cent of new business (i.e. first-time motor insurance purchasers or consumers switching from their previous providers) comes through PCWs, while renewals account for about 59 per cent of all PMI policies sold - which does not mean, however, that in the latter case consumers have not used a PCW: often consumers refer to the price comparison results in order to obtain a cheaper renewal premium from their current providers.

(To be continued)

Tuesday, May 06, 2014

Open Letter to European Commission: Stop DRM in HTML5

Free Software Foundation Europe, here.

Retail Price MFNs: Are they RPM ‘at its worst’?

A. Fletcher, M. Hviid, here.

Or, possibly, even worse than the worst RPM?

Premier League fans in Europe worse off after Murphy judgment

Kluwer Competition Law Blog, here

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?

EC Report on Competition Policy 2013

Here. Commission Staff Working Document here

Does Europe hate libraries?

Policyreview.info, here

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

Four Privacy Myths

N. Richards, here

When Does Sharing Make Sense?: Antitrust & Risk Evaluation and Mitigation Strategies

J. Rybnicek, here

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

Investigation into the combining of personal data by Google

Dutch Data Protection Authority, here.

Supermarkets are using science to turn ordinary shopping habits into bigger profits

TheVerge, here.

Advancing National Intellectual Property Policies in a Transnational Context

M. Trimble, here

The Marrakesh Puzzle

M. Trimble, here

SCCR27: Library and Archive joint statement on orphan works

IFLA.org, here

Old friends in new frocks? MFN clauses in the online hotel booking sector/6

(Previous installments here

Allegedly, between the investigated parties there is a “traditional” RPM clause in place, providing that the hotels would establish the room-only rate. Booking.com and Expedia are obliged to use the published rates when offering the hotels' rooms to consumers. Basically, what the former British competition agency declined to analyse was the related restrictive clause in the agreement between hotels and OTAs, i.e. the hotels' obligation that the published rates offered by Booking.com and Expedia would be as favourable as the rates offered to any competing OTA and the rates operated by the hotels themselves.

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.

Wednesday, April 30, 2014

BGH: Screen Scraping Does Not Constitute Unfair Competition

M. Husovec, here

Dominating Search: Google Before the Law

A. Daly, here.


Terix hits Oracle with antitrust countersuit

Here.

A case for behavioural antitrust?

Progressive Voices in Competition Law

S. Weber Waller, here.

Suddenly, "German" evolutionary competition theory is becoming almost trendy (see also here): Chrysostomos Mantzavinos' insightful paper included.

Online Hotel Booking Case

Y.Yu, Presentation here

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).

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."

EC finds that Motorola Mobility infringed EU competition rules by misusing standard essential patents (and accepts Samsung's commitments)

Press releases, here and here; Memo here. Almunia's remarks here.

Decision here



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

Cloud Computing: A cluster of complex liability issues

R. Weber, D. Staiger, 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

Extradited Italian Executive Sentenced to Serve Two Years in Prison

 FBI's press release, here.

Bundeskartellamt sieht Beschränkungen des Online-Vertriebs bei ASICS kritisch

Pressemitteilung hier

Draft impact assessment on the modernisation of the EU copyright acquis

Un taxi pour l'avenir, des emplois pour la France

T. Thévenoud, Mission de concertation Taxis - VTC, ici.

Deutscher Bibliotheksverband für Gleichstellung von gedruckten und elektronischen Büchern

Pressemitteilung hier.

Waivers of Confidentiality in Cartel Investigations

ICN, Explanatory Note, here

Predatory Pricing Analysis Pursuant to Unilateral Conduct Laws

ICN Recommended Practices, here

Interim Report on the Status of the International Merger Enforcement Cooperation Project

ICN Merger Working Group, here

State-owned enterprises and competition

Moroccan Conseil de la Concurrence, here.

The WIPO Copyright Agenda After Beijing and Marrakesh – Still a Broadcasters Treaty and then a New “Guided Development Period”?

M. Ficsor, here

New Developments in the COMESA Merger Control Regime – On the Path to Maturity

Kluwercompetitionlawblog, here

A Brave New World: The Potential Intersection of Competition Law and Data Protection Regulation

O. Lynskey, here

Umbrella Effects and the Ubiquity of Damage Resulting from Competition Law Violations

F. Maier-Rigaud, here

Non-reportable Transactions and Antitrust Enforcement

L. Overton, here.

Friday, April 11, 2014

FTC clears Facebook's WhatsApp deal, but warns on data collection

Pcworld.com, here.

FTC's letter to Facebook and WhatsApp here

Economic Analysis of the Territoriality of the Making Available Right in the EU

CRA for DG MARKT, here

Microsoft, Apple diverge on bankrolling Intellectual Ventures

Reuters.com, here

Old friends in new frocks? MFN clauses in the online hotel booking sector/5

(All Episodes here).

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).

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

Why did they cross the Pacific? Extradition: A Real Threat to Cartelists?

Y. Usami, here.

Procedural fairness in competition proceedings + Workshop on Competition Policy

2014 ASCOLA Conference, Warsaw, Preliminary Programme here (Docx download)

The Future of Reverse Payments in the Wake of FTC v. Actavis, Inc.

Symposium Papers, here

Canadian Competition Bureau Releases Price Maintenance Enforcement Guidelines

Blg.com, here

EU Consumers in the Digital Era

D. Currie, here

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

Thursday, March 27, 2014

Apple, Publishers Battle New E-book Antitrust Claims

Publishersweekly.com, here

A Year in the Life of the Joint DOJ-PTO Policy Statement on Remedies for F/RAND Encumbered Standards-Essential Patents

R. Hesse, here

Network Industries Class

R. Picker, Syllabus here (Session Slides to be added).

Australia Accepts Indonesia WTO Dispute On Tobacco Packaging; Calls For Five Disputes To Be Joined

IP-Watch.org, here

OFT issues decision in mobility scooters sector

Oft.gov.uk, here

CJEU Allowed Website Blocking Injunctions With Some Reservations

Husovec.eu, here

CJEU: UPC Telekabel Wien

Case C-314/12, here.

Lawyers and economists arguing against car dealer protectionism in NJ Tesla case

Letter 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.

Monday, March 17, 2014

WhatsApp founder says privacy concerns after Facebook buyout are 'unfounded'

TheVerge.com, here.

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.

Recap of the Copyright Office’s Roundtables on Orphan Works and Mass Digitization

ARL Policy Notes, here.

MPs and open-data advocates slam postcode selloff

TheGuardian.com, here.

General insurance add-ons: Provisional findings of market study and proposed remedies

UK Financial Conduct Authority, here.

Most Favoured Nation (MFN) clauses

Oxera, Notes prepared for Direct Line Insurance Group plc (UK Competition Commission's private motor insurance market investigation), here (pp. 28-33) and  here (pp. 23-33).

Here's why Amazon Prime can afford to raise prices

TheVerge.com, here.

Tuesday, March 11, 2014

Garcia v. Google: Stanislavski and Meisner Pay a Visit to Copyright

R. Picker, here.

Patentholder on Breast Cancer Tests Denied Injunction in Lawsuit

NYTimes.com, here.
Opinion here.

Vertical agreements: a new priority in antitrust enforcement

Conference organized by the Italian Competition Authority (6 March 2014), Programme and Presentations here.

Google faces $5B antitrust fine in India — but this time it can't settle

Zdnet.com, here.

Exclusive rights in classical art works: the "armed David" case and Italian law

IPkat.com, 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

King my Candy, Crush my Heart: The Weird World of Trademark Registrations

Aaronsanderslaw.com, here.

How Can Software Interoperability Be Achieved Under European Competition Law and Related Regimes?

I. Graef, here.

DOJ responds to public comments on US Airways/American merger

DOJ, here.

Sharing Risk in Collective Actions

Competitionbulletin.com, here.

Review of banking for small and medium - sized businesses (SMEs) in the UK: Update on work to date

OFT, here.

Thursday, February 27, 2014

The European Union is grilling Apple and Google about free-to-play apps

The Verge.com, here.

Advocate General Opens Door to Umbrella Claims in Cartel Damages Cases

J. Van Acker, V. Lefever, here.

Regulatory Policy and Behavioural Economics

P. Lunn, here (read only)

The FTC at 100

R. Lande, here.

Humility, Institutional Constraints and Economic Rigor: Limiting the FTC’s Discretion

G. Manne, here.

Las patentes y la libre competencia: informe sobre el anteproyecto de ley de patentes

Brief of Amici Curiae Law, Business, and Economics Scholars in Alice Corp. v. CLS Bank, No. 13-298 (software patents)

Here.
See also FSF's Brief, here.

CJEU says that spas must pay copyright fees and that territorial monopoly of collecting societies is OK

IPKat, here.

Will the Supreme Court save us from software patents?

Washingtonpost.com, here.

Secret 'Innocence of Muslims' Order Caused Google to Go Ballistic

Hollywoodreporter.com, here.
Garcia v. Google here

Wednesday, February 26, 2014

The Internet of Things: Building Trust to Maximize Consumer Benefits

J. Brill, here.

Apple officially appeals e-books antitrust ruling, asks for dismissal or retrial

Appleinsider.com, here. Appellate Opening Brief here (Scribd).

Uber kept new drivers off the road to encourage surge pricing and increase fares

TheVerge.com, here.

UK Government response to consultation on EU copyright rules

Here.

COMESA: new rules on merger control imminent

Iflr.com, here.

As Barnes & Noble Nook revenues slide 50%, the company says it’s launching another tablet

Gigaom.com, here.

Schweizer Firmen profitieren von Whatsapp-Übernahme

Nzz.ch, hier.

Flight Centre found guilty of anti-competitive behavior

Cch.com.au, here.Ruling here.

Archives and Copyright: Developing an Agenda for Reform

Create.ac.uk, here.