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Competition Law and Most Favoured Nation Clauses in Online Markets

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New Developments in Competition Law and Economics

Part of the book series: Economic Analysis of Law in European Legal Scholarship ((EALELS,volume 7))

Abstract

Recent antitrust enforcement in the EU has focused on the use of some peculiar forms of Most Favoured Nation (MFN) clauses by online platforms, giving rise to a wide discussion involving scholars, competition authorities and legislators. In online settings, the typical situation consists of an upstream supplier that sells its products through a downstream online platform and guarantees that the price and terms it sets for a particular product on that platform is no higher than the price and terms it sets for the same product on another platform. Whereas there is established literature on traditional MFN clauses, the same cannot be said for platform MFNs. This paper explores the peculiar features of platform MFNs and analyses them in the light of the business models adopted by online platforms (with a particular attention to digital comparison tools), examining the role of such intermediaries, how their activities may affect competition, and how the enhanced transparency typical of the Internet impacts on the markets concerned and the consumer’s trust and behaviour. After a review of the anticompetitive effects and justifications associated to MFNs in traditional and online settings, the paper focuses on the European experience and the existing cases in the field of platform MFNs, in particular concerning the investigations into the online hotel booking sector. The contribution then questions the theories of harm and the main critical issues derived from the cases analysed and aims at highlighting the difficulties that the competitive assessment of these clauses implies. Moreover, it suggests that the combined effects of platform MFNs with other clauses, such as Best Price Guarantees, must be deeply investigated.

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Notes

  1. 1.

    Lear (2012), p. 1.

  2. 2.

    Scott Morton (2012).

  3. 3.

    Lear (2012).

  4. 4.

    Fletcher and Hviid (2017).

  5. 5.

    Boik and Corts (2016).

  6. 6.

    Akman (2016).

  7. 7.

    Lear (2012), para. 3.9.

  8. 8.

    Baker and Chevalier (2013), pp. 21 et seq.

  9. 9.

    Baker (1996), p. 519; Vandenborre and Frese (2014), p. 588.

  10. 10.

    Baker and Chevalier (2013), p. 24.

  11. 11.

    Ibid.

  12. 12.

    Johnson (2017).

  13. 13.

    Wang and Wright (2017).

  14. 14.

    Ezrachi (2015), pp. 491–492; Hviid (2015), pp. 33 et seq.

  15. 15.

    Hviid (2015), pp. 33 et seq.; Foros et al. (2013).

  16. 16.

    Fletcher and Hviid (2017), pp. 73 et seq.; Boik and Corts (2016), p. 108.

  17. 17.

    Ezrachi (2015), pp. 506 et seq.

  18. 18.

    Ezrachi and Stucke (2016), p. 132.

  19. 19.

    Consumer Futures (2013).

  20. 20.

    Brynjolfsson et al. (2006).

  21. 21.

    Ezrachi and Stucke (2016), pp. 3 et seq.

  22. 22.

    CMA (2017), pp. 32 et seq.

  23. 23.

    European Commission, Case AT.39740, Google Shopping, 27.6.2017, C(2017) 4444 final.

  24. 24.

    Rochet and Tirole (2003), Evans (2003a), Caillaud and Jullien (2001), Id. (2003), Parker and Van Alstyne (2005), Armstrong (2006) and Evans and Schmalensee (2015).

  25. 25.

    Evans (2003b) and Evans and Schmalensee (2007).

  26. 26.

    Rochet and Tirole (2006).

  27. 27.

    Caillaud and Jullien (2003), pp. 309–310; Jullien (2011); Id. (2012).

  28. 28.

    Evans (2013) and Rochet and Tirole (2003).

  29. 29.

    Armstrong (2006) and Haucap and Stühmeier (2016).

  30. 30.

    Newman (2015), p. 156.

  31. 31.

    United States v. Apple Inc., et al., 12 Civ. 2826 (DLC); EU Commission, case No. COMP/39.847 – E-books.

  32. 32.

    CMA (2014); Bundeskartellamt press release, ‘Verivox vows to stop using ‘best price’ clauses’, 3 June 2015, available at <http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/03_06_2015_Verivox.html> (accessed on 26.02.2019).

  33. 33.

    See next paragraph.

  34. 34.

    CMA, Decision to accept binding commitments offered by ATG Media in relation to live online bidding auction platform services, case No. 50408, 29 June 2017.

  35. 35.

    Bundeskartellamt press release, ‘Amazon abandons price parity clauses for good’, 29 August 2013, <http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2013/26_11_2013_Amazon-Verfahrenseinstellung.html%3Fnn%3D3599398>; OFT press release 60/13, ‘OFT welcomes Amazon’s decision to end price parity policy’, 29 August 2013, <http://webarchive.nationalarchives.gov.uk/20140402142426/http://www.oft.gov.uk/news-andupdates/press/2013/60-13>.

  36. 36.

    European Commission, Case AT.40153, E-book MFNs and related matters (Amazon), final commitments published on 28.07.2017.

  37. 37.

    Skyscanner Ltd v CMA, [2014] CAT 16.

  38. 38.

    For details, see: Italian Competition Authority (ICA), decision of 21 April 2015; Autorité de la Concurrence, Décision n° 15-D-06 of 21 April 2015; Konkurrensverket, case ref. No. 596/2013, decision of 15 April 2015.

  39. 39.

    See Bundeskartellamt’s press releases of 20 December 2013 (https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2013/20_12_2013_HRS.html?nn=3591568) and of 23 December 2015, available at <http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/23_12_2015_Booking.com.html> (accessed on 26.02.2019).

  40. 40.

    Commission Regulation 230/2010 on the Application of Article 101(3) of the Treaty on the Functioning of the European Union to Categories of Vertical Agreements and Concerted Practices [2010] OJ L102/1.

  41. 41.

    Bundeskartellamt, Booking, para. 190 et seq.

  42. 42.

    Vezzoso (2016), p. 15.

  43. 43.

    Akman and Sokol (2017).

  44. 44.

    See notification 2017/570/B under Directive 2015/1535/EU.

  45. 45.

    Details are available at https://www.hotrec.eu/parity-clauses-of-booking-com-now-banned-in-sweden/.

  46. 46.

    Report on the Monitoring Exercise Carried out in the Online Hotel Booking Sector by EU Competition Authorities in 2016, 6 April 2017, available at http://ec.europa.eu/competition/ecn/hotel_monitoring_report_en.pdf (accessed on 26.02.2019).

  47. 47.

    Italianer (2014).

  48. 48.

    European Commission, Commission Staff Working Document, accompanying the Final report on the E-commerce Sector Inquiry, COM(2017) 229 final, pp. 177 et seq.

  49. 49.

    European Commission, Proposal for a Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services, COM(2018) 238 final, 26 April 2018.

  50. 50.

    Commission Guidelines on Vertical Restraints [2010] OJ C 130/1 [hereinafter VBER Guidelines], paras. 12–15. See Akman (2016), pp. 805 et seq.; Colangelo (2017), pp. 11–12.

  51. 51.

    Akman (2016), p. 817; Colangelo and Zeno-Zencovich (2016), p. 81; Colangelo (2017), pp. 10–11.

  52. 52.

    OECD (2013), p. 197.

  53. 53.

    Fletcher and Hviid (2017), pp. 79 et seq.; Atlee and Botteman (2013), p. 2.

  54. 54.

    Commission Regulation (EU) No 330/2010 on the application of Article 101(3) of the TFEU to categories of vertical agreements and concerted practices, [2010] OJ L 102/1 (hereinafter, VBER), Articles 2–3.

  55. 55.

    VBER Guidelines, pp. 47–48.

  56. 56.

    Contra, Akman (2016), p. 821.

  57. 57.

    Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

  58. 58.

    Cheng (2017).

  59. 59.

    VBER, Article 4(a).

  60. 60.

    VBER Guidelines, para. 107.

  61. 61.

    Vandenborre and Frese (2015).

  62. 62.

    Bundeskartellamt, HRS, para. 201.

  63. 63.

    Id., para. 203.

  64. 64.

    Caffarra and Kühn (2018), p. 220. On a different position, Vezzoso (2016), pp. 24 et seq.

  65. 65.

    CMA (2014), para 8.106.

  66. 66.

    Vezzoso (2016), p. 38.

  67. 67.

    Hviid (2015), pp. 40 et seq.

  68. 68.

    Ezrachi (2015), pp. 506 et seq.

  69. 69.

    Caffarra and Kühn (2018), p. 219–220.

  70. 70.

    Bundeskartellamt, Booking, para. 217.

  71. 71.

    Bundeskartellamt, Booking, para. 209.

  72. 72.

    Wals and Schinkel (2018).

  73. 73.

    E.g., Salop (1986), Ayres (1987), Edlin (1997) and Hviid and Shaffer (1999).

  74. 74.

    Hviid (2010).

  75. 75.

    Judgment of 13 February 1979, Hoffmann-La Roche & Co AG v EC Commission, Case 85/76, ECLI:EU:C:1979:36.

  76. 76.

    Hviid (2010), pp. 23 et seq.

  77. 77.

    Baker and Scott Morton (2018).

  78. 78.

    Id., p. 16.

  79. 79.

    District Court of the Northern District of Texas, Dallas Division, In re Online Travel Company (OTC) Hotel Booking Antitrust Litigation, [Case No 3:12-cv-3515-B (N.D. Tex., 18 February 2014)].

  80. 80.

    Order denying 137 Motion to Amend/Correct, 27 October 2014.

  81. 81.

    United States v. American Express, 838 F.3d 179 (2d Cir. 2016), cert. granted, Ohio v. American Express Co., 2017 WL 2444673 (U.S. Oct. 16, 2017) (No. 16-1454) (Amex).

  82. 82.

    Baker and Scott Morton (2018), Carlton and Winter (2018) and Ritter (2019).

  83. 83.

    Ohio et al. v. American Express Co. et al., 585 U. S. ____ (2018).

  84. 84.

    Edelman and Wright (2015), Mantovani et al. (2017), Caccinelli and Toledano (2018), Hunold et al. (2018), Wals and Schinkel (2018) and Vergé (2018).

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  1. Department of Law, University of Roma Tre, Rome, Italy

    Margherita Colangelo

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  1. Margherita Colangelo
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Correspondence to Margherita Colangelo .

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  1. Faculty of Law, University of Lucerne, Lucerne, Switzerland

    Klaus Mathis

  2. The School of Law, University of Notre Dame, Notre Dame, IN, USA

    Avishalom Tor

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Colangelo, M. (2019). Competition Law and Most Favoured Nation Clauses in Online Markets. In: Mathis, K., Tor, A. (eds) New Developments in Competition Law and Economics. Economic Analysis of Law in European Legal Scholarship, vol 7. Springer, Cham. https://doi.org/10.1007/978-3-030-11611-8_14

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