Identifying the Exclusionary Effect of Across-Platform Parity Agreements

• Author: Amine Mansour
• DOI: 10.1177/0003603X18770065
• Published date: 01 June 2018
• Date: 01 June 2018
• Subject Matter: Articles

Article

Identifying the Exclusionary

Effect of Across-Platform Parity

Agreements: Testing the Tests

Amine Mansour*

Abstract

Although across-platform parity agreements (APPAs) are increasingly scrutinized, their exclusionary

effects remain ambiguous. This article posits that the practice can either prevent entry or lead to the

exit of rival platforms. Assessing this foreclosure effect presupposes, however, using one of the

available tests, namely, the no economic sense test, the as efficient competitor test, and the consumer

welfare test. Whether APPAs lead to the foreclosure of rivals depends ultimately on the applied test

and, sometimes, on the way the test is applied. This reflects the paradox of APPAs. In an effort to

identify the most appropriate test to deal with APPAs’ foreclosure effect, this article also suggests that

the consumer welfare test is far superior to the others.

Keywords

exclusionary effect, no econom ic sense test, as efficient comp etitor test, consumer welfar e test,

across-platform parity agreements

I. Introduction

The rise of the digital economy challenges in many aspects the common ways of dealing with

competition concerns. A particular manifestation of this metamorphosis is the emergence or some-

times the renewed interest in new forms of vertical restraints, one of which is across-platform parity

agreements (hereinafter, APPA).

APPAs have been labelled as a “special category of price relationship agreements.”

1

Within this

special category, several v ersions have been identified .

2

The present article focuses on the mo st

*Montpellier University, Montpellier, France

Corresponding Author:

Amine Mansour, Montpellier University, Montpellier 34090, France.

Email: amine.mansur@coleurope.eu

1. Org. for Econ. Coop. & Dev. (hereinafter, OECD), Hearing on Across Platform Parity Agreements - Note by France, DAF/

COMP/WD (2015)64, 2 (2015). See also Can “Fair” Prices Be Unfair? A Review of Price Relationship Agreements, Report

Prepared for the Office of Fair Trading by LEAR (OFT1438), 84 (2012), para 6.1 (hereinafter, LEAR Report).

2. Morten Hviid, Vertical Agreements Between Suppliers and Retailers That Specify a Relative Price Relationship Between

Competing Products or Competing Retailers, OECD, DAF/COMP (2015)6, 20 (2015).

The Antitrust Bulletin

2018, Vol. 63(2) 246-272

ªThe Author(s) 2018

Reprints and permission:

sagepub.com/journalsPermissions.nav

DOI: 10.1177/0003603X18770065

journals.sagepub.com/home/abx

widespread version of APPAs, which is an agreement between a producer and a platform

3

whereby the

producer “undertakes to charge on that platform a price that is not higher than the price charged on

other platforms, including the new entrants.”

4

The consequences of such a practice remain ambiguous, as it has received little attention from both

economic and legal literature. Recently, the clause gained more visibility due to high-profile cases

such as Booking investigations,

5

the E-Book case,

6

and Amazon’s investigations.

7

Despite the fact that

those investigations gave rise to major divergences between National Competition Authorities

(NCAs),

8

it also appears that the practice has been mostly approached through the lens of Article

101 of the Treaty on the Functioning of the European Union (TFEU) by assessing its collusive effect.

9

This article deviates from such an approach. It focuses on the potential anticompetitive foreclosure

of the practice

10

by asking whether the use of an APPA by a dominant platform inevitably exclude

rivals. In practice, an APPA may obstruct entry or expansion of rival platforms by reducing their

ability to attract users through lower commissions or by implementing a differentiated business

model.

11

However, assessing this foreclosure effect is a difficult task due to the absence of prece-

dents

12

and the lack of any reference to APPAs, in both the European Commission’s Guidelines on

Vertical Restraints

13

and guidance on article 102.

That is precisely where the interest of this article lies. I assess the potential anticompetitive fore-

closure of the APPAs using three different tests, namely, (1) the consumer welfare test, (2) the no-

economic-sense test, and (3) the equally efficient competitor test. By doing so, the article highlights the

merits of each test and identifies the most appropriate one for purposes of defining APPAs’ antic-

ompetitive foreclosure. This is in substance the focus of the fourth, fifth, and sixth parts.

Part II analyzes the functioning of competition in the absence of an APPA, highlighting the

importance of an agency business model for a foreclosure effect to occur and the key factors for

competition between platforms.

Part III explores the functioning of competition between platforms when an APPA is introduced by

highlighting the impact of the practice on market players and the consequences flowing therefrom with

regard to market structure.

3. In line with the OFT/LEAR definition, by platform we refer to “those structures that act as some sort of market-place and

allow buyers and sellers to meet and trade directly”; see LEAR Report, supra note 1, at 31.

4. Id. at 30.

5. Autorite´ de la Concurrence, De

´cision n15-D-06, 21 avril 2015 (hereinafter, ADLC).

6. Commission Decision of July 25, 2013, in Case No. COMP/39.847/E-BOOKS.

7. Commission Press Release of June 11, 2015, IP/15/5166. More recently, the Commission has accepted Amazon’s

commitments to settle investigations on parity clauses applied to eBook distribution. See Commission Press Release of

May 4, 2017, IP/17/1223.

8. Philippe Chappatte & Helen Townley, Online Hotel Bookings – A Joint European Approach or A Most Favoured Nation?

SLAUGHTER AND MAY BRIEFING, 1 (2015).

9. Pinar Akman, A Competition Law Assessment of Platform Most-Favoured-Customer Clauses (CCP Working Paper 15-12,

7(2015)).

10. Foreclosure is defined in the Commission’s Guidelines on Article 102 as “a situation where effective access of actual or

potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant undertaking

whereby the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers.

See Eur. Comm’n, Guidance on the Commission’s Enforcement Priorities in Applying Article 82 [Article 102] of the EC

Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, [2009] O.J. (C 45) 7, 19 (hereinafter, Guidance Paper).

11. Andre Boik & Kenneth S. Corts, The Effects of Platform MFNs on Competition and Entry (Toronto University Working

Paper, 2, 2014), https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name¼RES2015&paper_id¼41.

12. Since June 2015, the Commission is investigating Amazon’s use of MFN clauses in its contracts with E-book publishers.

13. Eur. Comm’n, Guidelines on Vertical Restraints, [2010] O.J. C130/1.

Mansour 247