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Showing posts from April, 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).

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."

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 (i…

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 Expedi…

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 consum…

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 …

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 sub…

Text and Data Mining

Report from the Expert Group, EC Directorate-General for Research and Innovation, here