1. A Competition Law Assessment of Platform ‘Most-Favoured-Customer’ (MFC) Clauses
Dr Pınar Akman
Associate Professor
School of Law, University of Leeds
2014 LIDC Congress, 19 September 2014, Turin

2. Platform MFCs are not ‘normal’ MFCs.
‘Normal’ MFC: promise by a seller to a buyer that the buyer will be treated as well as the seller’s ‘most-favoured-customer’.
Eg. Barnes & Noble to customer: the price at which I sell Harry Potter to you is no higher than the price at which I sell Harry Potter to any of my other customers.
Links prices between different customers of the same seller.
‘Platform’ MFC: ‘third-party’ agreement
Eg. publisher to Apple: the price of Harry Potter to a customer at iBookstore will be no higher than the price of Harry Potter to a customer buying from Amazon.com.
Links prices for the same customer buying from different sellers.
closer to a Price-Matching-Guarantee than MFC.

3. MFCs have potential procompetitive and anticompetitive effects.
Help buyers obtain inputs for less;
Introduce new products: prevent opportunism where there are relationship-specific investments;
Deter rent-seeking delays and hold out problems where important information discovered after contract;
Protect investments by preventing free-riding;
Encourage retailer entry;
Avoid discrimination.
Anticompetitive
Match prices across competitors for the same product;
Reduce incentive to lower price to anyone;
Make collusion easier by reducing incentive to cheat;
Foreclose that market by raising rival’s or entrant’s costs;

4. Platform MFCs may fall outside the scope of Article 101 TFEU.
The Agency problem
Are (Internet) platforms retailers? Are they agencies? Or neither?
Agreements between agent and principal are not covered by Article 101: agreement is within the same economic unit (CEPSA; DaimlerChrysler).
Platforms do not own the product and do not set the price for it.
Platforms do not buy and/or sell the product; they cannot be retailers.
Platforms do not assume financial or commercial risks related to the sales or performance of the contract with third parties.
There is an exception to the agency exception in VBER Guidelines: foreclosure on the relevant product market; or facilitating collusion between principals.

5. To the extent that Article 101 TFEU is applicable, there is no uniform, principled approach.
Apple (US) – ‘horizontal price fixing conspiracy’; per se infringement.
Apple (EU) – concerted practice by object; commitments.
Booking.com/Expedia – restrictions on discounting (not MFCs) by object; commitments.
HRS – vertical restraint by effect; prohibition.
PCW – vertical; narrow MFCs good (in fact, vital), wide MFCs bad; market investigation remedies.
Neither MFCs nor agency agreements ‘by their very nature’ entail ‘a sufficient degree of harm to competition’.

6. Platform MFCs might be better dealt with under Article 102 TFEU.
Potentially avoids the agency problem since no need to identify ‘undertakings’ (Suiker Unie, [486]).
Focuses on market power – appropriate for vertical restraints.
Eg. Publishers and/or e-book retailers; online travel agencies; PCWs – concentrated markets.
Horizontal market power has been noted as a factor in PCW .
Interestingly, HRS directed only against HRS.
Foreclosure has been the focus of existing case law (Hoffmann-La Roche; Ruhrgas; Digitisation of European cinemas).
Abuse of (vertical) collective dominance?
- exploitation – MFCs imposed upon the contracting partner against their will (hotels; Amazon; insurance companies, etc).
- exclusion – foreclosure at platform/trading partner level.

7. Platform MFCs require an effects-based analysis.
Particularly the agency problem and the potential procompetitive justifications point out the need for an effects-based analysis.
Alternative for firms: vertical integration, which might be inefficient.
Market power appears to be an issue in all of the cases that came before the authorities.
Where neither the input nor the output market is concentrated, coordination is less likely to be a concern, even with MFCs (Salop and Scott Morton, 2013).
A uniform ‘European’ approach to MFCs has to be established on a principled basis – could put off other online businesses and chill competition unless the parameters of intervention known by firms ex ante.