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Online Platforms, Rate Parity, and the Free Riding Defence

Prepared for presentation at 11th ASCOLA Conference Leiden Law School, 30 June – 2 July 2016

38 Pages Posted: 30 Jun 2016 Last revised: 18 Jul 2016

Simonetta Vezzoso

University of Trento

Date Written: June 29, 2016

Abstract

A two-sided platform business is a new type of intermediary to be found in a growing number of economic sectors. As to the hospitability industry in particular, recent innovations in the field of digital technologies prompted the rise of so called Online Travel Agents (OTAs) and the demise of the traditional merchant model.

Recently national competition authorities (NCAs) in the EU investigated so called rate parity clauses in the contracts between the three largest OTAs and their hotel partners. These are contract clauses laying down the hotelier’s obligation to display the same room prices across sales channels. The parallel investigations conducted by the NCAs revealed an array of anticompetitive effects stemming from rate parity obligations. While the German NCA concluded that there was insufficient evidence of the efficiency gains of these clauses, and therefore decided to prohibit them, the French, Italian and Swedish NCAs implicitly recognised that some level of protection against free-riding was necessary, and accepted commitments to reduce the scope of the rate parity obligation.

The hotel online booking cases were closely followed in the EU and beyond, since they could help clarify a number of key assessment issues concerning a category of commercial practices already widely spread in online markets. In-depth analyses of the NCAs’ findings are now needed, especially in view of the promotion of an effective antitrust-based platform regulation. In particular, this article explores some of the challenges related to the application of the traditional free-riding defence to rate parity obligations.

Keywords: Online Platform, Online Travel Agent, Retail Most Favoured Nation Clause, Across Platform Parity Agreement, Rate Parity, Vertical Agreement, Exemption, Free Riding, Efficiency Gains, Consumer Pass-On

JEL Classification: D43, K21, L1, L42

Suggested Citation

Vezzoso, Simonetta, Online Platforms, Rate Parity, and the Free Riding Defence (June 29, 2016). Prepared for presentation at 11th ASCOLA Conference Leiden Law School, 30 June – 2 July 2016. Available at SSRN: https://ssrn.com/abstract=2802151 or http://dx.doi.org/10.2139/ssrn.2802151

Simonetta Vezzoso (Contact Author)

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

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