The Moov Case (Intermediation Platform): An European and German Perspective

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1 The Moov Case (Intermediation Platform): Colloque internationale : L application du droit de la concurrence dans le secteur numérique Jeudi 17 novembre 2016 Université Paris Ouest Nanterre La Défense Prof. Dr. Florian Bien, Maître en Droit (Aix-Marseille) Giovedì, 19 Maggio 2016

2 The Moov Cas (Intermediation Platform) : Overview 1. The relevant market 2. Qualification (vertical agreement or unilateral practice?) 3. Exclusivity (exclusivity clause and exclusivity rebate) 4. Parity agreement 5. Agreement with "bouge" n Prof. Dr. Florian Bien, Maître en Droit (Aix-Marseille) 2

3 The Moov Case (Intermediation Platform) : Market Definition Some characteristics of multi-sided platforms Moov as a multi-sided platforms : the platform operator brings two different groups of customers together, coaches and users. These two groups will trade directly with each other. Indirect network effects : a greater number of users on the one side of the market attracts more coaches on the other market side. A greater variety of coaches, in turn, will attract more users to choose their coach via the platform. Prof. Dr. Florian Bien 3

4 Market Definition - cont d The Moov Case (Intermediation Platform) : Prominent examples of multisided online platforms with indirect network effects : ebay, Amazon Marketplace, Uber, Lyft (ridesharing platform), AirBnB, Expedia, Booking, Booking, HRS, Google, Bing. As most platforms do Moov has to convince both market sides to join the platform. Therefore, often one side of the market is subsidized by the other, the one that is less price sensitive. Prof. Dr. Florian Bien 4

5 Market Definition - cont d The Moov Case (Intermediation Platform) : No cash flow no market? Moov provides its services free of charge to the users whilst coaches have to pay a commission. Is such a market open to intervention by the antitrust authorities? The Düsseldorf Higher Regional Court in its HRS-Decision: the user s side is not a market, it nevertheless possibly influences the hotels market side. [Decision of 9 Jan. 2015, Ref. VI card file 1/14 (V), para. 43] Prof. Dr. Florian Bien 5

6 Market Definition - cont d The Moov Case (Intermediation Platform) : No cash flow no market? cont d Future changes in German competition law with the entering into force of the 9 th amendment of the German Act against Restraints of Competition: 18(2a) Draft of the GWB: Der Annahme eines Marktes steht nicht entgegen, dass eine Leistung unentgeltlich erbracht wird. [ The assumption of a market is not precluded by the fact that a service is provided free of charge. ] Prof. Dr. Florian Bien 6

7 The Moov Case (Intermediation Platform) : Market Definition cont d Very limited role of the SSNIP test (Small but Significant Nontransitory Increase in Price) Which price to increase? Users or coaches price or both simultaneously? Difficult to use if users use the platform free of charge (see Moov ): It is impossible to increase a starting price of 0 by 5 10 % (what about a 5 10 % increase of advertising exposure or data disclosure?). Difficult to predict the rentability of an increase in price on one side as you have to take into account effects on the other side, too. More complex versions of the SSNIP test lead to practical limits of the test (too much data needed) Prof. Dr. Florian Bien 7

8 The Moov Case (Intermediation Platform) : Market Definition in the case of Moov Market for the booking of coaches via trainer portals Moov is clearly dominant if no other platform offers this kind of service Or Market for the booking of coaches including direct reservation Moov s dominant position less evident but still to be answered in the affirmative: quite a high market share (30 %), hence a market share of at least 40 % would be necessary for the legal presumption of dominance (cf. 18(4) GWB) astonishing rapid increase in market share, atomized competition of the individual coaches. Prof. Dr. Florian Bien 8

9 The Moov Case (Intermediation Platform) : Market Definition in the case of Moov cont d Arguments in favor of a separate market for the booking of coaches via trainer portals: The platform offers special services which are not available to consumers searching and contacting coaches individually: - Preselection of tested coaches - Comparative search (prices, services offered by the coaches) - Provision of an alternative coach at the booked time slot. Prof. Dr. Florian Bien 9

10 The Moov Case (Intermediation Platform) : 2. Qualification: vertical agreement or unilateral practice? The agreement between Moov and the coaches can be qualified as being both, a restrictive vertical agreement and an unilateral conduct of Moov that imposes the terms of the agreements to its coaches. As shown above, it might however be difficult to prove the existence of a dominant position of Moov. The effect vis-à-vis potential competitors will be the same: Foreclosure of the market as coaches referenced on Moov are not allowed to offer their services via competing platforms. Thus, new entrants will have difficulties to find free coaches for their new platform. On the other hand, coaches are probable free to move away from Moov and to get referenced on a competing (cheaper, more innovative) platform (major difference to cases like Delimitis ). Prof. Dr. Florian Bien 10

11 The Moov Case (Intermediation Platform) : 2. Qualification: vertical agreement or unilateral practice? cont d If Moov holds a monopoly (see below) one might argue that there is risk of exploitation of the coaches (not very probable as new platforms could enter the market and offer their services for less money). Prof. Dr. Florian Bien 11

12 The Moov Case (Intermediation Platform) : 3. Exclusivity (exclusivity clause and exclusivity rebate) Exclusive agreements can exclude rivals, especially when they are concluded by dominant firms. a) Exclusivity clause Clause prohibits listing on other platforms in the internet. Coaches are able to offer their services offline, nevertheless the clause effects a restriction of internet distribution. b) Exclusivity rebate Coaches pay lower commission if they do not offer their sevices offline. Prof. Dr. Florian Bien 12

13 The Moov Case (Intermediation Platform) : 4. Parity agreement Across-platforms parity agreements (APPA) are a special form of a most favoured customer clause. APPAs are typical vertical restraints in online commerce. With APPAs a booking platform mandates its content providers that they do not offer their products at lower prices on any other platform. Prof. Dr. Florian Bien 13

14 4. Parity agreement cont d The Moov Case (Intermediation Platform) : Possible harm to competition (see Bundeskartellamt, HRS-case, B9-66/10, 20 December 2013): APPA restrict competition between platforms: they remove the incentive for them to charge to coaches referenced on Moov lower commissions in return for the offer of training at lower prices. APPA restrict competition between the coaches for the best price as they cannot react flexibly to special situations by offering special prices. They would be obliged to apply them generally. APPA facilitate collusion among the coaches. They can easily observe the prices of their competitors and be quite sure that they do not deviate from those advertised on the platform. Prof. Dr. Florian Bien 14

15 4. Parity agreement cont d The Moov Case (Intermediation Platform) : Possible harm to competition cont d APPA may lead to a foreclosure of the platform market. New platforms are hindered to attract users by offering Moov coaches at lower prices as coaches can not pass on the advantage of a reduced commission to users. On the other hand, the new platform might offer other advantages and services both to coaches and especially to users (multihoming). If there were other coach search platforms like Moov, which also applied MFN the competition restraints caused by Moov s MFN would be reinforced by the MFN clauses of the other portals. Prof. Dr. Florian Bien 15

16 5. Agreement between Moov and Bouge! The Moov Case (Intermediation Platform) : Horizontal or vertical agreement? Bouge! as a (potential) competitor of Moov or its simple agent? Both? coach coach coach coach coach Moov (selection of coaches) Bouge! (placement of coaches to users) User User User Users Prof. Dr. Florian Bien 16