Assessing the Competition Law Impact of Platform Price Parity Agreements

[Deepti Pandey and Sushant Singh]

The authors are fourth year students of WBNUJS, Kolkata.


The global increase in the foothold of the online platforms has considerably accelerated leading to a significant share in the relevant market.[i] The areas where these businesses have flourished in India include food delivery services, hotel and travel bookings, cab services and delivery of products through e-retail inter alia.[ii] On one hand, it has contributed to convenience and market efficiencies.[iii] On the other hand, it has raised eyebrows of the regulatory authorities across jurisdictions specifically in relation to the Price Parity agreements.[iv] In particular, these have tremendously impacted the competition which is why several cases have emerged in Germany, the European Union and India among others challenging the cartelization, abuse of dominance and anti-competition.[v]

A commonly accepted definition of price parity agreement (also known as ‘Across Platform Parity Agreement’[vi] or ‘Most Favoured Nation Agreement’) is an agreement between a service provider and an intermediary where the service provider guarantees to abide by a minimum price threshold while selling its own product or service to any other intermediary.[vii] It essentially provides an assurance to the intermediary who is a party to the agreement that he/she is offered the terms at least as favourable as other intermediaries.[viii] Depending upon the intensity of the containment/restraint, such agreements can be classified as ‘wide’ (here, restraint applies to other channels – both online and offline) or ‘narrow’ (here, the restriction applies to the extent of service provider’s own website).[ix] There is a difference in approaches as regards the two forms of price parity agreements across jurisdictions. While there is some degree of unanimity regarding invalidating wide price parity clauses, certain jurisdictions do confer validity to narrow price parity agreement.[x]

The controversy regarding their validity has become crucial particularly from India’s standpoint especially after the release of the 2020 Report on E-Commerce (“Report”) where the Competition Commission of India (“CCI”) has vaguely referred to the competition crisis by the price parity agreements while refraining from their categorical invalidation. The concerns are intensively hiked in light of the increased cases filed particularly against online hotel booking sectors wherein the CCI has to step in and conduct the analysis on abuse of dominance.[xi] In this backdrop, this article seeks to analyze the validity of the price parity agreements and their effect on competition.

Price parity agreements and their relevance in online intermediation 

The primary motive for adopting these clauses as identified by the CCI is to preclude free-riding (a practice that allows the sellers/service providers to freely exploit the labour of online platform operators for gravitating customers otherwise available at cheaper alternative prices). In certain way, it may foster innovation in the online services catering greater to the demand side and thereby expands the consumer base.[xii]

In marketing terms, it should be viewed as an incentive provided for the marketing services of online channels. These channels in various instances help drive the prices for the goods/services.[xiii] The market and promotion advantage furthers the objective of the sellers/service providers to give in to the price parity agreements.[xiv] Various sectors (especially the hotel industry) have realized that there is a great potential in online platforms to integrate the consumer demands into a framework for tailorized services as well as to cater appropriately to the consumer perception regarding a steady and stable pricing.[xv] The enhanced information symmetry coupled with more innovative means to cater to the consumers helps the demand side which in turn creates returns for the supply side leading to the growth of the concerned sector.[xvi]

India’s contribution to the jurisprudence on price parity in e-commerce 

An attempt to provide an understanding on how the Competition Act, 2002 (“the Act”) regulates price parity agreements is made by the CCI. Based on the given Report, it appears that there is no clear cut response given to the status of price parity agreement and they are subject to a fact-specific inquiry which is grounded upon the factors under Section 3 and 4 of the Act. The rationale for according this uncertainty is evident from paragraph 93-95 of the Report where the CCI discusses both the pros and cons of price parity and seeks to arrive at a balancing approach.

So far so good: The MakeMyTrip case and a Vigilant CCI

Not all the cases involving the online intermediaries are impugnable. A dominant market is required to be proven and a case shall lie under Section 3 or Section 4 of the Act. A detailed analysis is required to ascertain whether the agreement has the effect of causing appreciable adverse effect on competition or is creating a dominant market. However, the subject-matter has recently come into the foray due to which there is not enough jurisprudence and judicial precedence. The two cases cumulatively discussed hereunder are the CCI’s analysis of the price parity agreement between hotel chains and online booking platform with reference to Section 3(4) and 4 of the Act.

The first case is the In Re: Rubtub Solutions Pvt. Ltd. and MakeMyTrip case (“MMT”). In the given case, MMT entered into a chain agreement containing price parity clause with Treebo Hotels. This agreement is challenged by Treebo as an infringement of Section 3(4) and Section 4(2)(a)(ii) of the Act.

In its analysis, CCI relied on the previous case – In Re: FHRAI and OYO (“OYO”). The OYO case involves allegation against the MMT for abuse of dominance on various factors – one such is the wide price parity clause it entered into with hotel companies. While ascertaining the abuse of dominance,  the CCI closely peruses the following factors:- 100% acquisition of Ibibo Group Holdings by the MMT, annual growth of the MMT in past three years, the MMT’s market share post the acquisition (around 63%). Based on these factors, it infers a prima facie abuse of dominance. It further reaffirms that the price parity agreement is wide in nature. This, in the opinion of the CCI, causes a repulsive effect by acting as a barrier to technology improvement, or may even cause increased prices charged to consumers by them.

For the purposes of price parity analysis, the MMT case solely relies on the aforementioned case law and holds the wide price parity agreement entered between MMT and Treebo as anti-competitive, capable of jeopardizing both the new players and consumers. These matters have been taken forward with utmost solemnity by the CCI. It is indicative from the order passed by the CCI directing the Director-General to conduct additional investigations on the operations of MMT and OYO in the exercise of its powers to order further inquiry based on a prima facie case under Section 26 of the Act.

Critical Assessment

There is a lack of uniformity on the price parity agreements across jurisdictions. For instance, in Germany, there appears to be a shift in favour of validating the narrow clauses.[xvii] In establishing the anti-competitive nature of these clauses, the court has on substantive grounds reasoned that these clauses enable an even-playing field for online platforms to earn return on their technological investments.[xviii] On the other hand, while Swedish authorities also validate the narrow clauses, their basis is entirely procedural and evidentiary.[xix] On the other end of the spectrum are the nations which categorically outlaw all forms of price parity agreements. For example, in France, the Macron Law holds an agreement putting any form of restraint in establishing price as null and void. Thus, these differential approaches are reflective of a lack of consensus on the jurisprudence on price parity agreements with the online platforms.

As far as Indian approach is concerned, the Report is representative of the authority advocating for a balanced approach. The case laws have further explained that the stricter construction applies only as far as the nature of price parity agreements is broad (providing no clarification on narrow clauses). Further, there is not much literature on the category in which the price parity agreement fall as regards Section 3(4) of the Act. On a whole, there is hardly any focus on how to operate narrow price parity clauses as allowing them might equally have some degree of anti-competitive effect.

Conclusion and Recommendations 

Based on the aforementioned analysis, the authors espouse for a balanced approach. In this regard, the authors believe that the approach adopted in the United Kingdom appears to be a persuasive model for India to adopt. In the 2017 Digital Comparison Report, the Competition and Markets Authority (“CMA”)  analyzed both narrow and wide price parity agreements and found that unlike narrow, wide price parity has no efficiency basis and should, therefore, be outrightly prohibited. There is justification for allowing narrow price parity due to its impact in curbing free-riding. However, there could equally be concerns of them expanding further which might raise the possibility of them becoming anti-competitive. This serves to create an even playing field for the online players who create value addition in service delivery of food, hospitality and travels inter alia by way of customizations, application-based cost-effective services etc.

Another mechanism in this regard could be conditions imposed within the legislations addressing price parity agreements. A prime example of this transparency legislation is the EU Regulation 2019/1150 (“EU Regulations”) enacted in June 20, 2019. Article 10 of the said Regulation states that where online platforms seek to limit the ability of other mechanisms to offer differential services to the end users using different terms and conditions, they are required to make public disclosures of the basis of imposing these limits which include legal, commercial and economic justifications.

Thus, based on our analysis without categorically nullifying price parity agreements as anti-competitive, the alternatives (balancing mechanisms, tools of transparency and fragmentation of narrow form of agreements etc.) can be employed which can reap benefits emanating out of these agreements in fostering competition while obliterating any anti-competitive effect arising thereof.

End Notes

[i] Madhav Sheth, Offline vs. Online: Consumer diversity driving smartphone penetration, The Economic Times, December 30, 2019, (last seen on April 04, 2020).

MilMila Tech India Pvt. Ltd, Online vs. offline shopping statistics India, Medium, June 04, 2018, (last seen on April 04, 2020).

[ii] Prof. (Dr.) R.L. Koul & Priya Prasad, An Analysis of the Abuse of Dominant Position by the E-Commerce Retailers in India, (last seen on April 04, 2020).

[iii] Competition Commission of India, Market Study on E-Commerce in India Key Findings and Observations, January 08, 2020, 31-32, (last seen on April 04, 2020).

[iv] Thomas Larrieu, Pricing strategies in online market places and Price Parity Agreements: evidence from the hotel industry, July 14, 2019, (last seen on April 04, 2020).

[v] Mark Oliver Mackenrodt, Price and Condition Parity Clauses in Contracts Between Hotel Booking Platforms and Hotels, 50 IIC – International Review of Intellectual Property and Competition Law, 1132 (2019), (last seen on April 08, 2020).

[vi] In re: Federation of Hotel & Restaurant Associations of India (FHRAI) and MakeMyTrip India Pvt. Ltd. (MMT), Case No. 14 of 2019 (Competition Commission of India), ¶52;  Kees Jan Kuilwijk, Price Parity Clauses and Online Platforms, August 2, 2017, (last seen on April 08, 2020); Thomas Larrieu, Pricing strategies in online market places and Price Parity Agreements: evidence from the hotel industry, July 14, 2019, (last seen on April 04, 2020); Competition Commission of India, Market Study on E-Commerce in India Key Findings and Observations, January 08, 2020, 25-26, (last seen on April 04, 2020).

[vii] Id.

[viii] Id.

[ix] Id.

[x] Supra note v.

[xi] Abhay Joshi, Scrutiny of the online hotel booking sector by CCI: Here are the key takeaways, CNBC, January 17, 2020, (last seen on April 08, 2020).

[xii] Ariel Ezrachi, The competitive effects of parity clauses on online commerce, 11 European Competition Journal (2015), (last seen on April 08, 2020).

[xiii] Maintaining overall price parity with OTAs, 05 Nov 2009, (last seen on April 08, 2020).

[xiv] Id.

[xv] Mikula Jung, Effects of Rate Parity Clauses on Pricing: A Research Study on the Hospitality Industry, Bucerius/WHU Master of Law and Business Program, 42, (last seen on April 08, 2020).

[xvi] Id.

[xvii] Düsseldorf Higher Regional Court, Narrow ‘best price’ clauses of Booking also anticompetitive, December 23, 2015, (last seen on April 08, 2020); Final Chapter of the Saga? “Narrow price parity clauses” declared permissible by Higher Regional Court of Düsseldorf, Linklaters, June 30, 2019, (last seen on April 08, 2020); Lukas Solek, Price Parity Clauses and Online Platforms: Is There a New Way Forward?, Linklaters, November 14, 2019, (last seen on April 08, 2020).

[xviii] Bryan Cave Leighton Paisner LLP, Price parity clauses and – a more unified approach or a reminder of diverging opinions?, Lexology, June 10, 2019, (last seen on April 08, 2020).

[xix] B.V. and Bookingdotcom Sverige AB v. Visita TFEU, Case No. PMT 7779-18, May 09, 2019 (Court of Appeal).


One response to “Assessing the Competition Law Impact of Platform Price Parity Agreements”

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