Ian Giles: Richard, really good to see you again. The topic I wanted to talk about today is so-called MFNs, most favoured nation clauses, which are in the news again following the CMA’s announcement of a Statement of Objections against ComparetheMarket. Just to start with, can you explain what are MFNs?
Richard Whish QC: Yes, well it’s… as a topic it’s very topical as you say. A lot of attention to this in recent years. Simple idea that you supply me with a product at a price of 10 and I say to you that if you were to supply this product to anyone else at 8 then please offer the same price of 8 to me. Often referred to as a most favoured nation clause. I wish we would drop this expression. It derives from international trade law where the state of Ruritania says to the state of Arcadia, you have access to my market at a tariff of 10 but if I ever offer a tariff of 8 to somebody else, I’ll offer you the same tariff – most favoured nation clause. I think it’s much better to talk in terms of price parity clauses. I find it myself easier to understand what’s going on if we talk about price parity clauses.
Ian Giles: And the basic idea therefore being that ComparetheMarket say to suppliers you will give me your best price and you won’t offer a price that’s better to any other comparison website or on your own website.
Richard Whish QC: You won’t offer a lower price to anyone else or yourself and, obviously, this means it supresses price competition – and presumably it leads to premiums being higher which means that commissions are going to be higher, and ultimately this feeds through to you and me in the price that we pay for our insurance.
Ian Giles: And we’ve seen a whole review of these… I mean, MFNs or price parity clauses have been reviewed by the Commission, by the French, the Germans, the Swedes, the Italians. I mean, there has been a whole suite of cases around this and a common theme in all of them is that it’s a situation where the platform has some kind of market power, it’s a “go-to” platform. What’s your thinking on this? Because you could say, absent market power, are these actually problematic? If you’re a company and you’ve got a clause which says you will give me your best price, you’ve been able to negotiate that, is that inherently anti-competitive?
Richard Whish QC: Well, having taught all my life that competition only gets distorted or restricted where there is market power, of course, I’ve got to agree that there must be some market power somewhere. I note in the Article 9 commitments case with Amazon, that decision is written up in terms of some kind of abuse of dominance theory so the Commission apparently did think that Amazon had significant market power…
Ian Giles: Enough market power for it to be a dominance case, which is interesting. So for companies looking at these cases they may well find that they are being asked to sign up to them by the powerful platforms that they are dealing with, or looked at from the other prospective if you’re imposing them, then it’s certainly something that the regulators are going to look at.
Richard Whish QC: Well, I think so and, I mean, let’s put this in the wider context that the CMA did a market study recently on digital comparison tools. It’s a very good piece of work. There’s lots of extremely interesting information there explaining how as a general proposition these things are good for consumers but that’s not to say that there mightn’t be terms that can have a harmful effect and, of course, before that we had the European Commission’s e-commerce report, and there is a lot of interesting stuff there and we’ve had the whole hotel online booking saga as well, so there’s a lot of learning out there.
Ian Giles: Yeah, but it still feels to me that the waters are quite muddy. You have these distinctions between narrow clauses, wide clauses, lots of commitments…
Richard Whish QC: And different decisions in different Member States. No, we are learning, but I think this case that the CMA is doing will be helpful and I note incidentally it’s the CMA doing it and not the FCA even though the sector lies within the perimeter of the FCA’s powers, but on the other hand the CMA has a lot of knowledge from having done the market study so my understanding is the FCA is providing input into the CMA investigation.
Ian Giles: Very good. But I mean, more broadly, online retail remains very much in the spotlight then and all of these types of clauses remain something that there is a lot of interest in as you say.
Richard Whish QC: Certainly, yes.
Ian Giles: One related development which is interesting is the recent super-complaint all about loyal customers being exploited. How do you see that interlinking with this whole debate and is that a competition law concern?
Richard Whish QC: Well, I think that that super-complaint, I mean, various complaints sort of straddle competition and consumer law and the purpose of the investigation actually is to work out which is the appropriate tool to deal with the problem, if there is a problem. But obviously there is, at the very least, there’s the phenomenon of consumer inertia that I sign up to a bank account or to a mobile phone account or an insurance policy or whatever and then I repeat year, after year, after year and very often that means that I am paying a lot more than somebody else who may have only recently become a customer, and that seems to me to be worth investigating. I suppose the thing to say is that sensible customers who sort of look after their own best interests would be looking to switch and shop around and one of the best ways of shopping around is through digital comparison tools, but then we want the digital comparison tool to work in the interest of consumers and not against consumers. So I can see how in a certain sense the two things come together.
Ian Giles: It’s interesting and has been the focus of a number of the market investigations, energy, retail banking…
Richard Whish QC: Switching inertia, indeed.
Ian Giles: But then the economists will say, well, price discrimination is actually efficient and this is…
Richard Whish QC: Sometimes it is and sometimes it isn’t.
Ian Giles: It all depends on whether you are being discriminated against.
Richard Whish QC: Indeed.
Ian Giles: Ok. Thank you very much, Richard.
Richard Whish QC: Pleasure.