The Prohibition of Price Parity Clauses and The Digital Markets Act

Platforms have imposed price parity clauses on sellers, which restrict how sellers can set retail prices. These clauses have been found to be anti-competitive in a number of recent abuse cases in and outside Europe. In particular, leading hotel booking platforms had to drop these clauses. The proposed Digital Markets Act prohibits the use of such price parity clauses for gatekeeper platforms that are addressees of the Act. I explore the economic rationale of such a prohibition and point to possible responses by gatekeeper platforms. This raises issues, which are of relevance more broadly for competition policy and the regulation of platforms.

By Martin Peitz¹

I. INTRODUCTION

Price parity clauses stipulate that sellers on a platform cannot set higher retail prices on this platform than in a certain set of alternative sales channels. This may include certain direct sales channels or other indirect sales channels provided by competing platforms. So-called wide price parity clauses stipulate that sellers must not offer a lower price through any other channel (including direct and indirect channels), while narrow price parity clauses stipulate that sellers must not offer a lower price in the direct sales channel but are allowed to set lower prices on other platforms. Wide-price parity clauses are widely seen as anti-competitive, while there is substantial disagreement about the likely effects of narrow-price parity clauses. Practitioners and academics often call pric