Narrow Price Parity and Market Power in Digital Platforms

Policy Paper 56

Abstract

Firstly, this policy paper examines the competitive implications of Price Parity Obligations (“PPOs”) providing an argument for the wholesale removal of PPOs that have traditionally been applied by business-to-consumer (“B2C”) digital platforms. Secondly, it undertakes an impact assessment following Booking’s removal of PPOs agreed to in August 2024 which follows a finding by the Competition Commission of South Africa that PPOs impede competition resulting in a likely adverse effect. While wide PPOs are generally considered anticompetitive, this view is mixed for narrow PPOs. Using market power as lens to understand the impact of narrow PPOs, evidence and arguments against their use suggest they suppress price differentiation and price competition, resulting in higher average prices; they increase business user dependency on the platform which reinforces their market power; they can potentially exploit business users and restrict their flexibility to innovate and develop their own distribution channels and marketing strategies.