Antitrust Regulation against MFN Clauses in the Internet Platform Economy

Abstract

Signing most-favored-nation clauses on prices between private entities on Internet platforms is a commercial practice that has emerged in recent years. It is also an essential concern of Draft Anti-Monopoly Law（expert opinion）which proposes an innovative provision regarding monopoly agreements between Internet platform operators. Looking beyond the borders, both the United States and the European Union have made the regulation of Platform MFN clauses an important issue. In this new era, when regulatory innovation in the new economy has become a trend of law development, in view of the reality that problems are widespread but solutions are lacking, it is necessary to explore the regulatory path of MFN clauses in an innovative way. From the perspectives of basic structure and economic motivation, there are big differences between basic MFN clauses in the traditional market and PMFN clauses in the Internet market. Although both contain “most-favored-nation” treatment requirements, the latter involves a wider range of subjects and more complicated legal relations, and may have commissions, in addition, platforms become contracting parties in PMFN, all of which make economic analyses in specific cases very different. Through economic analysis, it can be found that the rationality of MFN clauses is reflected in their effects of promoting competition, including prevention of price discrimination, reduction of free-riding problem on the platform, prevention of hold-up question and delay, and reduction of transaction costs. At the same time, their effects of restricting competition, such as reduction of price uncertainty, promotion of horizontal collusion, market foreclosure and softening of competition, will increase the risks in market competition. Making a comprehensive survey and review on relevant regulatory practices in the United States and the European Union over the past half century, it can be concluded that although the two jurisdictions have their own characteristics in aspects of legal basis, regulatory content, procedure, and final result, they have a consensus on at least four sides: both focus on analyzing economic effects, both tend to define these behaviors as vertical restrictions, both distinguish between agent distribution and wholesale distribution models, and both pay close attention to platform supervision in the digital economy. Following regulatory recommendations can be summarized: First, it is advisable to define types of monopolistic behaviors MFN clauses may constitute under current law. Second, the competition effects in a case should be examined through economic analysis. Last but not least, platform supervision must be reformed in the Internet platform economy.