Most Favoured Nation clauses in an online context

​In a decision of 07 November 2016, the Belgian Competition Authority has closed its investigation against real estate website operator Immoweb regarding the “Most Favoured Nation” clauses in its contracts with developers of software for real estate agencies.

Case

In 2015, the BCA opened an investigation against Immoweb for a possible infringement of Articles 101 and/or 102 TFEU and/or the corresponding provisions of the Belgian Competition Act. Immoweb is the operator of the website www.immoweb.be, the leading real estate website in Belgium.

At the core of the investigation was the software interface which enables real estate agencies to post their real estate portfolio on real estate websites. In Belgium it is common practice for the operators of real estate websites to pay a fixed sum to software developers for each real estate advertisement placed on their website. This system differs from other jurisdictions, where the software developers are paid by the real estate agencies.

Most of Immoweb’s contracts with these software developers contain a MFN clause. On this basis, the software developer undertakes to offer Immoweb the same financial conditions it offers to competitors of Immoweb, whenever these terms are more favourable. The preliminary findings of the BCA pointed to a dominant position of Immoweb on the online real estate market. As a result, the BCA considered Immoweb to be an unavoidable trade partner for the software developers. The BCA held that no real estate agency would be prepared to conclude a contract with a software developer that does not feature Immoweb’s website in its listing.

The BCA considered that the MFN clauses restricted competition by artificially raising prices for the competitors of Immoweb. The software developers need to include Immoweb in their offering, but they do not have any incentive to grant better terms to competitors of Immoweb, since they would have to pass these conditions on to Immoweb and therefore lower their overall revenues.

When informed of the BCA’s preliminary analysis, Immoweb offered to unilaterally put an end to the existing MFN clauses in its contracts, and to refrain from reintroducing said clauses in any future contracts with software developers for a period of five years.

Following these commitments, the BCA has decided not to pursue its investigation. As a result, the BCA did not take a formal position as to whether or not Immoweb is dominant, or whether it violated competition rules by incorporating MFN clauses in its contracts with the software developers.

Comment

The Immoweb investigation can be related to a broader interest by the BCA in the real estate sector. Back in 2010, the BCA established that the recommendations of the BIV - the Belgian institute for real estate agents - regarding certain minimum scales for the fees of real estate agents were in violation of competition law. Earlier this year, the BCA decided to launch an ad hoc investigation into the BIV’s current policy regarding real estate agents’ fees. In June 2016, the BCA concluded that the real estate sector was still largely characterised by limited differentiation in fees, and that a common rate of 3% was still used as a reference by the majority of real estate agents. However, the evidence collected in the context of this investigation was not sufficient to establish an anti-competitive practice.

The observed price rigidity may explain the position of the BCA in the Immoweb case. The case illustrates a determination to make the market more competitive, especially in the more innovative online segment.

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