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Price and Content Platform Parity: A Tale of Two Industries

This paper surveys the most recent contributions on the competitive effects of parity provisions in vertical industries. We explain that those effects depend on the scope of parity, the complexity of the vertical supply chain, the business model operated by sellers and distributors, and the strength of competition between direct and indirect distribution channels. We explain why ‘price’ parity agreements (contractual provisions mandating equal end-prices across distribution channels) are almost always anti-competitive. Yet, in complex supply chains, ‘content’ parity agreements (contractual provisions preventing upstream suppliers from offering different products through different platforms) may have positive effects on consumer welfare. This is more likely when distributors act as resellers and when direct and indirect distribution channels are close substitutes. To demonstrate the relevance of our analysis of the literature for competition policy, we apply our findings to two seemingly similar but, it turns out, very different distribution industries: hotels and airlines.