Restaurants, platforms, and contractual imbalance in the COVID era
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The pandemic has highlighted tensions and contradictions inherent in a model that is allowing many restaurants to remain open

The Italian version of this article was first published on IlSole24Ore.com

Clearly, the pandemic has accelerated digitalization in many sectors, in Italy as elsewhere. However, this shift has raised thorny issues in a variety of areas. The restaurant field is the site of the latest example.

The restrictions imposed by the current health emergency and a mass migration from serving customers in restaurants to home delivery have, in the eyes of restaurant owners, caused the “market power” of food delivery platforms (Deliveroo, Glovo, Just Eat, Uber, etc.) to explode, drawing accusations of unfair competition from those same owners.

This is a familiar story that has been told in other sectors, such as taxi service and tourism. But is it an accurate depiction? Attempts have been made to tamp down the market penetration of digital businesses in other sectors, but with little success. One example can be found in the actions taken by taxi driver cooperatives. After establishing that a driver must hold a license, the Italian antitrust authority (AGCM) and the courts actually censured cooperatives for attempting to stop their affiliated drivers from working with third-party apps.

Since then, all the major cooperatives have developed their own proprietary digital apps to attempt to keep pace with the market. Indeed, greater digitalization in the sector is a positive development, both economically and in terms of competition, where it wields even greater impact than it does as a legal issue.

The restaurant business is not exempt and is already developing autonomous digital initiatives such as MyBalloon, created by Nexus, which allows restaurant owners to access free e-commerce spaces directly to market their delivery services without relying on outside suppliers.

The very concept of “unfair competition” is debatable. Consider the example of French hotel owners, who accused Airbnb of operating in the sector without holding the licenses required by national law. The Court of Justice of the European Union shot down that idea, stating that Airbnb doesn’t offer tourism services but is simply an intermediary in the form of an information society service, and as such it is subject to the special liability regime under the e-commerce directive (2000/31/EC).

Likewise, delivery platforms serve to facilitate interaction between supply and demand and offer home delivery services to restaurants and customers, but they do not compete with restaurants, just as travel booking platforms do not compete with airlines and hotels, but simply provide support services to them.

Additionally, complaints about excessive “market power” in the hands of the platforms seem not to use that phrase in a technical sense, as it would be difficult to point to strictly defined “dominant positions” (meaning quasi-monopolies) in a market as crowded as the digital food delivery market. At most, the platforms might fall under the definition of “gatekeepers” set forth in the Digital Markets Act proposal that the EU Commission issued in December. In the future that could mean they would be subject to obligations regarding neutrality and sharing data with competitors, as well as bans against unfair negotiation or marketing conduct, among other things. That remains to be seen, however.

At best, a claim regarding competition could hinge on the existence of a “cartel” of platforms to the detriment of restaurants, but currently there is no evidence of such. In any case, experience dictates that relying on the right to fair competition (i.e., contesting unfair competition or seeking a ban on anticompetitive agreements or abuse of a dominant position) is not necessarily the best tack to take when it comes to resolving disputes that arise between traditional businesses and online platforms.

In the meantime, regulatory actions designed to block or temper some of the clauses criticized by restaurant owners might be considered. This would be similar to what was done in the agri-food industry to render the balance of power between supermarket chains and small producers more equitable. Or the applicability of economic dependence regulations could be explored, given that at the moment on-site restaurant service is strongly circumscribed (if not outright impossible). In that case, contested contractual clauses might be invalidated because they are imbalanced or abusive. However, both of these may turn out to be temporary situations due to the pandemic.

Article filed under: COVID-19, Regulatory, Antitrust
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