14.III.3 Price discrimination

The concept of price discrimination relates to the profits a data supplier can make, but deserves a more detailed discussion. Price discrimination refers to the situation in which (a) multiple prices are charged that (b) do not correspond to the differences in the costs.1 In the context of equity pre- and post-trade data, price discrimination enables to charge data users different prices for the same data product or service. Different types of price discrimination are possible. Example include different prices for each individual data user, as well as different prices depending on a data user group (e.g. different usage).2

Price discrimination is not in itself an unfair practice. It is common in many markets – both financial services and more generally – that different consumers pay different prices for the same product.3 For example, it is fairly well-accepted that consumers pay less where more of a product is acquired (volume discount). At the same time, price discrimination implies that certain conditions are met. Price discrimination can only be practiced where a firm has some market power (e.g. an oligopoly) or where there is so-called different price elasticity of demand.4 Price discrimination can in effect become problematic based on both economic or fairness considerations (which can overlap). Examples of economic considerations include the prices (i.e. does price discrimination increase or decrease prices on average?) and competition (i.e. is the market for data vendors competitive, that is – is there no monopolistic or oligopolistic pricing?).5 Examples of fairness considerations include who is harmed by price discrimination (e.g. retail or professional investors) and whether the product or service is essential.6 In the context of EU equity pre- and post-trade data prices, opinions differ as to what economic and/or fairness considerations should prevail.7