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Author: Herbert Hovenkamp Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
A bundled discount occurs when a seller conditions a discount or rebate on the buyer's purchaser or two or more different products. Firms that produce fewer than all the good in the bundle find it difficult to compete because they must amortize the discount across a smaller range of goods. For example, if the dominant firm offers a 10% discount for purchase of both good A and good B, but the rival makes only good B, it will have to offer a discount that is large enough to match the dominant firm's B discount as well as the foregone discount on A. The Antitrust Modernization Commission and several courts have adopted an quot;attributionquot; test for assessing the antitrust legality of bundled discounts. The test attributes the full discount to the product(s) for which rivals are claiming exclusion, and asks whether the resulting price is below cost. This test contains some features of the cost-based rule for single product predatory pricing, but it also differs in important respects. Both tests query whether an equally efficient rival can match the dominant firm's price. On the other hand, bundles that fail the attribution test can still be quot;sustainable.quot; That is, they need not involve pricing below cost, and thus their success does not depend on recoupment during a subsequent period of higher prices.Most models of bundled discounting consider two goods that are purchased in a one-to-one ratio. None of the judicial decisions involve such simplicity. In most the bundle consists of more than two goods, and different rivals may produce differing subsets of the dominant firm's bundle. Further, in nearly all of the cases the proportion of goods in the bundle can be varied at the will of the customer. We show that in such situations antitrust analysis of the bundle is significantly more complex and anti-competitive exclusion must typically be assessed on a rival-by-rival and customer-by-customer basis. This has important implications for the certification of class actions in bundled discount cases. We also provide some apparatus for assessing bundled discounts in these situations.
Author: Herbert Hovenkamp Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
A bundled discount occurs when a seller conditions a discount or rebate on the buyer's purchaser or two or more different products. Firms that produce fewer than all the good in the bundle find it difficult to compete because they must amortize the discount across a smaller range of goods. For example, if the dominant firm offers a 10% discount for purchase of both good A and good B, but the rival makes only good B, it will have to offer a discount that is large enough to match the dominant firm's B discount as well as the foregone discount on A. The Antitrust Modernization Commission and several courts have adopted an quot;attributionquot; test for assessing the antitrust legality of bundled discounts. The test attributes the full discount to the product(s) for which rivals are claiming exclusion, and asks whether the resulting price is below cost. This test contains some features of the cost-based rule for single product predatory pricing, but it also differs in important respects. Both tests query whether an equally efficient rival can match the dominant firm's price. On the other hand, bundles that fail the attribution test can still be quot;sustainable.quot; That is, they need not involve pricing below cost, and thus their success does not depend on recoupment during a subsequent period of higher prices.Most models of bundled discounting consider two goods that are purchased in a one-to-one ratio. None of the judicial decisions involve such simplicity. In most the bundle consists of more than two goods, and different rivals may produce differing subsets of the dominant firm's bundle. Further, in nearly all of the cases the proportion of goods in the bundle can be varied at the will of the customer. We show that in such situations antitrust analysis of the bundle is significantly more complex and anti-competitive exclusion must typically be assessed on a rival-by-rival and customer-by-customer basis. This has important implications for the certification of class actions in bundled discount cases. We also provide some apparatus for assessing bundled discounts in these situations.
Author: Patrick Greenlee Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Consider a monopolist in one market that faces competition in a second market. Bundled loyalty discounts, in which customers receive a price break on the monopoly good in exchange for making all purchases from the monopolist, have ambiguous welfare effects. To analyze such discounts as predatory pricing is incorrect. In some settings, they act as tie-in sales. Existing tests for whether such discounts violate Section 2 of the Sherman Act do not track changes in consumer surplus or total surplus. We present a new test and use it in an illustrative example based on SmithKline that assumes the "tied" market is a homogeneous good. If the tied market is characterized by Hotelling competition, bundling by the monopolist causes the rival firm to reduce its price. In numerical examples, we find that this can deter entry or induce exit.
Author: Sean Gates Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Antitrust law has become dominated by economics. With its chief end the enhancement of economic welfare through the preservation of the competitive process, antitrust jurisprudence now seeks to follow consensus economic theory. Antitrust liability rules are thus based on prevailing economic views. But what are courts to do when there is no consensus on the economics underlying particular conduct? How can the courts rationally develop antitrust liability rules when the economic analysis of certain conduct is unsettled? That is the case with loyalty rebates and bundled discounts, through which price rebates or discounts are conditioned on the customer purchasing a certain percentage of its requirements or multiple products from the seller. There is no established framework of analysis for conduct involving rebates. There is no long line of cases. There is no “great weight of scholarly opinion” presenting a consensus view. Economists and scholars simply disagree on when such practices may harm competition. Rebates thus offer a rare window into the development of antitrust jurisprudence in the absence of a consensus economic theory. Existing case law presents three analogies -- exclusive dealing, tying, and predatory pricing. Judicial decisionmaking regarding rebates is thus a study in analogical reasoning. But what is sorely missing from the current jurisprudence are in-depth analyses of the efficacy of these analogies. Fuller examination of the three analogies reveals flaws in each. But this examination also points to a better solution.
Author: Herbert Hovenkamp Publisher: ISBN: Category : Languages : en Pages : 41
Book Description
A bundled discount occurs when a seller charges less for a bundle of goods than for its components when sold separately. A characteristic of such discounting is that a rival who makes only one of the products in the bundle may have to give a larger per item discount in order to compensate the buyer for the foregone discount on goods that the rival does not sell. For example, if I sell A and B and offer a 20% discount only to customers who purchase one A and one B together, a rival in the B market might be able to match the discounted B price. But the rival must also compensate the customer for the loss of discount on A, given that the customer would still have to purchase A from the dominant firm at the undiscounted price. As a result, a rival who is equally efficient in other respects but who makes only product B may not be able to match the discount. The final Report of the Antitrust Modernization Commission (AMC) proposed a three part test for the illegality of a monopolist's bundling under Section 2 of the Sherman Act: (1) after allocating all discounts and rebates attributable to the entire bundle of products to the competitive product, the defendant sold the competitive product below its incremental cost for the competitive product; (2) the defendant is likely to recoup these short-term losses; and; (3) the bundled discount or rebate program has had or is likely to have an adverse effect on competition. We argue that the first of these three tests must be restated in order to take into account important possibilities, such as economies of scope; even so it is seriously overdeterrent particularly when bundling is used to facilitate price discrimination, where the secondary market is competitive, or where bundling is used to disguise price cuts in oligopolistic or cartelized markets. We also argue that the AMC's recoupment test is not helpful in most circumstances, but that its requirement of a separate showing of an adverse impact on competition is essential.
Author: Robert Bork Publisher: ISBN: 9781736089712 Category : Languages : en Pages : 536
Book Description
The most important book on antitrust ever written. It shows how antitrust suits adversely affect the consumer by encouraging a costly form of protection for inefficient and uncompetitive small businesses.
Author: Thomas A. Lambert Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The Third Circuit's decision in Lepage's v. 3M created a great deal of uncertainty about the legality of so-called bundled discounts - i.e., discounts (or rebates) conditioned upon purchasing multiple products from disparate product markets. This paper, prepared for a joint Department of Justice/Federal Trade Commission hearing on single-firm exclusionary conduct, describes the competitive risk bundled discounts present, summarizes and critiques the six leading approaches courts and commentators have proposed for evaluating the legality of such discounts, and proposes an alternative evaluative approach.
Author: Phillip Areeda Publisher: Wolters Kluwer ISBN: 1454801158 Category : Law Languages : en Pages : 2140
Book Description
The hands-on guide to antitrust issues that todayand’s courts confront most often, with guidance on developing litigation strategy, counseling clients on compliance, representing clients before regulators, and advising on mergers and acquisitions; confidently advise clients on Sherman Act compliance, Hart Scott Rodino, distribution and pricing issues, and complex commercial litigation. By Herbert Hovenkamp and Phillip E. Areeda. Now published in a single-volume with an annual update, Fundamentals of Antitrust Law, Fourth Edition provides sophisticated coverage of the topics most cited or litigated in the field. Whether you are developing litigation strategy, counseling clients on compliance, representing clients before regulators, or advising on mergers and acquisitions, Fundamentals of Antitrust Law, Fourth Edition has all the information you need, at your fingertips. Turn to this invaluable volume when: Advising clients on specific aspects to comply with the Sherman Act Developing litigation strategies Representing clients before regulators Advising clients on mergers and acquisitions Advising clients on Hart Scott Rodino Handling complex commercial litigation Handling distribution and pricing issues for clients And more Organized by issue, Fundamentals of Antitrust Law, Fourth Edition covers the full range of anticompetitive conduct, as well as procedural issues. It is keyed to the leading Areeda and& Hovenkamp treatise, Antitrust Law: An Analysis of Antitrust Principles and Their Application and includes extensive cross references, organization that follows the main work, and a thorough index that allow you to get to the information you need quickly and easily.
Author: Herbert Hovenkamp
Author: Herbert Hovenkamp
Author: Patrick Greenlee
Author: Bruce H. Kobayashi
Author: Patrick Greenlee
Author: Bruce H. Kobayashi
Author: Sean Gates
Author: Herbert Hovenkamp
Author: Robert Bork
Author: Thomas A. Lambert
Author: Phillip Areeda