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Abstract:
Loyalty discounts lie at the heart of the debate on single-firm conduct, probably the most controversial issue in contemporary antitrust practice. Under particular conditions, loyalty discounts may have an exclusionary effect. However, they constitute a classical form of price competition, an effective commercial tool, and a way to solve coordination problems in the production chain. In the United States, the fear of lessening price competition has led to a very strong presumption of legality of discounts, provided that they are not predatory or bundled. In the EU, the tendency to induce loyalty, if not a mere intent to exclude rivals, is traditionally deemed to be enough to justify the prohibition of the practice. In the paper, it is submitted that the opposite (almost) per se rules prevailing on the two sides of the Atlantic should be set aside. A detailed analysis, based on a suitable price-cost test and a careful assessment of the impact of the practice on the competitive capacity of minor rivals and on the overall degree of competition in the market concerned, would allow intervention in cases of seriously exclusionary discount policies, while limiting the unnecessary prohibition of effective forms of price competition.

K21, L1, L2, L11, L22

Abstract:
Loyalty discounts lie at the heart of the debate on single firm conduct, probably the most controversial issue in contemporary antitrust practice. Under particular conditions, loyalty discounts may have an exclusionary effect. However, they constitute a classical form of price competition, an effective commercial tool and a way to solve coordination problems in the production chain. In the United States, the fear to lessen price competition has led to a very strong presumption of legality of discounts, provided that they are not predatory or bundled. In the EU, the tendency to induce loyalty, if not a mere intent to exclude rivals, is traditionally deemed to be enough to justify the prohibition of the practice. In the paper, it is submitted that the opposite (almost) per se rules prevailing on the two sides of the Atlantic should be set aside. A detailed analysis, based on a suitable price-cost test and a careful assessment of the impact of the practice on the competitive capacity of minor rivals and on the overall degree of competition in the market concerned, would allow to intervene in cases of seriously exclusionary discount policies, while limiting the unnecessary prohibition of effective forms of price competition.

Antitrust, Abuse of dominant position, discounts, rebates

Abstract:
The controversial debate on the appropriate standard for the assessment of bundled discounts echoes the difficulties encountered by courts, antitrust authorities and scholars in their ongoing attempt to develop a coherent theoretical framework to distinguish exclusionary conduct from legitimate competition. Currently, there is no general consensus on the treatment of the practice. Even the recent DOJ report on single-firm conduct – withdrawn by the new US administration – and the Commission guidance on Article 82 EC have not definitely clarified the proper approach to bundled discounting. The application of general principles on foreclosure could prevent the use of an effective competitive tool and may result in reduced price competition and protection of inefficient competitors. On the other hand, a total bundle predation-style safe harbor would not detect above-cost bundled discounts that are capable of excluding or limiting the competitive capacity of equally efficient rivals. The US discount allocation test aims at tempering the excesses of the two above-mentioned approaches, but it is too simplistic, does not fit most actual cases and may be both over-deterrent and under-deterrent. The test proposed by the Commission guidance may give rise to similar inconveniences, although it is more likely to be over-deterrent. This paper proposes a refined cost-based test, aimed at establishing whether an equally efficient rival could reasonably compete for the (contestable portion of demand for the) product(s) reasonably open to competition. This test is based on the idea that a practice should be considered a legitimate form of competition on the merits if, notwithstanding the possible existence of one or more competitive advantages that cannot be reasonably replicated or overcome by rivals in an acceptable time frame, a hypothetical competitor that is equally efficient under all remaining aspects could react to the dominant firm’s behavior through a conduct that would benefit consumers. However, in case of complex pricing policies, cost-based tests are imperfect and approximate tools, which may provide useful evidence and indications as to the risk of exclusion of equally efficient rivals, but cannot usually function as a safe harbor for dominant firms. A cost-based test can only be part of a comprehensive assessment of the likely effects of the practice. When the application of an appropriate cost-based test turns out to be too complex and uncertain or, in any case, the test does not provide sufficiently complete and reliable indications, a proper allocation of the burden of proof could reduce the risk of type I and type II errors.

Antitrust, Monopolization, Abuse of dominant position, Bundling, Bundled discounts, Bundled rebates

Abstract:
Price squeeze abuses lie at the crossroad between different forms of potentially anticompetitive conduct, as well as between antitrust law and regulation. The main question that has arisen in the academic debate and actual practice is whether a combination of a lawful wholesale price and a non-predatory retail price can be characterized as exclusionary conduct based on the analysis of the margin between the two prices. In the paper, we argue that there is no need for a separate price squeeze theory under antitrust law. Assuming that the costs of supplying an input to rivals and to internal downstream divisions do not differ, a price squeeze capable of excluding equally efficient competitors may arise only from upstream discrimination (discriminatory price squeeze) or downstream predation (predatory price squeeze). However, when the downstream division of the dominant firm is not a separate legal entity, distinguishing discriminatory and predatory price squeezes may turn out to be impossible, as internal transfer charges are absent in many concrete settings of vertical integration. In these cases, an analytical framework for the assessment of price squeeze cases can be useful, provided that it is intended as an operational tool aimed at detecting anticompetitive conduct of a discriminatory or predatory nature, which is not directly observable. Instead of mimicking regulatory tools and criteria, the analytical framework for the assessment of price squeeze cases should be construed in accordance with basic principles of competition law and traditional doctrines of antitrust liability. This approach strongly supports the application of principles on refusal to deal to price squeeze cases and the use of the equally efficient competitor test to ascertain whether a given pricing policy is anticompetitive.

Antitrust, Unilateral conduct, Monopolization, Abuse of dominance, Price Squeeze, Margin Squeeze, linkLine, Deutsche Telekom