Evaluating Bundled Discounts

Abstract:     
Bundled discounts - discounts conditioned upon purchasing products from multiple product markets - present a dilemma for antitrust scholars: on the one hand, they result in lower prices and therefore provide immediate benefits to consumers; on the other hand, even above-cost (i.e., non-predatory) bundled discounts may cause long-run consumer harm by foreclosing competitors that are as efficient as the discounter but do not sell as broad a line of products. Courts therefore need an evaluative approach that would identify and condemn only those bundled discounts likely to cause long-term consumer harm by driving out efficient rivals. The approach must also be easily administrable so as to avoid chilling procompetitive discounting behavior. This article identifies and critiques five attempts courts and commentators have made at articulating such an evaluative approach and, finding each approach lacking, proposes an alternative evaluative approach. The proposed approach would presume the legality of above-cost bundled discounts but would permit that presumption to be rebutted by a plaintiff that proved certain facts demonstrating that it had fully exhausted its competitive options and was, or was likely to become, as efficient as the discounter. The recommended approach would be easily administrable and would include clear safe harbors to ensure that procompetitive bundled discounting is not discouraged.

Number of Pages in PDF File: 73

JEL Classification: A12

Accepted Paper Series