Antitrust Analysis of Bundled Discounts

Abstract:     
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.

Keywords: bundling, bundled discounts, loyalty discounts, loyalty rebates, monopolization, antitrust, sherman act

JEL Classifications: K21, L12, L41, L42

Working Paper Series