29 Pages Posted: 1 Apr 2009 Last revised: 30 Jun 2009
Date Written: June 29, 2009
I discuss and assess the various standards for establishing liability for loyalty discounts offered under a requirement contract. I find that the standard proposed by the Antitrust Modernization Commission is likely to result in many cases of violation that are not caught. The safe harbor defined by the AMC would permit activity that is in fact anticompetitive. I propose instead a structured rule of reason test that relies on consumers' surplus comparisons under the loyalty/requirement practice and the but-for world. The proposed standard does not have a safe harbor based on a price/cost comparison because such comparisons do not generally correspond to consumers' surplus comparisons.
Keywords: bundling, loyalty discounts, requirement contracts, monopolization, antitrust, monopoly
JEL Classification: K21, D42, D43
Suggested Citation: Suggested Citation
Economides, Nicholas, Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard? (June 29, 2009). NET Institute Working Paper No. #09-02; NYU Law and Economics Research Paper No. 09-15; Antitrust Bulletin, 2009. Available at SSRN: https://ssrn.com/abstract=1370699