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Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard?

29 Pages Posted: 1 Apr 2009 Last revised: 30 Jun 2009

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Date Written: June 29, 2009

Abstract

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

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

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0864 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/networks/

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