Antitrust and Rebates: A Study in Analogies

25 Pages Posted: 27 Oct 2009

Date Written: October 27, 2009

Abstract

Cases involving rebates (both loyalty and bundled) present a unique opportunity to observe the development of antitrust law. With little direct precedent to rely upon, courts have sought to analyze the antitrust implications of rebate schemes through analogies to other, better known, types of conduct. These efforts provide profound insight not only into the antitrust analysis of rebates, but also into the means by which antitrust law is developed.

The development of antitrust law has largely followed (or lagged) economic inquiry into competitive practices. For instance, in Leegin the Supreme Court abandoned the per se rule for minimum resale price maintenance after noting that “respected authorities in the economics literature suggest the per se rule is inappropriate, and there is now widespread agreement that resale price maintenance can have procompetitive effects.” Similarly, in State Oil, after chronicling the development of the antitrust treatment of vertical restraints, the Court concluded “that there is insufficient economic justification for per se invalidation of vertical maximum price fixing.”

Rebates are different. The Court has never considered this type of conduct. Nor, in fact, have many lower courts. There is no established framework of analysis for conduct involving rebates. There is no long line of cases. There is no “great weight of scholarly opinion” presenting a consensus view. While we have LePage’s and PeaceHealth, the antitrust analysis for rebate schemes therefore starts with a relatively clean slate. We are thus afforded an opportunity to witness the development of a new body of antitrust law and to examine the means by which it comes about.

Keywords: antitrust, loyalty rebates, bundled discounts,

JEL Classification: K21, L4, L41, L42

Suggested Citation

Gates, Sean, Antitrust and Rebates: A Study in Analogies (October 27, 2009). Available at SSRN: https://ssrn.com/abstract=1495342 or http://dx.doi.org/10.2139/ssrn.1495342

Sean Gates (Contact Author)

Charis Lex P.C. ( email )

United States

HOME PAGE: http://www.charislex.com

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