Loyalty Discounts, Exclusive Dealing and Bundling: Rule of Reason, Quasi-Per-Se, Price-Cost Test, or Something in between?

Journal of Antitrust Enforcement, (2016)

Posted: 2 Aug 2016

See all articles by Assaf Eilat

Assaf Eilat

Independent

David Gilo

Tel Aviv University - Buchmann Faculty of Law

Guy Sagi

Netanya Academic College; Hebrew University School of Law; Columbia University Law School

Date Written: 2016

Abstract

The article reviews loyalty rebates, target rebates, exclusive dealing, and bundling, and argues that these are analogous practices that deserve similar competitive analyses and rules. In particular, in the case of all of these practices, at least some marginal units are typically sold below cost. The article shows that the analyses and rules that should apply to all of these practices ought not to depend on their labels, but rather on the monopoly power of the supplier engaged in the practice; whether, in the particular case, exclusion is costless or almost costless; the size of the sanction that the buyer suffers from being disloyal to the monopolist, and whether the sanction makes it impossible for the monopolist’s as efficient rivals to compete for the buyer; the degree of market foreclosure, including its effective duration; the presence or absence of any efficiency justifications, and whether the discount is expected to be passed on to consumers. The analysis further highlights how exclusion may well be costless, or almost costless and can be achieved when the monopolist has non-price means of coercing buyers to be loyal. Further, intermediate cases are explored, in which exclusion, though not entirely costless, is nevertheless cheaper to the monopolist than ordinary predatory pricing.

Keywords: loyalty rebates, target rebates, exclusive dealing, bundling, tying, exclusionary practices

JEL Classification: K21, L41, L42

Suggested Citation

Eilat, Assaf and Gilo, David and Sagi, Guy, Loyalty Discounts, Exclusive Dealing and Bundling: Rule of Reason, Quasi-Per-Se, Price-Cost Test, or Something in between? (2016). Journal of Antitrust Enforcement, (2016). Available at SSRN: https://ssrn.com/abstract=2816223

Assaf Eilat

Independent ( email )

No Address Available

David Gilo (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972-3-6406299 (Phone)

Guy Sagi

Netanya Academic College ( email )

Israel
C (Phone)

Hebrew University School of Law ( email )

Mount Scopus
Jerusalem, IL Jerusalem 91905
Israel

Columbia University Law School ( email )

3022 Broadway
New York, NY 10027
United States

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