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Bundled Rebates as Exclusionary, Not Predatory

40 Pages Posted: 15 Jun 2007  

Tim Brennan

University of Maryland, Baltimore County - Department of Public Policy; Resources for the Future

Date Written: June 18, 2007


Prevailing tests for whether bundled rebate programs are anticompetitive, including the recent Antitrust Modernization Commission Recommendation 17, are based on whether some incremental or total price in the rebate program is less than some appropriate incremental cost. This test is based upon an error - that rebate programs, and exclusionary conduct more generally, should be treated like predation cases. Analyses supporting this perspective err in treating the buyers as end users rather than competing complement providers, as they are in all the leading U.S. and Canadian cases. Instead, rebate programs should be assessed on the basis of whether they raise the price of a complement, such as retailing or distribution.

This suggests a different two prong test: Does the rebate cover a competitively significant share of a complement market, and if so, what effect does the rebate have on the price rivals have to pay to obtain the complement? This test allows the use of merger guideline approaches, ignores (for the most part) cost-based comparisons, and does not require prior dominance in the primary market. In assessing this alternative approach, we look at when practices are exclusionary, compare rebates to explicit exclusive dealing, discuss distinguishing exclusionary from predatory rebates, assess the limits of "profit sacrifice" approaches in exclusion cases, and propose share-based remedies to recognize vertical efficiencies.

Keywords: bundled rebates, exclusion, monopolization, antitrust

JEL Classification: K21, L41, L12, L42

Suggested Citation

Brennan, Tim mname, Bundled Rebates as Exclusionary, Not Predatory (June 18, 2007). Available at SSRN: or

Tim Brennan (Contact Author)

University of Maryland, Baltimore County - Department of Public Policy ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-3229 (Phone)
410-455-1172 (Fax)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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