'Bundling' And 'Loyalty Discount' Claims Continue To Generate Confusion
A well-attended program on antitrust treatment of "bundled pricing" and "loyalty discounts" at the American Bar Association Antitrust Section Spring Meeting highlighted the confusion generated by the antitrust law implications of such conduct and the disagreements on the proper standards to evaluate them. In this environment, any significant company considering these types of marketing and pricing changes should engage experienced legal counsel in early-stage evaluation and planning.
Just What is "Bundling"?
All of the lawyers, economists and regulators agreed that the term "bundling" can be applied to almost any conduct where more than one product or ingredient is combined together (e.g., "whitening toothpaste is a bundle because it combines whitening agent and toothpaste, both of which could be purchased separately"), or where two or more products are marketed together and in which market power in one product is used to impair competitors selling a truly second product, as was alleged to be the case in LePages, Inc. v. 3M, 324 F.3d 141 (3d. Cir. 2003), when 3M offered rebates and other discounts across its broad product lines in order to reduce LePage's competitive inroads in sales of transparent tape. While "bundling" is distinct from "tying" (in which the second product must be purchased as a condition of obtaining the first product), there are suggestions that if the combination is priced attractively, a consumer is virtually "forced" to buy both, even if there is no condition that the buyer must do so. "Bundling" occurs when the offer is made, and the buyer then makes an "independent" decision to purchase or not to purchase. Tying, on the other hand, involves an express condition that denies the buyer "Product A" unless "Product B" is also purchased. But in antitrust complaints, bundling, tying, and monopolization (or attempted monopolization) are usually conflated to the point where the complaint resembles a non-US "abuse of dominance" claim, and courts (and, a fortiori, juries) have great difficulty in analyzing each claim separately. In short, confusion reigns. Why Are We Concerned About Bundling and How Do We Measure the Problem?
There is consensus that the underlying issue is how competition is harmed if a seller acquires or extends monopoly power (over a "non-competitive" product) by using a marketing tactic deliberately aimed to impair the ability of a competitor in the "competitive" product to sell that product on its...
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