Some Thoughts on Bundled Rebates and Exclusionary Policies

Posted by D. Daniel Sokol

H.E. Frech III (University of California at Santa Barbara Department of Economics) offers Some Thoughts on Bundled Rebates and Exclusionary Policies.

ABSTRACT: Bundling and related exclusionary practices are both common in the economy and often challenged under the antitrust laws. The following remarks highlight a few issues. This is not a complete discussion of these issues, let alone a complete treatise on the economics of bundling.

This paper is organized as follows:

Section I: Bundling practice that raise antitrust concerns rarely involve sales to final consumers Section II: The main underlying economic issue is exclusive dealing—broadly defined Section III: Exclusive dealing practices can have pro-competitive, anticompetitive, or neutral effects Section IV: The Antitrust Modernization Commission's three-pronged test Section V: Exclusionary practices often have a cumulative effect Section VI: The "equally efficient rival" idea is tricky in practice Section VII: Distinguishing procompetitive from anticompetitive exclusive dealing is difficult Section VIII: Conclusion