Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, April 22, 2009

Predatory Bundling and the Exclusionary Standard

Posted by D. Daniel Sokol

Shahar Dilbary (Alabama Law) addresses Predatory Bundling and the Exclusionary Standard.

ABSTRACT: Recent decisions - all relying on a stylized example first provided by the Ortho court - hold that a multi-product seller that uses a bundled discount in a way that excludes an equally or more efficient competitor engages in predatory bundling. According to these decisions, a bundle can be considered predatory even when the price of the bundle exceeds its cost. The article offers evidence demonstrating that the Ortho's stylized example and its monopoly leveraging theory are erroneous. The article further shows that even when a bundle's price excludes more efficient competitors and even when a component in the bundle is priced below cost, and thus sold at a loss, it may still have welfare enhancing effects. The result is that bundles that fail the discount allocation test and even bundles that fail the Brooke Group test may still be desirable. The article provides a number of examples from the airline and telecommunication industries to illustrate that both exclusionary and below cost bundles can be not only welfare enhancing, but also very common.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/04/predatory-bundling-and-the-exclusionary-standard.html

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