Wednesday, June 20, 2012
Posted by D. Daniel Sokol
Jonathan M. Jacobson (Wilson Sonsini) and Daniel P. Weick (Wilson Sonsini) discuss Contracts that Reference Rivals as an Antitrust Category.
ABSTRACT: Policymakers at the Department of Justice’s Antitrust Division have recently focused on a wide variety of these “contracts that reference rivals” (CRRs) as a source of potential antitrust concern, at least when deployed by firms with market power.1 The policymakers recognize that various efficiency justifications exist for the many different types of contracts in issue. Because, however, all types of CRRs affect, in some respect, the contract terms that may be available to the contracting party’s rivals, these agreements may each, in theory, both diminish the ability of rivals to compete and provide a vehicle for firms to learn their rivals’ terms of sale. In some instances, these effects may create or enhance market power or otherwise lead to consumer harm. This is the concern that appears to have informed recent DOJ enforcement actions against “most-favored nations” (MFN) clauses (which require one party to guarantee the other that it is receiving contractual terms as good or better than any arrangement made by its rivals2 and “non-discrimination” rules or clauses (NDR) (which require a party to guarantee that it will not disfavor the contracting party’s products relative to those of its competitors).3 There seems to be an insufficient appreciation, however, of the important differences between the various varieties of CRRs, and the fact that these differences may contribute to both the competitive effects and the justifications for the provisions’ use. These differences should therefore be taken into account in deciding whether or not CRRs violate the antitrust laws.