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On the use of price-cost tests in loyalty discounts: Which implications from economic theory?

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  • Motta, Massimo
  • Fumagalli, Chiara

Abstract

Recent cases in the US (Meritor, Eisai) and in the EU (Intel) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a price-cost test to predation but not to loyalty discounts. Still, the latter contain features (they reference rivals and allow to discriminate across buyers and/or units bought) that have a higher exclusionary potential than the former, and this may well warrant closer scrutiny and more severe treatment from antitrust agencies and courts.

Suggested Citation

  • Motta, Massimo & Fumagalli, Chiara, 2015. "On the use of price-cost tests in loyalty discounts: Which implications from economic theory?," CEPR Discussion Papers 10550, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10550
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    Cited by:

    1. Philippe Choné & Laurent Linnemer, 2016. "Nonlinear pricing and exclusion:II. Must-stock products," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 631-660, August.
    2. Pietro Crocioni, 2018. "On The Relevant Cost Standard For Price–Cost Test In Abuses Of Dominance," Journal of Competition Law and Economics, Oxford University Press, vol. 14(2), pages 262-291.

    More about this item

    Keywords

    Exclusive dealing; Inefficient foreclosure; Market-share discounts;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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