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Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard?

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Abstract

I discuss and assess the various standards for establishing liability for loyalty discounts offered under a requirement contract. I find that the standard proposed by the Antitrust Modernization Commission is likely to result in many cases of violation that are not caught. The safe harbor defined by the AMC would permit activity that is in fact anticompetitive. I propose instead a structured rule of reason test that relies on consumers’ surplus comparisons under the loyalty /requirement practice and the but-for world. The proposed standard does not have a safe harbor based on a price/cost comparison because such comparisons do not generally correspond to consumers’ surplus comparisons.

Suggested Citation

  • Nicholas Economides, 2009. "Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard?," Working Papers 09-02, NET Institute, revised Mar 2009.
    • Handle: RePEc:net:wpaper:0902
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    File URL: http://www.stern.nyu.edu/networks/Economides_Loyalty_Discounts_AntitrustBulletin.pdf
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    Cited by:

    1. Frank Maier-Rigaud & Ulrich Schwalbe, 2013. "Do Retroactive Rebates Imply Lower Prices for Consumers?," Working Papers 2013-ECO-10, IESEG School of Management.
    2. Lipnowski, Elliot & Ramos, João, 2020. "Repeated delegation," Journal of Economic Theory, Elsevier, vol. 188(C).
    3. Nicholas Economides, 2014. "Bundling and Tying," Working Papers 14-22, NET Institute.
    4. DeGraba, Patrick, 2013. "Naked exclusion by a dominant input supplier: Exclusive contracting and loyalty discounts," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 516-526.

    More about this item

    Keywords

    bundling; loyalty discounts; requirement contracts; monopolization; antitrust;
    All these keywords.

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