Working Paper No. 09-32:
An Evidence-Based Approach to Exclusive Dealing and Loyalty Discounts

Author(s):

Joshua Wright

Date Posted: July 2009

Availability:
Abstract (below)
Full text (original)   PDF file
Full text (most recent) on SSRN

Abstract:

At the recent Section 2 hearings focused on the antitrust analysis of exclusive dealing contracts, a sensible consensus view emerged that a necessary condition for anticompetitive harm in an exclusive dealing or de facto exclusive contract is that the contract deprives rivals of the opportunity to compete. These contracts, including market-share discounts and "loyalty discounts," can harm competition when they deprive rivals of an entrenched firm from accessing distribution sufficient to achieve a minimum efficient scale. The recently-withdrawn Section 2 Report reflects this consensus. This article discusses the strengths and weaknesses of the Section 2 Report approach to exclusive dealing and loyalty discounts.

The article is an adaptation of a posting originally presented in a Section 2 Symposium on the blog site, Truth on the Market, available online at TruthOnTheMarket.