Drawing a Line between Bundling and Contractual Exclusion under the Sherman Act

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M. Laurence Popofsky, Jun 10, 2008

Bundling has become antitrust law’s “hot button.” Push it and out pours a gusher of articles by learned scholars and noted practitioners. One ventures into the fray filled with trepidation. But venture one must because the backwash of the bundling cornucopia threatens to overwhelm the traditional analysis of exclusionary contractual practices which can constitute, or at least contribute to, antitrust violations under the Sherman Act. Were that to happen, it would be a doctrinal shipwreck of major proportions. However fascinating these current debates, they possess the potential for distorting the law’s application to other practices potentially harmful to the competitive process. Both LePage’s and, less obviously, PeaceHealth addressed price competition without more. That is to say, the cases involved complaints by competitors allegedly disadvantaged by a monopolist’s offer of discounts spread over a bundle of products, including some which the rival did not and could not offer. In neither case did the plaintiff prove that the prices were below the defendant’s costs regardless of how such costs were calculated (attributed or otherwise). What was not at issue, however, was whether formal contracts whether they are ties, exclusives, or market share commitments were illegal because they directly and substantially foreclosed competitors opportunities without reference to price. The crux of the problem is that the price versus contract distinction matters.

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