The DOJ and FTC have announced a joint one-day workshop on June 23, 2014, in Washington, DC, and are requesting comments by August 22, 2014, on the topic of competition issues relating to conditional pricing practices among firms in a supply chain.
Conditional pricing practices include loyalty or bundled pricing and other arrangements where “prices are explicitly or effectively contingent on commitments to purchase or sell a specified share or volume of a single product or a mix of multiple products.”
In announcing the workshop, the agencies state that a key focus of the workshop “will be to advance the economic understanding of the potential harms and benefits of conditional pricing practices and to reexamine their treatment under the antitrust laws.” In this vein, the agencies articulated a number of specific questions to be addressed.
Specifically, from an economic perspective the agencies would like to examine questions including the following:
What are the economic theories of harm and benefit? What do the economic and business-strategy literatures tell us about how and with what frequency firms employ conditional pricing practices? Under what circumstances are the various conditional pricing strategies likely to lead to competitive harm? In what settings might conditional pricing practices allow firms to realize efficiencies? To what degree might less-restrictive alternatives enable firms to achieve those same efficiencies?
More directly related to the relevant legal standards, the agencies intend for the workshop to explore issues including:
How has the treatment of various conditional pricing practices evolved in the courts? To what extent do the standards articulated in judicial decisions align—or fail to align—with the relevant theories of competitive harm and benefit? What are the practical challenges of proof that the courts and litigants have confronted when attempting to apply the different legal standards? Do price-cost tests provide certainty and predictability to firms? How do price-cost tests compare to other alternative tests? Under the various standards, how might misalignment with theory and challenges of proof threaten to under-deter harmful practices or over-deter beneficial conduct? How do the various legal standards, if at all, affect primary conduct? What legal standards should the courts and antitrust agencies apply to the various conditional pricing strategies and theories of competitive harm?
The DOJ and FTC’s call for a workshop on this topic is reflective of the fact that the legal analysis applicable to these arrangements remains largely unsettled in many respects. The workshop and ability to submit comments will provide a key opportunity for industry participants to provide their perspectives on the impact of these arrangements on their businesses and competition.