AAI Files Comments Opposing Cost-Based Safe Harbor For Conditional Pricing Practices

The American Antitrust Institute (AAI) filed public comments with the Federal Trade Commission (FTC) following the conditional pricing practices workshop held on June 23, 2014 by the FTC and the Department of Justice.

The AAI has long opposed a cost-based safe harbor for dominant firms’ use of “discounts” linked to market-share requirements, a position that was widely shared by the economists and other experts who spoke at the June workshop. The AAI’s written comments argued that insofar as market-share rebates (also called “loyalty rebates”) or similar conditional pricing practices are used by dominant firms to foreclose competitors or raise rivals’ costs, they should be analyzed like exclusive dealing arrangements and be condemned when they help preserve or extend a dominant firm’s market power, and the exclusionary conditions are not justified by countervailing procompetitive benefits.  The comments explain that neither policy nor precedent supports an above-cost safe harbor for conditional pricing practices that induce full or partial exclusivity, whether the price-cost test is of the “traditional” Brooke Group variety or the “discount attribution” type.

AAI’s comments were written by AAI’s General Counsel Rick Brunell, who was a speaker at the workshop.