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30 Can. Competition L. Rev. 93 (2017)
All-Units Discounts: Leverage and Partial Foreclosure in Single-Product Markets

handle is hein.journals/cacmplr30 and id is 99 raw text is: CANADIAN COMPETITION LAW REVIEW ALL-UNITS DISCOUNTS: LEVERAGE AND PARTIAL FORECLOSURE IN SINGLE-PRODUCT MARKETS Yong Chao and Guofu Tan* We present an exclusionary theory of all-units discounts schemes. These schemes offer a per-unit discount to all units purchased if the customer's purchase reaches a pre-specified quantity threshold. We demonstrate that when a dominant firm competes with a capacity-constrained rival, it is pos- sible for the dominant firm to use all-units discounts to leverage its market power in the non-contestable portion to influence the contestable portion of the demand in single-product markets and to partially foreclose the small rival. Our theory suggests that pricing below cost is not necessary for all- units discounts schemes to be exclusionary and that a standard price-cost test may not be useful in assessing the exclusionary effects of all-units dis- counts. We advocate a rule of reason approach based on a comprehensive analysis of market structure, the nature of discount programs, exclusionary effects, efficiency, and the welfare consequences of these practices. Nous pr~sentons une thorie dexclusion concernant les programmes descompte sur toutes les units. Ces programmes offrent un escompte par unit toutes les units achet~es si l'ichat du client atteint un seuil de quantit d~termin d'avance. Nous d~montrons que lorsqu'une soci~t dominante livre concurrence un rival capacit limite, il lui est possible d'utiliser les escomptes sur toutes les unites pour multiplier son pouvoir de march dans la part non disputable pour influencer la part disputable de la demande sur les marchs produit unique et pour iminer partielle- ment le petit rival. Selon notre thorie, la fixation d'un prix infrrieur au coit n'est pas ncessaire pour que les programmes descompte sur toutes les units aient un effet tendant exclure et un critkre standard prix-coit n'est pas ncessairement utile pour l'valuation des effets tendant exclure des escomptes sur toutes les units. Nous militons enfaveur d'une approche raisonn~e fondue sur une analyse exhaustive de la structure du march, de la nature des programmes descompte, des effets tendant exclure, de l'efficience et des cons~quences sur le bien4tre de ces pratiques. 1. INTRODUCTION ow to evaluate loyalty rebates (or discounts) programs is an unsettled topic in antitrust policy debate and enforcement. Conditional discounts and rebates can arise for many different reasons. Discounts based solely on the volume of purchase could help

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