Safe Harbors for Quantity Discounts and Bundling
Dennis W. Carlton and Michael Waldman, EAG 08-1, January 2008
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Abstract:
The courts and analysts continue to struggle to articulate safe harbors for a wide variety of common
business pricing practices in which either a single product is sold at a discount if purchased in bulk
or in which multiple products are bundled together at prices different from the ones that would
emerge if the products were purchased separately. The phenomenon of tying in which the sale of
one product is conditioned on the purchase of another is closely related to bundling. Its analysis
relies on the same economics as that used to analyze bundling (see, e.g., Carlton and Waldman
(2008)), though the law seems to make a distinction between the two. The need for safe harbors for
common business pricing practices arises from the recognition that these practices often are
motivated by efficiency and that a broad antitrust attack on them could cause more harm than
good. In this essay, we analyze and propose safe harbors for quantity discounts and bundled
products. In analyzing the latter case, we discuss the deficiencies of the particular safe harbor
proposed in the report of the Antitrust Modernization Commission (2007) (AMC) of which Carlton
was a member.