Academic journal article Missouri Law Review

A Bundle of Trouble: An Analysis of How the Lower Courts Have Handled Bundled Discounts since LePage's Inc. V. 3M

Academic journal article Missouri Law Review

A Bundle of Trouble: An Analysis of How the Lower Courts Have Handled Bundled Discounts since LePage's Inc. V. 3M

Article excerpt

I. INTRODUCTION

A bundled discount, also known as a "loyalty discount" or "bundled rebate," is created when a seller offers a buyer a reduction in price that is contingent upon the buyer purchasing a minimum percentage of the buyer's needs from the seller. (1) Since the Third Circuit's decision in LePage's Inc. v. 3M in 2003, (2) a decision that directly dealt with bundled discounts, district courts facing antitrust lawsuits involving bundled discounts have been left with little guidance as to how they should approach the procompetitive and anticompetitive aspects of such a discounting scheme. Consequently, the decisions made and the analysis used by these district courts since LePage's has varied greatly. Some courts have chosen to reject LePage's reasoning outright, (3) while others have followed LePage's initially, only to then subsequently reject the reasoning in later decisions. (4)

This Summary will analyze the reasoning utilized in the various district court decisions since LePage's and will seek to illustrate how those courts have dealt with a lack of clear foundation as to how to handle bundling claims under the antitrust laws. Furthermore, this summary will attempt to determine specific reasons why the LePage's decision has failed to provide a proper approach to determining the legality of bundled discounts. Finally, the Summary will conclude that the Supreme Court should grant certiorari in order to provide both the district and circuit courts with guidance as to how they should balance between both the procompetitive and anticompetitive effects of bundled discounts.

II. LEGAL BACKGROUND

A. What is a Bundled Discount?

A bundled discount, also known as a "loyalty discount" or "bundled rebate," is created when a seller offers a buyer a reduction in price that is contingent upon the buyer purchasing a minimum percentage of the buyer's needs from the seller. (5) One of the most basic forms of a bundled discount is the package discount, which occurs when "a seller charges a lower price for a group of disparate goods sold together than for the same collection of goods purchased separately." (6) However, bundled discounts can be more complex, such as when a seller offers to pay a rebate on all of a buyer's purchases from the seller so long as the buyer meets certain purchasing targets pertaining to each of the seller's product lines. (7) Thus, one of the distinguishing characteristics of a bundled discount is that they are "multi-product, purchase target discounts--they are conditioned upon purchasing some quantum of goods from multiple product markets" from a single seller. (8)

B. Monopolization under the Sherman Act

Section 2 of the Sherman Act provides: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony," and subject to significant fines and imprisonment. (9) Additionally, a private party who successfully sues for an antitrust violation may recover threefold the damages and counsel fees if successful. (10)

In U.S. v. Grinnell Corp., the Supreme Court held that in order to show monopolization under section 2 of the Sherman Act, a plaintiff must prove, inter alia, that the defendant has demonstrated a "willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." (11) Although there are no bright line rules available to determine exactly what types of conduct fall under this element, (12) actions such as unlawful acquisitions, (13) predatory pricing, (14) refusals to deal, (15) and leveraging (16) have been found illegal under section 2. Traditionally, courts have analyzed claims involving bundled discounts under either an exclusionary conduct or predatory pricing claim. …

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