FTC and DOJ Shine the Spotlight on Conditional Pricing Practices

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Signaling increased interest in conditional pricing, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) recently held a one-day workshop to examine the economic, legal, and policy implications of conditional pricing practices (e.g., loyalty discounts and bundled pricing). The agencies’ stated goals for the workshop were “to advance the economic understanding of the potential harms and benefits of conditional pricing practices and to reexamine their treatment under the antitrust laws.”

During the workshop, the agencies heard from economists, academics, and attorneys, focusing on both the theoretical and practical considerations that they believe should govern the antitrust analysis of such arrangements. Most of the presenters advocated a more fact-specific, case-by-case analysis of conditional pricing practices, as opposed to bright-line rules.

Many presenters argued that complex pricing practices generally, and conditional pricing in particular, are not susceptible to the price-cost test fashioned by the U.S. Supreme Court in its 1993 opinion in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., or other bright-line rules. Notably, several economists and academics lamented the dearth of empirical research on the competitive harms and benefits of these practices. One presenter, Yale Professor Fiona M. Scott Morton, cautioned that even if empirical research was available it would likely be more skewed toward pro-competitive effects, because firms employing questionable conditional pricing practices will not open themselves up to such scrutiny. 

On the final panel of the day, Deborah L. Feinstein, Director of the FTC’s Bureau of Competition, and Renata B. Hesse, Deputy Assistant Attorney General for Criminal and Civil Operations at the DOJ’s Antitrust Division, asked the panelists for guidance on when the agencies should challenge such practices. They also probed panelists on the guidance that should be provided to companies considering such practices.

Both the FTC and DOJ have expressed interest in conditional pricing practices and are accepting public comments through August 22, 2014. Submissions may be made online through the FTC and DOJ websites. DOJ and FTC guidance could help to inform companies as to the agencies’ future enforcement intentions.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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