A Note on Loyalty Discounts


Loyalty (or “market share”) discounts have become increasingly visible in antitrust policy debates.1 Loyalty discounts are prevalent in the sale of medical devices and pharmaceutical products, especially by dominant firms,2 and are being used more frequently by firms in other industries as well. Intel’s use of them has led to antitrust proceedings by AMD,3 the European Commission,4 the New York Attorney General,5 and, most recently, the Federal Trade Commission.6

This note examines reasons firms offer for the use of loyalty discounts, the sparse case law addressing their use, and how antitrust policy might be applied going forward in evaluating their legality. The note’s analysis suggests that loyalty discounts are essentially a form of exclusive dealing. Application of the sort of price-cost test typically used in analyzing predatory pricing therefore seems inappropriate. And while use of an attribution test similar to that used in analyzing bundled pricing conduct might make sense in theory, the real-world difficulties in applying such a test to loyalty discounts render that approach impractical. The suggestion here, therefore, is to apply basic rule of reason analysis — to determine whether the impairment of rivals, net of efficiencies, is likely to reduce market output or otherwise cause material consumer harm.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

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.

© Wilson Sonsini Goodrich & Rosati | Attorney Advertising

Written by:


Wilson Sonsini Goodrich & Rosati on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.