Whereas tying involves a refusal to sell one product (the tying product “A”) without another (the tied product “B”), bundled discounts merely “encourage” — not require — purchases of both products. Now, the degree of “encouragement” could be so great as to constitute a de facto tie. For example, if a lamp monopolist charges $100 for a lamp but will sell a lamp/lampshade combo for $5, he has effectively tied the two products, even though the lamp is technically available separately. It thus makes sense to conclude that bundled discounts may, in certain circumstances, amount to de facto tie-ins.

But in what circumstances? Presumably, the plaintiff would have to show that the bundled discount is so “effective” that it has an effect similar to an outright refusal to sell the packaged products separately. The Areeda-Hovenkamp treatise suggests that courts should focus on the “proportion of separate purchasesâ€? –i.e., the percentage of purchases of “tiedâ€? product B, by purchasers who buy both the defendant’s “tyingâ€? product A and any seller’s product B, that are outside the defendant’s package. The treatise suggests that if separate purchases exceed 10 percent, there should be no illegal tie.

{In addition, the treatise posits three “safe harborsâ€? where a tie should not be found even if separate purchases are less than 10 percent. The three safe harbors are where: (1) the separate price of tying product A is less than or equal to the market price of A; (2) the “package price” of tied product B (i.e., the price of the package less the separate price of tying product A) exceeds or equals the market price of B; or (3) the package price of B exceeds or equals the marginal cost of rivals’ B. In the first two situations, there can be no legitimate concern that the defendant has jacked up the separate price of tying product A in order to induce buyers to purchase the package. In the third, there is no injury to competition because the defendants’ rivals could compete by reducing their prices to competitive levels.}

Of course, the Areeda-Hovenkamp proposal is not the law; it’s just a suggestion for courts. But courts analyzing bundled discounts as tie-ins are going to have to analyze whether a de facto tie-in has occurred, and they’re likely to follow some test similar to the Areeda-Hovenkamp suggestion. My guess it that most bundled discounts plaintiffs could not make the showing necessary to establish a de facto tie-in.

As Josh observes, cases like LePage’s give them an easier option.

But hey! Why not just re-tool the complaint as a bundled discounts/LePage’s style case and get past summary judgment without evidence of either? I won’t comment on the JJ case specifically, but it does make sense to bring a case on a bundled discount theory if you cannot show the requisite foreclosure or competitive effects. In the case of bundle on bundle competition, these requirements are not likely to be met.

As Keith points out, the exclusionary theories do not require proof of below cost pricing. But this is precisely why it is so essential to sensible antitrust policy that plaintiff’s demonstrate substantial foreclosure when alleging exclusionary distribution contracts facilitate monopolization. My post, which Thom kindly links to above, reviewing Hovenkamp’s treatment of this issue touches on this issue in a bit more detail.