Abstract and Keywords
This chapter deals with a broad class of quasi-exclusive, vertical agreements that we refer to as “quantity commitment discounts” (QCDs), though they are often referred to as “loyalty discounts,” as they appear to exchange price concessions for a buyer’s loyalty to a particular brand. As the discussion in section 5.2 indicates, law and policy have not evolved to yield clear standards for judging QCDs. Section 5.3 covers the basic economics of QCDs. Section 5.4 evaluates the circumstances when QCDs may cause harm to competition. We demonstrate that QCD agreements that would arise absent an ability or intent to exclude rivals might nevertheless do so, and might also cause ancillary harm to competition. Section 5.5 assesses the various means of testing for potential harm, discussing interpretations of the so-called attribution test and its flaws as well as other indicators of potential harm.
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