PRICE DISCRIMINATION IN A FORM OF DISCOUNTS: CATEGORIZATION AND IMPACT ON COMPETITION

This paper is aimed to clarify the definition and categorization of discounts as well as pro- and anticompetitive effects of discounts. The author applied qualitative methods to the research. The modern literature review unfolds the gap of proper discounts definition, which is proposed to be covered by five-dimensions approach to discounts categorization. Based on such aspects of discount scheme as time, product, threshold, distribution level and customer, the approach provides comprehensive and uniform characteristics of discount. It allows assessing effects of competition, which are classified in two groups. Pro-competitive effects include stimulation of demand, decreasing cost due to economy of scale, solving coordination problems within a supply chain. Anti-competitive effects encompass predation scheme, raising rival’s cost, exclusive dealing, leverage and exclusionary bundling. The importance of correct assessment of the discounts by antitrust authorities is high as an overenforcement in this sphere may lead to adverse effect on total welfare.

17. Abuse of dominance (1): non-pricing practices

This chapter considers abusive non-pricing practices under Article 102 TFEU and the Chapter II prohibition in the Competition Act 1998. It deals in turn with exclusive dealing agreements; tying; refusals to supply; abusive non-pricing practices that are harmful to the single market; and miscellaneous other non-pricing practices which might infringe Article 102 or the Chapter II prohibition. Reference is made to the case-law of the Court of Justice and the Commission’s Guidance on the Commission’s Enforcement Priorities in Applying Article [102 TFEU] to Abusive Exclusionary Conduct by Dominant Undertakings

11. Illegality

Poole’s Casebook on Contract Law provides a comprehensive selection of case law that addresses all aspects of the subject encountered on undergraduate courses. A contract may be deemed illegal or void on grounds of public policy. This chapter examines the illegality of contracts under English law, contracts prohibited by statute (express prohibition), and contracts that are illegal in their performance. It considers contracts that are void on grounds of public policy, focusing on contracts in restraint of trade, covenants between employer and employee, exclusive dealing agreements, exclusive service agreements, and severance of the objectionable parts of covenants. The chapter also discusses the recovery of money or property transferred under an illegal contract, along with the UK Law Commission’s proposed reform of the law governing illegal contracts and the Supreme Court decision of Patel v Mirza over controversy concerning the nature of illegality, the basis for intervention in illegal contracts, and the ability to recover under an illegal contract.

11. Illegality

Course-focused and comprehensive, Poole’s Textbook on Contract Law provides an accessible overview of the key areas on the law curriculum. This chapter examines contracts that are tainted by illegality or otherwise contrary to public policy, and how illegality affects the parties’ positions following the hugely influential Supreme Court decision of Patel v Mirza. A contract may be illegal from the beginning or illegality may arise as a result of statute (for example, express statutory prohibitions). Examples of illegal contracts are those intended to commit crimes or contracts prejudicial to sexual morality. As a general principle, illegal contracts cannot be enforced and benefits conferred in the performance of an illegal contract cannot be recovered. There are some exceptions, however, such as where the parties are not in pari delicto (not equally guilty), or where the claimant can establish his right to the money or property transferred without having to rely upon the illegal contract. This chapter also examine the law’s treatment of contracts in restraint of trade, including exclusive dealing and exclusive service agreements.

How Antitrust Really Works: A Theory of Input Control and Discriminatory Supply

------->Antitrust law and policy today are a semi-coherent welter of legal and economic doctrines. Immanent in them, however, is a structure of great simplicity and utility. The concept at the heart of the antitrust laws is the linear supply chain, consisting of an essential input, a downstream market in which competition is harmed through the discriminatory supply of the input to downstream firms, and consumers who pay higher prices for finished products as a result of the discriminatory behavior. Antitrust attacks this problem of the discriminatory supply of inputs in two ways. First, it seeks to prevent any one intelligence from taking control over the input, because absent such centralized control, competition from input suppliers eliminates any attempt at discrimination. Stopping the centralization of control over inputs is not always possible, however, because sometimes centralized control improves the quality of the input, and antitrust follows an implicit rule of “innovation primacy,” which holds that any act that plausibly improves the product likely does more good for consumers than any resulting increase in prices harms them, and so the act must be immune from antitrust scrutiny. ------->Second, antitrust regulates attempts by input controllers to use their power to increase their profits other than by charging what they know to be the highest possible prices for their products given their level of knowledge of consumer willingness to pay. Profits can be increased in this way by only three routes, each of which involves discrimination by the input controller in the supply of inputs to downstream firms. The input controller can discriminate in favor of firms that improve the final product ultimately sold to consumers and so increase consumers’ willingness to pay. The input controller can discriminate in favor of downstream firms that supply the input controller with information about consumer willingness to pay, enabling the input controller better to choose its prices to maximize its profits. And the input controller can discriminate against downstream firms that refuse to give the input controller access to profits that the firms have in turn extracted from consumers. The doctrine of innovation primacy protects discrimination that improves the final product sold to consumers, but not discrimination that facilitates information acquisition or the disciplining of refractory downstream firms. ------->This analysis resolves numerous longstanding conundrums in antitrust, including (1) whether antitrust picks winners (it must), (2) whether picking winners limits consumer sovereignty (impossible, because whenever a firm discriminates in the supply of inputs, the firm picks winners, and antitrust, which does no more than challenge such discrimination, therefore only ever substitutes its judgment for that of firms, never for that of end consumers), (3) whether antitrust should have a monopoly power requirement (it should, but the requirement should apply to the input market and not, as at present, to the downstream market in which competition is harmed), (4) whether firms should be allowed to compete on their own platforms as a general matter (of course they should, unless it is thought that consumers always know better than firms how everything they buy should be made, from start to finish), and (5) how to define the limits of the firm (the boundary of the firm does not end where formal ownership ends, but rather where discrimination in the supply of inputs ends). The analysis also shows why Lorain Journal, Aspen Skiing, Linkline, Trinko, Microsoft, Qualcomm, exclusive dealing, and tying are all the same basic case.