Just a couple of thoughts, Josh:

Bundled discounts can be offered in different ways. Some are targeted at particular distributors or retailers. So, for instance, 3M might say to Wal-Mart: “We’ll give you a 20% discount on all your A and B purchases if you meet certain purchase targets on A and B purchases from 3M.” Other B/Ds are available to all purchasers, as when a seller offers a generally available package price on two of its products.

With respect to the former sort of B/Ds (which are probably the ones that create antitrust concern — Barry Nalebuff emphasized that point at the hearing), you’re exactly right that proof of substantial foreclosure should be required for liability. With respect to the latter sort, though, I probably wouldn’t require a plaintiff to prove substantial foreclosure. That’s because I’d assume that, if the plaintiff couldn’t meet the discount (and couldn’t otherwise keep its products in the market), it would be effectively foreclosed as to practically all buyers.

Put differently, I’d analogize the first situation (targeted discounts to middlemen) to exclusive dealing (or tying), where foreclosure from distribution outlets is the primary concern and should be proven by the plaintiff. Like Dan, I’d require proof of foreclosure AFTER the plaintiff had shown that it could not meet the discount by competing hard. (Absent such a showing, foreclosure is the plaintiff’s own fault.) I’d analogize the second situation (discounts offered to all buyers) to predatory pricing, where there generally is no requirement that a plaintiff establish foreclosure, though it must prove that the relevant market is capable of sustaining supracompetitive prices.

Since, as Nalebuff emphasized, the B/D situations that tend to raise antitrust concerns are those involving targeted discounts to middlemen, I’d agree with you that a showing of foreclosure should generally be part of a plaintiff’s prima facie case in the cases that matter.

Thanks for making me think a little.

Now…back to writing those damn exams.

First, to be clear, I didn’t mean to say that foreclosure analysis isn’t relevant to analyzing bundled discount claims. In the latter sections of my Emory Law Journal article, I actually say that it is. My argument, instead, is that it isn’t a useful starting place. In many cases, foreclosure shouldn’t even arise as an issue because the plaintiff cannot show that it could not profitably compete for any customers’ business.

To illustrate, compare a true exclusive dealing contract to a bundled discount offer. If a dominant firm (say Dentsply) puts customers to an all-or-nothing choice, then it can deny rivals a foothold in the market. If it’s Dentsply’s teeth exclusively or no Dentsply, most dental labs are going to have to accept Dentsply and forgo all other teeth manufacturers, just because Dentsply is such an important player that dental labs can’t afford not to have Dentsply.

But now say that Dentsply gives some sort of bundled discount. Buy x amount of our teeth and x amount of our gums (a little gross–sorry) and you get 5% off. A firm that makes just teeth might say: “It’s just like the exclusive dealing contract. Since customers aren’t going to want to lose the discount on the gums, those customers are now foreclosed to us.”

Not so fast. Suppose that the single-product rival could profitably give dental labs a discount equal to the full value of the 5% on the teeth and 5% on the gums. In that case, the single-firm rival should have nothing to complain about. In order to make sales to dental labs offered the bundled discount, it simply has to offer a substantial discount of its own on teeth (and this assumes that it can’t get together with other gum makers and offer its own bundled discount on teeth and gums).

This is why I said that exclusive dealing analysis begins with the assumption that whatever contracts are covered by the exclusive dealing contracts are “foreclosed” to rivals, a fact not at all in evidence in bundled discount cases.” Until the plaintiff shows that it couldn’t profitably respond to the defendant’s bundled discount by offering its own discount that would make customers indifferent on price, there is no basis for asking whether a substantial share of the relevant market is foreclosed. Indeed, if the plaintiff can profitably offer its own discounts in response, there is no “foreclosure” at all but just good, old-fashioned price competition.

Where I do say that foreclosure analysis should come in is when the plaintiff shows that matching the defendant’s bundled discount would force it to price unprofitably (and, generally, that it is as efficient as the defendant in the production of the competitive good). At that point, there are many other showing that I think the plaintiff should have to make, and one of them is that the share of the market “foreclosed” by the bundled discounts was substantial.