Loyalty Discounts, the Intel Investigations, and ZF Meritor v. Eaton

Broadcast Date: Monday, March 31, 2014 from 12:00 pm to 2:00 pm (ET)

Overview:

This presentation uses two recent antitrust matters (the various Intel investigations and cases; ZF Meritor v. Eaton) to describe the circumstances in which an incumbent monopolist can use loyalty discounts with buyers to exclude a rival. In addition to noting the circumstances where loyalty discounts can be used to predate a rival, the presentation also describes two economic theories of exclusion that do not rely on below-cost pricing by the incumbent.

Agenda:

What does the law say about loyalty discounts
1. Scott: 15 minutes
  1. Provide an overview of the case law in the United States dealing with market share discounts and other types of loyalty discounts prior to Eaton and Intel
  2. Discuss the different bodies of law to which courts look in analyzing loyalty discounts and the pros and cons of each.
2. Katrina: 15 minutes
  1. Provide an overview of developments in the regulatory environment, including commentary by regulators
  2. Discuss the legal theories used by regulators to challenge loyalty discounts
  3. Analyze the intersection between court decisions and regulatory action
What does economic theory say about loyalty discounts
1. John: 15 minutes
  1. If a plaintiff wanted to show consumer harm, three economic theories would apply:
    1. below-cost pricing to drive a rival from the market
    2. using exclusive contracts to lock-up enough downstream buyers so that a rival cannot operate at efficient scale.
    3. using exclusive contracts to cartelize the downstream market
  2. The last two of these do not require that the loyalty discounts represent below-cost pricing.
Why Intel and Eaton cases are important (2 minutes)
Intel Cases
1. John: 15 minutes
  1. Description of Key Facts in Intel Cases
  2. Do facts support economic theories of harm
2. Katrina: 15 minutes
  1. Review the Intel case, assess its implications for further regulatory action, and discuss lessons learned
Eaton Case
1. Scott: 15 minutes
  1. Description of Key Facts in Eaton
  2. Discuss the Eaton decision and how it fits with prior precedent
  3. Discuss lessons learned from Eaton and how U.S. courts are likely to treat loyalty discounts going forward
Legal Guidance relating to the use of loyalty discounts (15 Minutes)
Questions (15 minutes)

Who Should Attend:

Antitrust attorneys and other interested professionals

Scott A. Westrich Senior Counsel Orrick

Mr. Westrich is senior counsel in Orrick, Herrington & Sutcliffe's San Francisco office. He has experience with a broad range …

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John Simpson Principal The Brattle Group

Dr. Simpson is an expert in analyzing the competitive effects of mergers, acquisitions, and various business practices, such as exclusive …

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Katrina Robson Counsel O'Melveny & Myers LLP

Katrina M. Robson is a counsel in O’Melveny’s Washington, DC office and a member of the Antitrust and Competition Practice, …

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Course Level:
Intermediate

Advance Preparation:
Print and review course materials

Method of Presentation:
On-demand Webcast (CLE)

Prerequisite:
NONE

Course Code:
134600

NASBA Field of Study:
Specialized Knowledge and Applications

NY Category of CLE credit:
Areas of Professional Practice

Total Credits:
2.0 CLE

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About Orrick

Orrick is a leading global law firm focused on serving clients in the technology, energy and infrastructure and financial services sectors. Founded in San Francisco and celebrating its 150th anniversary, the firm today practices in 25 markets across the U.S., Europe and Asia. In recognition of an extraordinary record of wins in high-stakes disputes, the Recorder named Orrick California Litigation Department of the Year for 2013 and American Lawyer recently named the firm to its 10-Year A-List.

Orrick’s global Antitrust and Competition Practice Group—widely recognized for helping to shape modern antitrust law in groundbreaking decisions in cases such as Continental T.V. v. GTE Sylvania (vertical non-price restraints) in the United States, Europe and Asia—represents multinational clients across a full spectrum of U.S., international and cross-border antitrust regulatory and litigation needs. Orrick’s global reach enables us to provide integrated, seamless representation, and this capability has been integral to effective coordination of international cartel investigations and cross-border M&A.

Website: https://www.orrick.com/Pages/default.aspx

About The Brattle Group

The Brattle Group provides consulting and expert testimony in economics, finance, and regulation to corporations, law firms, and governments around the world. We aim for the highest level of client service and quality in our industry. We are distinguished by our credibility and the clarity of our insights, which arise from the stature of our experts, affiliations with leading international academics and industry specialists, and thoughtful, timely, and transparent work. Our clients value our commitment to providing clear, independent results that withstand critical review.

The Brattle Group’s experts provide economic analysis and testimony on antitrust and competition matters in a wide range of industries throughout the world. Our experts include two Nobel laureates, economic professors at leading universities, and former managers and staff at government competition agencies. We have provided advice in hundreds of mergers and acquisitions and testimony and support in many high-profile antitrust cases.

We frequently present at law firms and conferences, during which we share an economists’ perspective of antitrust issues and provide analysis of issues that arise in connection with recent trends in: mergers and acquisitions, monopolization and vertical restraints; price fixing and collusion; damages; class certification; and energy antitrust and regulation.

Website: https://www.brattle.com

About O'Melveny & Myers LLP

For more than 125 years, O’Melveny & Myers LLP has helped clients succeed in adapting to the ups and downs of countless business cycles. That commitment remains as strong today as ever. Approximately 800 lawyers across Asia, Europe, and the United States help clients develop legal strategies that take the full measure of their global risks and opportunities into account. Whether a cross-border merger requires US, UK, and Chinese tax advice, or a multijurisdictional dispute involves tracking down witnesses and documents in different countries and languages, O’Melveny’s worldwide reach maximizes strategic advantage and efficiencies for our clients.

Website: https://www.omm.com/