Can Bundled Discounting Increase Consumer Prices Without Excluding Rivals?

Since we abhor suspense, we will quickly answer the question our title poses: No. As a general matter, bundled discounting schemes lower prices to consumers unless they are predatory—that is to say, unless they exclude rivals and thereby permit the bundled discounter to price free of competitive restraint. The corollary of this observation is that bundled discounting is generally pro-competitive and pro-consumer and should only be condemned when it is capable of excluding rivals. We pose and answer this question because it is at the heart of Section VI of Professor Elhauge’s provocative draft article which is the subject of this symposium. In Section VI, Professor Elhauge argues that bundled discounting can have “power effects” identical to conventional tying arrangements irrespective of any exclusionary effect on rivals as well as that cost/revenue tests for bundled discounting perversely immunize the worst bundled discounting schemes—those that represent the highest non-exclusionary price increases to consumers