Should Predatory Pricing Rules Immunize Exclusionary Discounts?

The purpose of this commentary is to analyze some of the empirical issues that help lay the foundation for the policy conclusions in the excellent and provocative article by Professor Herbert Hovenkamp, Discounts and Exclusion (hereinafter "D&E'). To oversimplify, D&E asserts that discounts usually are procompetitive. It also concedes, but essentially in its footnotes, that discounts can be anticompetitive, but argues that these anticompetitive situations are so rare they should have little impact on public policy. D&E then asserts that efficiencies from discounts are common and significant.

It then asserts that the only way to bring clarity, predictability, and an acceptable Type II error balance to this area is to adopt the rules that D&E suggests, including complete legality for all single-product discounts (unless the discounting violates normal predatory pricing rules).