Contractual Discounts and Competition: Interpreting Unilateral Conduct under Section 2 of the Sherman Act

Quantity commitment discounts (QCDs) are vertical agreements in which a seller conditions price discounts on the specified quantity or share of a product line that the buyer commits to purchase from the seller. QCDs are a natural outcome of sales-promoting competition among differentiated sellers and would be commonly used absent any possibility of excluding rivals. Both economic theory and the law recognize that in some cases pricing and business practices of sellers may harm or weaken rivals and might also reduce social welfare. Absent clear standards defining the bounds of illegal conduct, the mere threat of antitrust liability may dampen rivalry among firms, with resulting harm to the competitive process and, ultimately, consumers. Existing tests for exclusionary effects are unreliable and biased in favor of finding anticompetitive harm.