Antitrust Law and Competition for Distribution

Abstract

The regulation of the competitive process for product distribution and promotion is an unsettled and incoherent area of antitrust law. Competition for distribution involves contracting activity regarding the decision to carry, promote, or place a particular product. This process includes business practices recently subject to intense antitrust scrutiny such as slotting allowances, discounts, bundled rebates, category management, and exclusive dealing. Antitrust law has designed rules for each of these practices independently, ignoring the economic relationships between these business practices. Focusing on the economics of the competitive process for distribution exposes an antitrust policy that systematically mishandles the regulation of these contracts. These economic insights suggest that per se legality for arrangements less than one year in duration or arrangements that foreclose less than 40% of total distribution would improve consumer welfare without significant risk of anticompetitive harm.