DP4756 Economic Theories of Bundling and their Policy Implications in Abuse Cases: An Assessment in Light of the Microsoft Case

Author(s): Cristina Caffarra , Kai-Uwe Kühn , Robert Stillman

Publication Date: November 2004

Keyword(s): bundling , efficiency defenses , foreclosure , policy rules

JEL(s): K21 , L41

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP4756.asp

Theories of bundling have had great importance in European competition policy in recent merger control and abuse of dominance cases. Prominent examples include GE/Honeywell, Tetra Laval/Sidel and the recent Microsoft decision. The European Commission has been heavily criticized in all of those cases. In this Paper we attempt to sketch how a systematic approach to bundling cases can be structured. We first provide an overview of existing bundling theories, concentrating on robust economic mechanisms and their empirical implications. This allows us to develop a number of clear criteria to identify potentially anticompetitive bundling. We show that a careful reading undermines recently proposed arguments for a (modified) per se legality rule for bundling.