We recently wrote about attempts to force exclusivity onto customers. But firms with large or dominant market shares often must walk a fine line between properly offering customers percentage-based discounts and improperly coercing customers into de facto exclusivity. For example, if a dominant firm offers a 25 percent price reduction to a customer that purchases all of its needs for a particular product from the dominant firm, does that offer constitute a competitive 25 percent volume discount, or an anticompetitive 25 percent penalty for purchasing any product from the dominant firm’s competitor? Not surprisingly, it usually depends on whom you ask: the dominant firm or the competitor.
The Third Circuit provided some guidance on the line between price competition and coercion with its recent opinion in Eisai, Inc. v. Sanofi Aventis U.S., LLC, No. 14-2017 (3d Cir. May 4, 2016). In Eisai, the Sanofi defendants, manufacturers of the anticoagulant Lovenox, offered customers the “Lovenox Acute Contract Value Program,” which provided percentage-based discounts. Customers who joined the program received a 1 percent discount from Sanofi’s wholesale price, and increasingly higher discounts if Lovenox exceeded 75 percent of the customer’s total purchases of low-molecular-weight heparin, with the discounts potentially reaching 30 percent. If a customer left the program, the customer lost its discount but could still purchase Lovenox at regular wholesale prices. During the relevant time period, Lovenox’s market share ranged from 81.5 percent to 92.3 percent. Continue Reading