Economic theories of bundling and their policy implications in abuse cases: an assessment in light of the Microsoft case

Introduction:

"Theories of bundling have gained great prominence in European competition policy in a number of recent cases, concerning both merger control and abuse of dominance. Significant examples include GE/Honeywell, Tetra Laval/Sidel and the recent Microsoft decision in which the European Commission ordered the unbundling of Windows Media Player from Windows. The Commission has been heavily criticized, especially in the US, for its treatment of bundling in these cases. An important current of opinion in the US has been advocating a “laissez faire” approach to bundling practices."

" In this paper we argue that a “laissez faire” approach to bundling cannot be justified based on the current status of the economic literature. Like most economists, we do not wish to see restrictive policies being adopted against bundling: one reason is that they may interfere with product design decisions, and thus hamper product innovation. But a cautious policy approach towards bundling does not imply that intervention is never appropriate."