The antitrust treatment of loyalty discounts and rebates in the EU competition law: in search of an economic approach and a theory of consumer harm

Abstract

In the paper, the fundamental question is under what conditions loyalty discounts and rebates adopted by a dominant firm cause anti-competitive effects. Fidelity schemes, although extremely frequent in the market, if applied by a dominant firm, are likely to be judged as illegal per se, as demonstrated by the EU case-law delivered so far and the severe scrutiny reserved by the national competition authorities. As a result, the paper first provides an analytical overview of loyalty structures, focusing in particular on retroactive rebates, and elaborates on important economic implications, such as the lock-in and the suction effect. The work then discusses the novelties introduced by the Guidance Paper on the Application of Art. 102 of the TFEU, which calls for an effects-based analysis of exclusionary abuses. Therefore, after an in-depth evaluation of the as-efficient competitor test, the new approach of the European Commission towards loyalty discounts and rebates is discussed in details with reference to a controversial antitrust case recently examined at EU level (Tomra). The paper finally proposes a systematic economic framework for analysing the effects, and therefore the legality, of fidelity schemes, in the light of a consistent theory of consumer harm.

Keywords: fidelity discounts, loyalty rebates, abuse of dominant position, as-efficient competitor test, consumer harm, exclusive dealing, foreclosure, monopolization, nonlinear pricing, predation, Tomra

JEL Classification: K21, L12, L42