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Fidelity Rebates - Chris Pike - OECD Competition Division – June 2016 discussion

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This presentation by the OECD Competition Division was made during a roundtable discussion on Fidelity Rebates held at the 125th meeting of the OECD Competition Committee on 16 June 2014. More papers, presentations and contributions from delegations on the topic can be found out at www.oecd.org/daf/competition/fidelity-rebates.htm

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Fidelity Rebates - Chris Pike - OECD Competition Division – June 2016 discussion

  1. 1. FIDELITY REBATES Presentation of the OECD Background paper Chris Pike OECD Competition Division OECD Competition Committee Roundtable - 16 June 2016
  2. 2. The Background note together will all materials related to the discussion can be found at: www.oecd.org/daf/competition/fidelity- rebates.htm 2
  3. 3. In recent years there have been important cases in different jurisdictions that have contributed to a rich debate on the approach to adopt when examining fidelity rebates (sometimes referred to as loyalty discounts). The background paper : • draws practical lessons from that debate. • explores why it is that firms use fidelity rebates. • identifies some rationales that potentially benefit/harm consumers. • examines the legal framework in which fidelity rebate cases take place, and identifies the objectives, standards and presumptions that determine the relevant assessment. • sets out an analytical framework for assessing the exclusionary effect of fidelity rebate schemes. • concludes by identifying the implications for prioritising investigations. Abstract 3
  4. 4. • Schemes that reward (partial) exclusivity – Thresholds: % of purchases, or individualised target • Distinct from quantity rebates – Ubiquitous, often used competitively • Do not necessarily involve a price reduction • Potential efficiencies mean even when used by dominant firms these might benefit consumers. • Per se prohibition therefore risks harming consumers. (Partial) Exclusivity Rebates
  5. 5. 1. Provides an analytical framework for assessing the exclusionary effects of fidelity rebate • When there’s a role for different price cost tests, and when there’s not • Raising rivals costs through customer or input foreclosure • Must be able to answer: Why can rivals not compete against the rebate? 2. Identifies ambiguity and complexity • Suggests no place for presumptions (either prohibition or safe-harbour) 3. Describes newer theories: • Rebates that create an effective tax on rivals prices • Rebates that are used by rivals to soften price competition 4. Case boxes What the paper does
  6. 6. • Circulate it within your organisations • Ask if you would like the OECD secretariat to come and talk to your staff • Find all the material on the webpage: www.oecd.org/daf/competition/fidelity- rebates.htm What to do with the paper

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