Loyalty Rebates: Exclusive Dealing, Predatory Pricing, or Both? Assessing the Competitive Effects of Loyalty Rebates – Should Rebates be Viewed as Exclusive Dealing, Predatory Pricing, or Both? Conference: importance and country experiences on SOE reforms SOEs and Private Firms: Leveling the Playing Field Across Markets” March 27 from 9:00-10:30 the OECD experience and good practices on the application of the competitive neutrality principles. Your presentation should take 15-20 minutes to bring in the OECD experience and good practices on the competitive neutrality principles and why they are important to ensure a level playing field across markets This session will discuss the rationale for State participation in the economy; SOEs and competition policy - what matters in practice. It will also Introduce market discipline through competitive neutrality in markets with SOEs and private sector participation.   Chris Pike Competition Expert, OECD ICN Unilateral Conduct Workshop Stellenbosch, South Africa November 2018

Should Rebates be Viewed as Exclusive Dealing, Predatory Pricing, or Both? OECD Roundtable on Fidelity Rebates (2016) Theories of harm on loyalty rebates Predatory Pricing Profit sacrifice followed by recoupment Leveraging non-contestable sales De Facto Exclusive Dealing Consumer foreclosure: reduce rivals’ revenue e.g. divide and conquer & economies of scale Input foreclosure: raise rivals’ costs e.g. agree an exclusive deal on key materials or IP Taxing rivals prices – vertical coordination Softening price competition theories

Testing the theories of harm Predation: Price-cost test & recoupment test or ‘discount attribution test’ De facto exclusive dealing: Is it de facto exclusive dealing? Does exclusive dealing raise rival’s costs? Do increased costs raise prices? Why could rivals not match it? Taxing rivals prices: Do buyers face a significant tax on buying from a rival? Are prices high? How do distributors react when one rejects the rebate?

So, loyalty rebates can be both… Work from the complaint and consider the facts of the case Don’t rely on price cost tests Better to prioritize cases where high prices are insulated from competition Hence do not focus on predatory cases And don’t forget potential efficiencies!

Thank you for your attention! http://www.oecd.org/daf/competition/fidelity-rebates.htm Thank you for your attention! Chris Pike chris.pike@oecd.org