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Brian Sher, Feb 11, 2009
Rebates was always the hardest exclusionary abuse. Navigating through the DG Competition Staff Discussion Paper of 2005, the retroactive rebate section felt like Ellen MacArthur’s description of sailing fast in the Southern Ocean at night (“lashing rain no headlights…no windscreen no roof”). The debate has deepened, notably with differing perspectives laid out in the U.S. Department of Justice (DOJ)’s own Single-Firm Conduct report of September 2008, and in the inter-US-agency “dialogue” which followed. But we are still a long way from any international consensus. The best that can be said is we now understand better the different strands of thinking. And in Europe we do at least now, with the Commission’s new Guidance, have a coherent approach. Whether it is going to work in practice is another matter. In this short article I propose initially to summarize, in the most succinct way I can, the EC approach to rebates and exclusive dealing, and the DOJ approach. Then I will tackle the subject through a series of propositions: First, that the EC has shifted in its conditional rebates analysis decisively to a test based on leveraging non-contestability; Second, that the EC seeks to work in the doctrine of the “as efficient competitor” by nominally loading the discount onto the contestable portion of demand and this approach has some support in the United States; Third, that the EC has watered down, through the fitting (or retrofitting) of several safety valves, its test for when rebates will be exclusionary; Fourth, that we are moving, slowly in Europe, towards a common predatory standard for exclusionary price behavior but until the Commission properly addresses what that standard is we will not have a standard at all; Fifth, that there remain a number of other differences between EC and U.S. policy (or indeed the policies of other jurisdictions) where the EC has yet to properly elucidate its position; and Sixth, that exclusive dealing, which we always saw as the extreme version of a rebate scheme, is in many respects paradoxically easier to deal with, and seems to have drawn more international consensus.
