Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Antitrust Figure of the Day – Quantifying Rebates

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Preliminary observations: 1.  The author of this blog hates sweeping, unsupported, antitrust law statements. 2. In the, past, the author of this blog has made a lot of work on rebates under Article 82 EC.

The mainstream  scholarship on rebates often contends, without ever bringing quantitative evidence to this effect, that rebates, which are the essence of competition, significantly lower prices to customers. They ought therefore to be deemed pro-competitive. In turn, the recent scholarship argues, without much nuance, that the decision-making practice of competition authorities and, in particular, of the European Commission, would be overly restrictive. The case-law under Article 82 EC would allegedly chill competition in prohibiting a significant number of dominant firms’ pro-competitive rebates. A related assertion is that rebates are arguably pervasive. However, no robust evidence is ever given in support of the view that most industrial sectors have recourse to rebates.

Against this background, I recommend the reading of Matthew A. Edwards’s  refreshing “The Law, Marketing and Behavioral Economics of Consumer Rebates”, (2007) Vol 12:2, Stanford Journal of Law, Business & Finance, 362.  Whilst conceding methodological and informational problems, Edwards’ paper seeks to provide hard facts, and references,  in support of the contention that rebates are pervasive, and overall entail significant price concessions to consumers. A few excerpts:

During the past two decades, consumer rebates have become a major marketing method. Although exact figures are difficult to ascertain, estimates of total rebate offer volume now range from $4 to $10 billion per year. According to oneconsulting firm, over 80% of consumers participated in rebate offers in 2004,redeeming over five billion rebates worth more than $3 billion. The prevalence of rebates within the consumer electronics and high-tech products markets is particularly pronounced—one recent industry study indicated that 25% of all computer hardware product purchases, and almost 50% of personal computer sales included rebate offers”.
In addition to this, the paper makes a number of interesting substantive points.  Warmly recommended.
(Image possibly subject to copyrights: source here)

Written by Nicolas Petit

11 December 2009 at 8:12 am

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