Loyalty rebates and the more economic approach to EU competition law

ABSTRACT In 2009 the European Commission published the art. 102 guidance regarding abusive exclusionary conduct by dominant undertakings. The guidance is based on the more economic approach to competition policy. This paper investigates the welfare implications of the more economic approach to loyalty rebates. First, the paper presents an economic framework linking weights attached to probabilities of false positives and negatives and the legal norm. After that, the paper discusses cases before the guidance paper (i.a. Hoffmann-La Roche), the guidance paper itself, and cases after the guidance paper (i.a. Intel). In the period after the guidance paper, we observe a non-linear increase in the weight attached to preventing false positives. The paper concludes that to further limit welfare losses due to false positives, the category of rebates that is assumed to be abusive should be defined in a restrictive way. Furthermore, in law enforcement priority should be given to cases that, considering all the circumstances, can be expected to be most harmful to consumers.