The law of free competition, and more specifically Article 102 of the Treaty on the Functioning of the European Union (TFEU), imposes restrictions on the pricing practices of dominant undertakings. Although a business has the right to protect its commercial interests, certain discount policies are viewed with skepticism by European courts and regulatory authorities.
Types of Discounts and Their Legal Treatment
Fidelity Discounts
These are granted when a buyer purchases a specific quantity of products from the dominant company. The greater the quantity, the larger the discount. While these are common commercial practices, European courts treat them cautiously, especially when they originate from dominant firms.
Exclusivity and Target Discounts
Discounts offered to customers on the condition that they purchase exclusively or predominantly from a single supplier are akin to target discounts. These systems can have restrictive effects on competition, discouraging new competitors from entering the market and reinforcing the dominant position of the enterprise.
Volume Discounts
Traditionally, volume (or quantity) discounts have been considered lawful, as they reflect economies of scale and reward customers for placing large orders. However, under certain conditions, they may be deemed abusive if they lead to anti-competitive outcomes.
Judicial and Theoretical Approaches
EU case law often classifies the above practices as abusive, evaluating them based on their specific features (e.g. whether they are excessively high, long-lasting, or exclude competitors from the market). In contrast, academic theory tends to favor a more flexible approach, arguing that courts place too much emphasis on the form of the discounts rather than on their actual competitive effects.
Conclusion
Restricting discount schemes by dominant undertakings may negatively impact their ability to attract customers and freely shape their commercial strategy. A balanced approach—one that considers both the protection of competition and the economic analysis of the effects of such discounts—is essential for developing fair and effective business practices.
