negative effects will in general depend on the size of the tied market share. In case the dominant company does not apply the single branding obligation or rebate system to a good part of its buyers but only selectively to some and not to others, the Commission will investigate whether or not these selected buyers are of particular importance for the possibilities of entry or expansion of competitors. It will for instance investigate whether the tied customers are the ones that are most likely to be responsive to offers from alternative suppliers. These customers may form a particular way of distributing the product that would be suitable for a new entrant. Or they may be customers situated in a geographic area well suited to new entry, for example because of proximity to suppliers in other geographical areas. The Commission will also take into account whether there are economies of scale and scope, network effects or learning curve
effects.91 The Commission will also investigate whether the single branding obligation or rebate system is targeted at the customers of specific competitors. In such cases the Commission may find that a market distorting foreclosure effect results even though the tied market share is very modest.
Where these are good substitutes, rebate system unlikely to foreclose
146. In markets where for all or most part of demand there are proper substitutes, for instance where the product is homogeneous and the competitors to the allegedly dominant company are not capacity constrained, rebate systems will generally not have a market distorting
foreclosure effect. If competitors are competing on equal terms for all the customers and for each individual customer’s entire demand, then a rebate system is unlikely to have a foreclosure effect unless the effective price under the rebate system, calculated over all sales by the dominant
company to its customer(s), is found to be predatory (see section 6 on predatory pricing).92
In case in a
homogeneous product market the competitors of the allegedly dominant company are capacity constrained, a rebate system may have a foreclosure effect in case the average customer’s
Network effects arise when consumers place greater value on larger networks than small ones. Examples include telephone networks where, in the absence of an obligation to interconnect, users directly derive value from being able to communicate with many other users, but also networks of users of computers where users indirectly derive value from more software being made available to large networks. In general, if the market conditions are as described here, it is unlikely that a dominant position is found, even at high market shares.