Suction Effect 153. The strength of the inducement to purchase more from the dominant supplier, i.e. the loyalty enhancing effect, will depend amongst other things on the level of the rebate percentage
and on the level of the threshold. The higher the rebate percentage and the higher the amount that needs to be purchased before the rebate kicks in, the stronger the inducement just below the threshold.98 The fact that exceeding the threshold will not only reduce the price for all purchases above the threshold, but also for all previous purchases during the reference period, will create
a so-called ‘suction’ effect. The price of the units of the last transaction before the threshold is exceeded will effectively be seriously lower and is possibly even negative because this transaction triggers the rebate for all the purchases below the threshold in the reference period. The higher the amount that constitutes the threshold and the higher the rebate percentage, the stronger the suction effect will be near the threshold.99 The rebate enables the dominant supplier to use the inelastic or ‘non contestable’ portion of demand of each buyer, i.e. the amount that
would anyhow be purchased by the buyer, as leverage to decrease the price for the elastic or
‘contestable’ portion of demand, i.e. the amount for which the buyer may prefer and be able to find substitutes.100
Suction effect stronger on final unit bought - ATC 154. The suction effect in principle is strongest on the last purchased unit of the product before the threshold is exceeded. However, what is relevant for an assessment of the loyalty enhancing effect is not competition to provide an individual unit, but the foreclosing effect of the rebate system on commercially viable amounts supplied by (potential) competitors of the dominant supplier. These competitors are smaller rivals already active in the market and potential entrants. The rebate system should not hinder as efficient competitors to expand or enter. As these competitors can not compete for an individual customer’s entire demand (see §143 above) the question is whether the rebate system hinders them from supplying
In case the rebate is granted not in the form of a percentage but in the form of a lump sum payment once the threshold is exceeded, the inducement will be higher if the lump sum rebate increases. However, in such a case the inducement felt near the threshold will not be related to the level of the threshold. This has been recognised in the case law. Case 322/81 Michelin I, cited in footnote 26, paragraph 81; Case T- 203/01 Michelin II, cited in footnote 59, paragraphs 87-88; Case T-219/99 British Airways, cited in footnote 86, paragraphs 272-273.
See Case T-203/01 Michelin II, cited in footnote 59, paragraphs 162-163.