Required Share 155. As a first step the Commission will endeavour to calculate how big a share of customers’ requirements on average the entrant at least should capture so that the effective price is at least as high as the average total cost of the dominant company (“the required share”).101 In a number of cases the size of this share, when compared to the actual market shares of
c o m p e t i t o r s a n d t h e i r s h a r e s o f t h e c u s t o m e r s ’ r e q u i r e m e n t s , m a y m a k e i t c l e a r w h e t h e r t h rebate system is able to have a foreclosure effect. In case the shares of the customers’ requirements purchased from actual rivals are smaller than the required share, the rebate scheme is likely to have a foreclosure effect where there is in addition no indication that these rivals are less efficient. In such a situation a rival would have to more than double its sales to these customers to overcome the foreclosure effect. In case the market share of each competitor is much bigger than the required share, the rebate system is unlikely to have a foreclosure effect e
that hinders competition.
Box: calculation of the required share in case of a uniform rebate
The required share (RQS) is calculated as follows:
RQS = R x P/(P – ATC)
Where R is the rebate percentage customers obtain once they have purchased more than the threshold, P is the (list) price without the rebate and ATC is the average total cost of producing the product of the dominant company.
For instance, where the rebate is 5%, P is 100 and ATC is 75:
RQS = 5% x 100/(100 – 75) = 20%
What to do if foreclosure not clear
101 In case the required share differs significantly between customers because of differing rebates, the Commission will not calculate the average share for all customers but an average share per group of customers with a similar rebate. It will evaluate the importance of these different groups of customers for entry and expansion.