the level that the buyer would purchase in the absence of any loyalty enhancing obligation or rebate. If the threshold is set at the amount that would anyhow be purchased, the rebate may induce the buyer to purchase extra units in order to be able to benefit from the rebate on these incremental purchases.
Loyalty Enhancement depends on: 167. The strength of the inducement to purchase more from the dominant supplier, i.e. the loyalty enhancing effect, will depend in the first place on the level of the rebate percentage: the higher this percentage, the lower the price for these additional purchases. It will not be important for the assessment whether the threshold is set in terms of a percentage of total requirements of the buyer or an individualised volume target, as both are ways to set the threshold at what would
anyhow be purchased. Here too a grid may be used by the dominant supplier in case of uncertainty about the optimal threshold to be set, for instance because of changing loyalties or because of overall demand changes.
Conditional rebate on incremental purchases 168. In view of the above, once it is established that the dominant company grants conditional rebates only on incremental purchases and where the threshold is set in terms of a percentage of total requirements of the buyer or an individualised volume target, the Commission will conclude that the rebate system constitutes an abuse only if the resulting price for these incremental purchases is a predatory price. The Commission will apply to such a system the guidance as developed in the section on predatory pricing. In that context, as the leveraging between the ‘non-contestable’ and the ‘contestable’ portion of demand allows the rebate system to operate without a profit sacrifice and thus to operate for a long time, an abuse
is considered likely if the resulting price does not cover average total cost and the part of demand to which the rebate is applied is important enough to create a foreclosure effect.
If rebate incremental and target standardised 169. Also in case it is established that the dominant company grants conditional rebates on incremental purchases but that the threshold is set in terms of a standardized volume target, will the Commission apply the guidance as developed in section 6 on predatory pricing. In such