Induce higher sales and avoid double marginalisation
A second example could be that the rebate system is indispensable to incite the
customers to purchase and resell a higher volume and avoid double marginalisation. Here it needs to be shown in the first place that the customer has considerable market power and that without the rebate system the resulting resale price applied by the customer would be higher than the price a vertically integrated monopolist would ask and that thus without the rebate system total output would be lower. Such efficiency may require a rebate system with conditional rebates on incremental purchases above a certain threshold but is unlikely to require and is unlikely to be efficiently achieved with a rebate system with conditional rebates on all purchases.
Incentive to supplier to make relationship-specific investments that are sunk
A third example could be that the rebate system or the single branding obligation is
indispensable to provide the incentive for the dominant supplier to make certain relationship- specific investments in order to be able to supply a particular customer. An investment is considered relationship-specific if, after termination of the supply contract with that particular customer, the investment cannot be used by the supplier to supply other customers and can only be sold at a loss. General or market-specific investments in (extra) capacity are normally not relationship-specific investments. In case of relationship-specific investments the dominant supplier may not want to commit these investments before particular supply arrangements are fixed. Before such can be considered necessary it must be shown that the relationship-specific investment is a significant long-term investment that is not recouped in the short term and that the investment is asymmetric, i.e. that the supplier invests more than the buyer. Under such circumstances it may be indispensable to require that the customer purchases at least a certain minimum amount over a period and to an extent necessary to allow depreciation of the relationship-specific investment and thus solve the holdup problem. In case future demand is uncertain it may not be possible to require absolute minimum amounts to be purchased, in which case an alternative more adequate measure may be to impose a rebate system or a single branding obligation until the investment is depreciated.