The FCCA Clarifies the Assessment Criteria of Customer Bonus Schemes

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The Finnish Competition and Consumer Authority (FCCA) gave a decision, on 11 October 2016, concerning the customer bonus scheme of S Group, a major grocery retailer in Finland. The FCCA determined that the scheme did not restrict competition, and concluded its investigation.  

The FCCA decision clarifies which factors are relevant when assessing the effects of customer bonus schemes of dominant companies on effective competition.

Customer Bonus Schemes are an Accepted and Common Means of Competition

The matter concerns the S Bonus scheme where bonuses are paid to a customer based on his purchases from a dominant company or its scheme partners. According to the FCCA’s decision, this kind of customer bonus scheme is to be assessed as a so-called conditional discount. Conditional discounts are a common form of price competition, which companies can employ to promote the demand for their products and to benefit their consumers. The FCCA decision states that conditional discounts granted by a dominant company can also have beneficial effects from the consumers’ perspective. A discount mechanism applied by a dominant company may, however, have a loyalty-enhancing effect which can, in some circumstances, lead to anticompetitive foreclosure effects in the market.   

Assessment of the Anticompetitive Foreclosure Effects

The assessment of the impacts of a customer bonus scheme is based on an overall assessment. The application of a scheme may amount to abuse of a dominant position if it prevents the expansion or entry of competitors that are as efficient as the dominant company or hinders the possibility of such competitors to fulfil a part of the purchase needs of individual customers.

According to the FCCA, this so-called as-efficient competitor test is, however, only one of the tools that can be used in assessing the effects of the discounts. Besides the costs, the FCCA also takes into account the following factors in its overall assessment: