Loyalty Discounts May Abuse a Dominant Position - No Change

In an important appeal judgment earlier today, the General Court reaffirmed the established principle that a company enjoying a dominant market position is likely to be abusing that position where it applies a loyalty discount system. A "loyalty" or "fidelity" discount occurs where a financial advantage is granted in return for a purchaser sourcing all or most of its requirements for the relevant products from the dominant supplier. The General Court (which, before December 2009, was known as "the Court of First Instance") also confirmed that, even in the absence of a financial advantage, a purchase commitment meant to cover most or all of the purchaser's expected requirements for the relevant products is likely to be abusive.

What were the abusive practices considered by the General Court?

The judgment concerns the appeal to the General Court by Tomra Systems ASA and various other companies within the Tomra group ("Tomra") of a 29 March 2006 Decision by the European Commission (the "Commission") fining Tomra €24m. The Commission found that Tomra had abused a dominant position on various national markets for reverse vending machines, infringing the abuse prohibition at what is now Article 102 of the Treaty on the Functioning of the European Union. Such machines collect used beverage containers and, having identified the type of container, automatically dispense a deposit to be reimbursed to the consumer. The Commission found that Tomra's abuse consisted both in a general policy of denying market access to competitors and in specific practices evidenced by its dealings with retailers. These practices consisted of the following:

Entering into agreements where the retailers agreed to buy exclusively from Tomra. "Exclusivity" here included quasi-exclusivity and de facto exclusivity. Entering into agreements specifying individualised quantity commitments corresponding to the entire or almost the entire demand of the retailer. Entering into retroactive rebate agreements to compensate such commitments. A "retroactive" rebate occurs where the purchaser's bonus is granted for all purchases, even below a triggering threshold, once the threshold is attained. What are the General Court's conclusions?

Tomra appealed on many points, most of which concerned the Commission's selection and analysis of evidence. Although the General Court accepts the possibility of one or two flaws in the detail of the evidence, its judgment approves the Commission's...