Michelin II: A Per Se Rule Against Rebates by Dominant Companies?

Denis Waelbroeck

Journal of Competition Law and Economics, 2005, vol. 1, issue 1, 149-171

Abstract: In its Michelin II judgment of September 2003, the CFI found that Michelin breached Article 82 EC by setting up a system of rebates that could potentially induce loyalty and exclude its competitors. This paper comments extensively on Michelin II and other cases, with a focus on what sort of competition policy is desirable as regards rebates by dominant companies. Contrary to Michelin II, pricing policies of dominant companies which are not linear and not strictly reflecting economies of scale are not necessarily anticompetitive and may indeed have significant pro-competitive effects. Furthermore, a requirement that a rebate scheme be "economically justified" is very difficult to apply in practice, and the Court should not have put the burden of proof for the justification of quantitative rebates upon the dominant company. Most preoccupying is the Court's rejection of the effect criterion when deciding on the legality of a rebate: Such an approach, which differs markedly from US and UK law as well as from the OECD report on fidelity discounts, will generally result in a disproportionate per se-prohibition of any pricing behaviour and in economic inefficiencies. A fairer and clearer approach could therefore distinguish between rebates that are per se allowed and other rebates that ought to be prohibited only if they have effects on the market.

Date: 2005
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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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