Problem

Rebate cartels

Nature:

A rebate is a return or a reduction by a seller to a buyer of some part of the purchase price. It may be given: when the buyer has purchased a certain quantity (quantity rebate); when he has purchased exclusively from the seller or from a group of which the seller is a member (loyalty rebate); or when he has performed a particular function in the distribution of the product, for example wholesaling (functional rebate).

The basis for the granting of a quantity rebate may be the quantity of a particular product purchased from a particular seller either at one time or over a period of time (simple quantity rebate). It may also be the aggregated quantity of several products purchased from a single seller or several sellers, or of a single product purchased from several sellers. Where quantity rebates depend upon the aggregated quantity purchased by the buyer from a group of sellers, they are usually called aggregated rebates or aggregated quantity rebates. However, this term is also used to denote rebates that depend on the quantity of several products bought from the same seller. Aggregated rebate systems based on purchases made from several sellers may be adopted by a seller with or without there being a specific agreement among the several sellers. Where there is an agreement, it is usually referred to as an aggregated rebate cartel.

Inasmuch as a rebate cartel involves an agreement that effects the pricing of a product, it can be considered as a type of price cartel. These formal rebate systems must be differentiated from the informal ad hoc preferential treatment frequently given by individual sellers to established customers, in such forms as payment terms, delivery dates, etc.

Incidence:

In the early 1980s, rebate cartels of suppliers in developed market-economy countries, unless they related exclusively to exports to foreign markets (in which case the rules concerning export cartels would apply), were in principle subject to the same rules as apply to cartels generally. In the USA rebate cartels were, therefore, prohibited per se as a form of illegal price-fixing. In a number of other countries (Canada, France, Germany, Japan and Norway), and in the EEC/EU and ECSC, cartels were prohibited in principle but may qualify for a general or special exemption. Only one country (Germany) provided for a special exemption for rebate cartels; such cartels might be exempted in individual cases but only if the agreed rebates were such as to constitute a genuine compensation for services rendered and if the cartel did not seriously damage outsider suppliers or discriminate against customers. In principle, to meet these requirements, purchases from firms outside the cartel in any foreign countries must be included, but this principle has not always been enforced. In 1970 there were 33 officially registered exempted rebate cartels in the (then) Federal Republic of Germany.

In the period 1957 to 1968, aggregated rebate cartel arrangements were adjudicated as violating French law by the French Technical Commission for Cartels and Dominant Positions. Other known cases have related to trade within the European Free Trade Association (EFTA) and the European Economic Community (EEC). Deferred rebate and dual rebate systems of loyalty rebates are applied by a number of international shipping conferences.

Broader Problems:
Cartels
Strategies:
Using cartels
Values:
Cartel
Related UN Sustainable Development Goals:
GOAL 10: Reduced Inequality
Problem Type:
D: Detailed problems
Date of last update
22.05.2019 – 17:19 CEST