Loyalty and Fidelity Discounts and Rebates

As with other policies offering lower prices to at least some buyers, loyalty and fidelity discounts are generally pro-competitive and beneficial to consumers even though they may harm certain competitors. Potential problems exist, however, when such discounts are employed in ways that reduce price transparency, exclude or restrict a significant number of actual or potential competitors, or raise the probability of anticompetitive co-ordination. The sometimes complex pro- and anti-competitive effects of loyalty and fidelity discounts are explored in the executive summary, background paper and summary of discussion pertaining to a June 2002 OECD Competition Committee roundtable discussion of the topic. While these documents reveal some interesting policy differences among various members of the Competition Committee, they also point to general agreement that loyalty and fidelity discounts are more likely to raise competition concerns when practised by firms enjoying substantial market power.