Above-cost discounts may sometimes fall under Article 6(a) of Law No. 4054 on the Protection of Competition (the “Competition Law”), which prohibits acts or transactions that directly or indirectly impede the entry of another firm into the market or impede the activities of those already within the market. Depending on circumstances, above-cost discounts may amount to a form of predatory pricing conduct (Please see the “Predatory Pricing” section for further explanation).
Similar to below-cost pricing, offering above-cost discounts in a selective manner may lead to the exclusion of one or multiple competitors from the market. Therefore, the Competition Board (the “Board”) may impose monetary fines on a dominant firm that offers above-cost discounts selectively, when there is evidence that such discounts are designed to drive a competitor out of the market. Discounts are considered an abusive behavior when they are offered to customers who have a tendency to switch to a competitor’s goods. These might be targeted at certain geographical areas, or at specific customers. For there to be a violation, the firm must use the selective discount scheme for a sufficiently long time and in a manner to specifically exclude competitors.
The findings of abuse are restricted to dominant firms. Discriminatory discounts by companies with no or insignificant market power are not abusive. That said, the indications in practice suggest that the Board is increasingly and alarmingly inclined to assume that purely unilateral conduct of a non-dominant firm in the form of offering selective discounts could be interpreted as giving rise to an infringement of article 4 of Law No. 4054, which deals with restrictive agreements.