Lecture
6
Marketing, Advertising and Product Safety I
BBA361
Business Ethics and Corporate Governance
Department of Business Administration
S.Chan
Reference:
Chapter 10, “Ethics and the Conduct of Business”,John R. Boatright
Consumer Council website
1
Marketing Ethics
Ethical framework for marketing in American society (bill of rights for consumer):
•
Fairness:
The right to be provided with adequate
information about products
•
Freedom:
The right to have a voice in the marketing of
major marketing decision;
•Well-being:
The right to be protected from harmful products
The right to be offered a choice that
includes the products that consumers truly want.
•Freedom
& well-being:
2
Marketing Ethics in Hong Kong I
Consumer rights in Hong Kong:
1.
2.
3.
4.
5.
6.
7.
8.
The right to satisfaction of basic needs;
The right to safety
The right to be informed
The right to choose
The right to be heard
The right to redress
The right to consumer education
The right to a healthy and sustainable environment
3
Marketing Ethics in Hong Kong II
http://www.consumer.org.hk/website/ws_en/competition_issues/model_code/2
006100401.pdf
•
Trade Practice Rules
•
Complaint Handling Rules
•
Fair Competition Rules
4
Marketing Ethics in Hong Kong II
I) Trade Practice Rules
false
trade descriptions (虛假或誤導性商品
說明)
misleading omissions (誤導性遺漏),
aggressive commercial practices (具威嚇性
的營業行為),
bait advertising (餌誘式廣告宣傳),
bait-and-switch (先誘後轉銷售行為), and
wrongly accepting payment (不當地接受付
款)
5
False Trade Descriptions(虛假或誤導性商品
說明)
 It
is an offence if traders supply or
offer to supply any goods or
services to which a false trade
description is applied, or apply a
false trade description to any
goods or services that are supplied
or offered to be supplied to
consumers.
6
Misleading omissions (誤導性遺漏)
 It
omits or hides material information,
or provides material information in a
manner that is unclear, unintelligible,
ambiguous, or untimely, or fails to
identify its commercial intent (unless
this is already apparent from the
context); and as a result, it causes or
is likely to cause, the average
consumer to make a transactional
decision that he would not have
made otherwise.
7
Aggressive commercial practices (具威嚇性的營
業行為)
A commercial practice engaged by a trader in
relation to a consumer is aggressive if, in its
factual context, it significantly impairs or is
likely significantly to impair the average
consumer’s freedom of choice or conduct in
relation to the product concerned through the
use of harassment, coercion or undue influence;
and it therefore causes or is likely to cause the
consumer to make a transaction decision that
consumer would not have made otherwise.
 E.g. “We will not let you go unless you have
paid for them!”

8
Bait advertising (餌誘式廣告宣傳)
http://www.legislation.gov.hk/blis_ind.nsf/CurChinOrd/54A907FC21D1E1F048257BAC002A556F?OpenDocum
ent

Advertising by a trader of products for supply at a specified price is
bait advertising if (having regard to the nature of the market in which
the trader carries on business and the nature of the advertisement)
there are no reasonable grounds for believing that the trader will be
able to offer for supply those products at that price in reasonable
quantities and for a reasonable period; or the trader fails to offer
those products for supply at that price, for a reasonable period, and
in reasonable quantities.

E.g. advertisement on the display window stating, “Huge sale on
plane tickets, HK$999 direct flight to Hokkaido, for today only.” “We
want to purchase the HK$999 direct flight ticket to Hokkaido.” The
staff replied, “We’re sorry, the ticket was sold out.” “The travel
agency has just opened for business for 5 minutes, the tickets run out
this quickly?” The staff responded, “Well, that’s the case. We only
offer 1 ticket at each outlet.”
9
Bait-and-switch (先誘後轉銷售行為)
 The
making by a trader of an invitation
to purchase a product at a specified
price is a bait and switch if, having made
the invitation, the trader then, with the
intention of promoting a different
product, refuses to show or demonstrate
the product; refuses to take orders for
the product or deliver it within a
reasonable time; or shows or
demonstrates a defective sample of the
product.
10
Wrongly accepting payment (不當地接受付款)
A
trader wrongly accepts payment if at
the time of accepting payment for the
product, he intends not to supply the
product or intends to supply a product
that is materially different from the
product, or there are no reasonable
grounds for believing that the trader
would be able to supply the product
within the specified period or a
reasonable period.
11
Marketing Ethics in Hong Kong II
II ) Handling Consumer Complaints
•
•
•
•
•
•
•
•
Independency and Impartiality
Transparency
Visibility
Affordability
Speed and Timeless
Competence of Appropriate Officers
Accessibility/ Ease of use
Security
12
Marketing Ethics in Hong Kong II
III ) Fair Competition Rules
甚麼是競爭法？
競爭法的主要目的為禁止妨礙、限制或扭曲在香港的競爭的行為；提
高經濟效益和促進自由貿易為目的，從而保障消費者利益。在2014年
，競爭法草擬指引出現，指引主要針對行業協會的反競爭行為，包括
組織的章程及決議，甚至無約束力建議。當中提到專業機構和行業協
會等組織，如果提出影響會員市場行為，例如價格的決定，即使不是
強制性，亦有機會違反《競爭法》。而在2012年通過的競爭法中，則
主要禁止三大類反競爭行為，禁止業務實體之間直接或通過行業協會
或貿易協會作出任何具有妨礙、限制或扭曲競爭的目的或效果的協議
及其他經協調做法，濫用市場權勢，以及只適用於電訊行業的反競爭
行為。
13
Reference

Competition Commission http://www.compcomm.hk/en/index2.html
概覽

立法會在2012年6月14日通過《競爭條例》（《條例》）。

《條例》旨在禁止和阻遏各行業的業務實體作出其目的或效果是妨礙、
限制或扭曲在香港的競爭的反競爭行為。《條例》訂有概括條文，禁止
三大類反競爭行為，《條例》稱之為第一行為守則、第二行為守則和合
併守則，三者統稱為「競爭守則」。

第一行為守則禁止業務實體之間訂立或執行其目的或效果是妨礙、限制
或扭曲在香港的競爭的協議、決定或經協調做法。

第二行為守則禁止在市場中具有相當程度市場權勢的業務實體，藉從事
目的或效果是妨礙、限制或扭曲在香港的競爭的行為，而濫用該權勢。
14
Fair Competition Rules
•
First Conduct Rule (Conduct substantially lessening
Competition)
•
Second Conduct Rule (Abuse of Dominant Position)
15
First Conduct Rule
(第一行為守則)

An undertaking (業務實體) must not:
1) Make or give effect to an agreement;
2) Engage in a concerted practice (經協調做法);
or
3) As a member of an association of
undertakings, make or give effect to a
decision of the association,
If the object or effect is to prevent (妨礙),
restrict (限制) or distort (扭曲) competition in
HK
16
First Conduct Rule
(第一行為守則)
 Captures
agreements/conduct and
businesses outside HK if there is an
object/effect in HK
 Object restriction: the type of
agreement is so harmful that it is not
necessary to prove any effect on
competition (e.g. “serious anticompetitive conduct”)
17
First Conduct Rule –
Non-Price Vertical Restraints
Restrictions on distributors
Restrictions on suppliers
Non-price
Vertical
vertical restraints
include

Product

Customers

territories
Distribution
arrangement often
include one or more of these
restraints
These
types of vertical restraints
are generally not per se illegal –
require assessment

High risk where company is
dominant
restraints may sometimes be
imposed on a supplier by a customer

Restraints on selling to other
customers at all

More limited restraints
preventing supply to a customer’s
competitors
Most
likely to raise concerns where

Customer is in a dominant
position

Access to supply of relevant
product is limited
18
First Conduct Rule –
Territorial Restrictions
 Brand
owner wants to appoint
exclusive distributor for
different territories or for
different customers/sales
channels
19
First Conduct Rule – 4 Cardinal Sins –
Serious Anti-Competitive Conducts
嚴重反競爭的行為
Price fixing 操縱價格
Output restriction 限制產量
When competitors agree on pricing
When competitors agree to restrict
rather than competing against each other
the volume or type of particular
Pricing/discounts/promotions
goods/services available (Cartels,
Verbal/written
first hand flats sale?)
Market sharing 編配市場
When competitors agree to divide
or allocate customers, suppliers or
geographic areas among
themselves
Bid rigging 圍標
When competitors agree not to compete
with each other for tenders (so one can
“win” the tender at the lowest price)
Without the knowledge of the person
calling for the bid
20
First Conduct Rule – Pricing
http://www.compcomm.hk/tc/usefulresources_competition_1.html

Price fixing is when competitors agree on pricing rather
than competing against each other. This includes agreeing
to prices, a formula to calculate prices / margin or
elements of a price such as discounts, rebates, promotions
or credit terms.

Price fixing can occur verbally or in writing – agreement
can be by a 'wink and a nod', made over a drink, price
fixing can occur at an association meeting or at a social
occasion.

In a competitive market, each competitor should make
price decisions independently. Anything that removes price
uncertainty between competitors risks being a form of
price fixing which hurts consumers and other businesses.

Price fixing increases prices and reduce quality of the
products sold. Under the Competition Ordinance, it is a
serious anti-competitive conduct.
21
First Conduct Rule - Pricing


Brand owner wants to tell its
distributors/franchisee/retailers that
they should sell at the “recommended
retail price” or include a provision
allowing for termination in the event that
they do not comply
Effect on franchise, direct marketing?,
e.g. 7-11 , Herbxlxfe, NxSkin… etc
22
First Conduct Rule
If conduct is classified as “serious anti-competitive
conduct”:
1. The exclusion from the First Conduct Rule for
agreements of lesser significance does not apply. The
exclusion would otherwise apply to:
 Arrangements between undertakings whose
combined annual worldwide turnover for the
turnover period does not exceed HK$200M
 Decisions of associations of undertakings if the
turnover of the association for the turnover
period does not exceed HK$200M

23
First Conduct Rule
2.
The Commission does not have to issue a
Warning Notice before bringing proceedings in
the Tribunal.

If the Commission believes the First Conduct Rule
has been contravened and the conduct is not serious
anti-competitive conduct, the Commission must
issue a Warning Notice to the undertaking, giving it
an opportunity to alter the conduct within a
specified period.
24
First Conduct Rule
Object restrictions
The
four types of serious anti-competitive conduct
Resale

Price Maintenance (RPM)
Supplier sets fixed or minimum resale price charged by reseller

“You must charge HK$100”

“You must charge at least HK$100”
Information
Group
exchange – future price and quantities
boycotts
Effect restrictions
Does
the conduct in question have an anti-competitive effect?
As a result of the agreement, can the parties profitably increase
price, or reduce output, product quality, product variety or
innovation?
25
First Conduct Rule - RPM
Resale price maintenance (RPM) is
illegal in nearly all countries
 General rule is that resellers must be
free to set their own resale prices
 Recommended resale prices are usually
allowed BUT:
 Must not be binding; and
 No pressure or incentive or “penalty”
on reseller to comply
 Monitoring a distributor’s prices
legitimate: but cannot be used to
implement indirect RPM

26
First Conduct Rule
Example : Fixing resale prices
NailCo,
a manufacturer of nails and screws
sells its products in HK through independent
retail stores
It
requires each of the stores to sell its
products at a price stipulated by NailCo
Reason:
this ensures an orderly market and
avoids customer confusion as a result of
differing prices across HK.
NailCo
claims the arrangement affords
retailers a healthy profit margin
27
First Conduct Rule
Assessment
The
Commission considers this to have the
object of harming competition.
NailCo’s
justifications would be unlikely to
satisfy the Ordinance’s requirements for the
economy efficiency exclusion to apply.
Price
is the key parameter of competition and
price competition is central to the regime
established by the Ordinance.
28
First Conduct Rule
Practical tips on pricing
Remember
the rule covers:

Agreements and discussions

On prices, margins, discounts and rebates
×Discussion
of pricing information with competitors
×Reach
any agreement/informal understanding with competitors on any aspect of
price policies
×Impose
fixed or minimum resale prices
Issue to be aware of:
Procurement
Joint
(joint buying/selling)
venture agreements
29
First Conduct Rule
Example : Information exchange
A
trade association for junk owners collects and
circulates information to its members on their
respective proposed future prices.
This
includes information as to the proposed
prices for specific journeys.
The
information is not made available to the
public and is circulated in advance of a seasonal
price review by the association members.
30
First Conduct Rule
Assessment
The
Commission would consider this
arrangement as either an agreement or
concerted practice with the object of harming
competition.
The
information exchange allows the junk
owners to adjust their future pricing to reflect
the proposed pricing of competitors and thus
reduces price competition in the market.
The
information exchange arrangement is an
indirect form of price fixing.
31
First Conduct Rule
In determining whether there is an
agreement, the Commission will generally
seek to determine whether there is a
“meeting of minds” between the parties
concerned.
 Agreement under the First Conduct Rule may
exist no matter whether there has been a
physical meeting of the parties.
 An agreement may be formed through, for
example, an exchange of letters, emails,
SMS, instant messages or telephone calls.

32
First Conduct Rule


An undertaking may be found to be party to
an agreement or, in the alternative a
concerted practice, if it attended a meeting
at which an anti-competitive agreement is
reached and it failed to sufficiently object
to, and publicly distance itself from, the
agreement or the discussions leading to the
agreement.
This may be the case regardless of whether it
played an active part in the meeting or
intended subsequently to implement the
agreement.
33
First Conduct Rule
A
concerted practice is a form
of cooperation, falling short of
an agreement, where
undertakings knowingly
substitute practical
cooperation for the risks of
competition.
34
First Conduct Rule

The Commission will likely conclude that
there exists a concerted practice with the
object of harming competition where
competitively sensitive information such as
an undertaking’s planned prices or planned
pricing strategy is exchanged between
competitors in circumstances where:
 The information is given with the
expectation or intention that the
recipient will act on the information
when determining its conduct in the
market; and
 The recipient does act or intends to act
on the information.
35
First Conduct Rule
Example for concerted practice
Each
calendar quarter, a number of private language
schools in Hong Kong complete a survey, organised by
one of the schools, which requests the schools to
provide detailed information on their intended fee
increases for the following quarter.
The
results of the survey are then distributed to each
school that participated in the survey before the
schools finalising their respective fee arrangements for
the next quarter.
The
results of the survey show the proposed future
fees for all participating schools by name.
36
First Conduct Rule

Assuming there is no evidence of an agreement, the
Commission would consider the language schools’
behaviour as evidence of a concerted practice.

In a competitive market, each language school would
make its fee decisions independently.

Independence would result in a range of fee levels at
the different schools, and a variety of options for
students in terms of price.

But the concerted practice has the effect of removing
all uncertainty between the schools as to their
respective fee-setting policies. This conduct harms
competition and leads to higher prices.
37
First Conduct Rule
Group Boycott
A
group boycott is a type of secondary boycott in which two or
more competitors in a relevant market refuse to conduct business with a firm
unless the firm agrees to cease doing business with another competitor.
It
is a form of refusal to deal, and can be a method of shutting a competitor
out of a market, or preventing entry of a new firm into a market.
Any
company may, on its own, refuse to do business with another firm, but
an agreement among competitors not to do business with targeted individuals
or businesses may be an illegal boycott, especially if the group of competitors
working together has market power.
E.g.
rumours among Coca Cola, Park’n, 759 Shop
38
First Conduct Rule
Practical tips on information exchange
×Confidential
and commercially sensitive information should not be
revealed to a competitor

Pricing and volume data (future particularly sensitive)

Capacity

Costs

Commercial strategy
You
can gather publicly available data
Certain
types of information considered less sensitive:

Historic, aggregated or anonymized data

Issues of general industry interest

Information on lobbying
39
First Conduct Rule
Practical tips on trade associations
Trade
associations should have a well-defined items in the agenda
Consider
Make
the agenda before attending
sure minutes are kept
Do
not volunteer any information regarding your likely future conduct
to a competitor
If
a competitor reveals competitively sensitive information to you:

Stop the meeting and note your concerns

If the conversation continues, leave and ask that your absence be noted

Inform the company secretary/legal team of your concerns
40
First Conduct Rule
EU example: Bananas
UK example: RBS/Barclays
Bilateral
RBS
weekly calls between
importers on current market
conditions
Forward
looking information
including quotation prices, weather
conditions, and stocks
Dole
- €45.6M fine; Del Monte €14.6M fine
unilaterally disclosed
generic/specific future pricing
information (relating to loan pricing)
to Barclays employees over 6 month
period
Barclays
‘blew the whistle’
£28.59M
fine for RBS
Appeal
rejected (arguing this was
merely market gossip, not part of
broader price-fixing cartel and not
serious restriction of competition)
41
Second Conduct Rule
(第二行為守則)
An undertaking (業務實體) that:
Has
a substantial degree of market power (具有相當程度
市場權勢)
In
a market
Must not
Abuse
By
(濫用) that power
engaging in conduct
That has as its object or effect the prevention (妨礙),
restriction (限制) or distortion (扭曲) of competition in HK.
Market
definition: each market has a product and
geographic dimension
42
Second Conduct Rule Assessment of SMP
A substantial degree of market power (SMP) arises
where an undertaking does not face sufficiently
effective competitive constraints in the relevant
market.
 Substantial market power may also be the ability
profitably to charge prices above competitive
levels, or to restrict output or quality below
competitive levels, for a sustained period of time
(2 years).
 However, the relevant period may be shorter or
longer depending on the facts, in particular with
regard to the product and the circumstances of
the market in question.

43
Second Conduct Rule Assessment of SMP
 The
definition of a substantial
degree of market power does not
exclude the possibility of more than
one undertaking having a substantial
degree of market power in a
relevant market, particularly if the
market is highly concentrated with
only a few large market participants.
44
Second Conduct Rule Assessment of SMP
An undertaking in a competitive market
may be able temporarily to raise its price
above the competitive level, but it will be
unable to sustain such a price increase
because customers will switch to cheaper
suppliers or additional suppliers will enter
the market.
 If an undertaking can profitably charge
prices above competitive levels over a
sustained period (i.e. 2 years), it can be
considered to have a substantial degree of
market power.

45
Second Conduct Rule –
Assessment of SMP
Market power is a matter of degree.
 The degree of market power possessed by an
undertaking will be assessed based on the
circumstances of the case.
 An undertaking does not need to be a monopolist (壟
斷者) to have a substantial degree of market power.
 When assessing whether an undertaking has a
substantial degree of market power, the Commission
will consider the extent to which that undertaking
faces constraints on its ability profitably to sustain
prices above competitive levels.

46
Second Conduct Rule –
Assessment of SMP

The Ordinance considers the following nonexhaustive list in determining whether an
undertaking has a substantial degree of market
power:
 The market share of the undertaking;
 The undertaking’s power to make pricing
and other decisions;
 Any barriers to entry to competitors into the
relevant market; and
 Any other relevant matters.
47
Second Conduct Rule –
Market Share

Turnover or sales value data.

Sales volume data.

Capacity. Market shares may be determined by
measuring an undertaking’s capacity to supply
the relevant market.

Other indicators. Market share might also be
calculated by reference to, for example,
product reserves held, customer base or share of
new customers.
48
Second Conduct Rule –
Potential Entry or Expansion

Regulatory and legal barriers (such as
licensing requirements);

Structural barriers (such as significant
economies of scale and/or scope, or
network effects); and

Strategic barriers intentionally created
or enhanced by incumbent undertakings
in the market.
49
Second Conduct Rule

Competition rules apply to unilateral conduct by an undertaking
with substantial market power (SMP)

No need for agreement with another party

Companies in a strong market position may be regarded as having
substantial market power if they have the ability profitably:

To charge prices above competitive levels; or

To restrict output or quality below competitive levels for a
sustained period of time (normally 2 years)

In EU, a company is unlikely to have SMP if their market share is
below 40% (no indicative thresholds in HK)

Have SMP is not itself unlawful but imposes special
responsibilities
50
Second Conduct Rule
Exploitative abuses
Cause
direct harm to the consumers/customers
For
example, excessive pricing, i.e. charging
customers a higher then normal price for a product or
service which bears little or no relation to the economic
value of the product/service provided
Exclusionary abuses
Seen
as most harmful
This
is conduct that aims at excluding actual
competitors from expanding or deterring would-be
entrants (e.g. anti-dumping)
51
Second Conduct Rule
Examples of exclusionary abuses
Predatory pricing 掠奪性訂價
Tying and bundling
Margin squeeze
Refusal to supply (arises only in
limited circumstances)
Exclusive dealing
52
Predatory Pricing 掠奪性訂價
 Pricing
strategy where a product or
service is set at a very low price,
intending to drive competitors out
of the market, or create barriers to
entry for potential new competitors,
e.g. free to use IE10.0, free
shipping for amazon.com
 The Commission will consider
whether there is pricing below
average variable cost and pricing
below average total cost
53
Tying and Bundling
Tying occurs when a supplier makes
the sale of one product (the tying
product) conditional upon the
purchase of another (the tied product)
from the supplier (i.e. the tying
product is not sold separately)
 Bundling refers to situations where a
package of two or more products is
offered at a discount (Each one sold
at $10; while a package of 3 sold at
$21)

54
Margin Squeeze

In order for a margin squeeze case to arise, three
elements must be present

First, an upstream firm must produce an essential or
bottleneck input with no substitutes and no scope for
other firms to provide the essential input themselves

Second, that firm must sell that essential input to one
or more downstream firms which seek to use that
input in the provision of some downstream product or
service

Third, the upstream firm must itself use its own input
to compete against those downstream firms in the
market for that downstream product or service (with
very thin margin)
55
Refusal to Supply

As a general matter, an undertaking, whether or
not it has a substantial degree of market power, is
free to decide with whom it will or will not do
business

The term “refusal to deal” describes a situation
where an undertaking with a substantial degree
of market power refuses to supply an input to
another undertaking, or is willing to supply that
input only on objectively unreasonable terms –
known as a constructive refusal to deal

Constructive refusal could, for example, consist of
unduly delaying or otherwise degrading the supply
of the relevant input, or imposing a price for the
input that is excessive
56
Refusal to Supply

In assessing whether a refusal to deal is a
contravention of the Second Conduct Rule, the
Commission may consider as appropriate:
 Whether or not it is technically and
economically feasible for the undertaking with
a substantial degree of market power to
provide the input in question
 The past history of dealing between the
undertakings (the termination of an existing
supply arrangement might more readily be
characterised as abusive); and/or
 The terms and conditions at which the products
in question are generally supplied or are
supplied in other contexts
57
Exclusive Dealing

Exclusive dealing is commonly used in commercial
arrangements and in most cases will not harm
competition

An undertaking with substantial market power may,
however, seek to foreclose competitors by
preventing them from selling to customers though
exclusive dealing arrangements

Exclusive dealing in this context includes
arrangements requiring a customer to purchase,
directly or indirectly, all or a substantial
proportion of its requirements of a particular
product from a particular undertaking

This may take the form of either an exclusive
purchasing obligation or a conditional rebate
58
Exclusive Purchasing Obligation
 An
exclusive purchasing obligation
requires a customer to purchase its
requirements of a particular product
exclusively or to a large extent only
from the undertaking with a substantial
degree of market power
 Other obligations, such as stocking
requirements, may have the same
effect as exclusive purchasing even
though they do not, strictly speaking,
entail exclusivity
59
Conditional Rebates

Conditional rebates, in particular loyalty or
fidelity rebates, involve the grant of a rebate
to customers as a reward for particular
purchasing behaviour

Typically, a loyalty rebate scheme involves
offering a financial incentive to encourage the
buyer to commit to purchasing more from the
supplier

As a general matter, rebates of this kind are
normal commercial arrangements intended to
stimulate demand to the benefit of consumers
60
Conditional Rebates

However, rebates which are granted by an undertaking with a
substantial degree of market power can have foreclosure effects
similar in nature to those caused by exclusive purchasing
obligations. Usually a loyalty rebate involves the customer being
awarded the rebate if the customer’s purchases over a defined
period exceed a defined threshold

Loyalty rebates may be granted either on all purchases from the
undertaking with a substantial degree of market power
(retroactive rebates) or only on purchases above the relevant
threshold (incremental rebates)

Retroactive rebates have the potential to foreclose the market
significantly since buyers switching portions of their demand to an
alternative supplier would lose the rebate in respect of all
products purchased and not only the incremental amount for which
the buyer is considering alternative suppliers
61
Exclusive Purchasing Obligation
Example
A
large and popular rice noodle producer, LargeNoodle
Co, offers significant rebates to local grocery stores in
Hong Kong that agree to purchase a certain volume of
rice noodles from LargeNoodle Co. LargeNoodle Co sets
volume targets for each customer individually and these
correspond roughly to the volume of noodles which the
customer usually purchases. The targets are calculated
over a period of one year and increase in size, year on
year, for a period of 5 years. No rebates are received
unless the grocery store hits the volume target, and
after that point, the rebate is received in respect of all
volumes purchased from LargeNoodle Co that year
62
Exclusive Purchasing Obligation



The effect of the rebate scheme is that
customers in practice purchase all of their rice
noodle requirements from LargeNoodle Co, as to
do otherwise would lead to them losing the
entire rebate for a particular year
Other rice noodle producers are effectively
“locked out” from supplying a large portion of
the grocery market and can no longer compete
effectively with LargeNoodle Co.
If LargeNoodle Co has a substantial degree of
market power, this rebate scheme may amount
to an abuse under the Second Conduct Rule
63