fidelity bonus

fidelity bonus

a business practice whereby a supplier rewards distributors/ retailers with preferential supply conditions (prompt delivery times, access to supplies in times of shortage, back-up services) in return for their loyal custom. The operation of fidelity bonuses, by encouraging dealers/retailers to place the whole or a substantial part of their orders with the one supplier, may help the supplier increase his sales and protect market share. However, if undertaken by a DOMINANT FIRM, the practice may serve to limit competition in a market by depriving rival suppliers of distribution outlets. See OFFICE OF FAIR TRADING.
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