Back-End Discount

A discount is a reduction in the price of goods or services from the usual price. Typically, discounts are negotiated at the time of ordering, or at least prior to the receipt of the goods or service.  ‘Back-end discount’ is sometimes used to refer to an additional discount demanded by a purchaser of goods or services after delivery and indeed resale or consumption, but before payment is rendered (under typical 30-60-90 day credit terms), often as a condition of on-time payment (or further orders or business.) Although the practice is considered grossly unethical, it has allegedly been practiced by major retailers in a number of jurisdictions, including notably supermarket chains in the United Kingdom. The practice is difficult to implement in many other jurisdictions which have very strong mandatory interest provisions for late payments, which may penalise even seeking or suggesting a back-end discount. The seeking of back-end discounts by a dominant purchaser, i.e., a monopsonist or oligopolist is potentially an abuse of a dominant position and a breach of competition law.

A pre-agreed early or prompt-payment discount, or rebate for achieving certain sales volumes is not usually considered a back-end discount, provided it is negotiated or proposed at the time of ordering or during price negotiation.