7.3 Bartering or trading goods as a condition for a discount or other favourable terms?

In my view, not all situations where goods (or services) are traded for other goods (or services) with an additional payment in cash, qualify as barter transactions. Where a person trades in her old car when buying a new one, the old car will have a value and the value of the supply of the ‘old’ car to the car business will be offset against the sales price of the new car. This is a barter transaction.

However, if a shoe seller grants its customers a 10% discount if they hand in a pair of old shoes that will go to charity, irrespective of the age of those shoes, this is, in my view, not a barter transaction. The aim of the shoe seller is not (primarily) to obtain those old shoes, but to come up with an incentive for selling more new shoes. The old shoes as such will not represent a specific value to him. The same principle applies to a cookware manufacturer that offers 30% discount on all its pans sold in physical shops of participating retailers, only if the purchaser hands in an(y) old pan at that retailer. The old pan does not represent a proper value or consideration for the new pan either for the retailer (actually making the discounted sale) or for the pan manufacturer (who is likely to be at least partially funding the discount). Again, even though the discount is made conditional to the handing in of the old pan, the scheme is intended to get people to buy (and possibly switch to) pans of the brand of the manufacturer, purchased at the retailer. This way of qualifying these transactions is based on the economic and commercial reality of the transaction (see Chapter 2).

If the retailer does not receive cash back from the pan manufacturer for collecting the old pans and selling the pans at the (conditional) discounted value, it can be argued that the retailer agrees to do this because participating in the scheme will get potential customers to his stores, which creates the opportunity to sell other goods (and services) besides the pan. If this is specifically agreed, and if this trade can be valued in money, it should qualify as a barter transaction.