Exclusive dealing

In competition law, exclusive dealing refers to an arrangement whereby a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies in a given area. When the sales outlets are owned by the supplier, exclusive dealing is because of vertical integration, where the outlets are independent exclusive dealing is illegal (in the US) due to the Restrictive Trade Practices Act, however, if it is registered and approved it is allowed.

Exclusive dealing can be a barrier to entry.

Third line forcing involves the supply of goods or services on condition that the purchaser acquires goods or services from a particular third party, or a refusal to supply because the purchaser will not agree to that condition.[1]

Examples

• Tied petrol stations that only deal with one petroleum supplier or seller.
• Public houses tied to breweries.
• Franchisees forced to buy product from a host company instead of a local provider.
• seller agreeing to sell only to certain buyer
• market segmentation approach

In British politics

In British politics, 'exclusive dealing' was, before the introduction of the secret ballot by the Ballot Act 1872, a means by which those without the vote could exert pressure on shopkeepers etc. – a policy that any shopkeeper voting against the popular candidate would lose the custom of non-voters of an opposite persuasion. The practice was much the same as a modern boycott; it was effective for the Radicals in some borough constituencies,[2] and they were therefore wary of any offer or attempt to introduce the secret ballot ahead of a substantial extension of the franchise.

In European Union Law

Exclusive dealing agreements under the Article 102 of the Treaty on the Functioning of the European Union are the Vertical agreements that bound the customer to purchase all or most of a specific type of goods or services only from the dominant supplier. The term of exclusive dealing agreement is applicable to an exclusive supply obligation, where there is a restriction on the supplier to supply to anyone other than the specific down-stream customer and vice versa. The Commission stated in Guidelines on Vertical Restraints [3] that agreements binding to purchase goods of 80% or more, will be caught in line with the meaning of Exclusive dealings and may be determined abusive, see Case 85/76[4]. An exclusive purchase agreement is not per se illegal under Article 102 (see Case C-413/14) [5] and can only be deemed abusive if it can be capable having a foreclosure effect on as-efficient competitors and has no objective justification, see [6]. Hence, a defence that the customer willingly entered into agreement will not suffice; the question is whether the agreement might horizontally foreclose competitors as efficient (or more) that the dominant company in the appropriate market, see Case 85/76[7] and Case C-393/92 [8].

See also

• Anti-competitive practices
• Competition policy
• Fair Trading Act
• Vertical restraints

Notes and references

1. Australian Competition & Consumer Commission: Exclusive dealing
2. see p17 of Bickerstaffe, Derek (1964). "Politic and party organisation in Oldham" (PDF). Durham E-Theses Online. Durham University. Retrieved 25 February 2016. and in particular the 1832 placard quoted
3. European Commission (May 2010), Guidelines on vertical restraints, p. 9 para.29
4. Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461
5. Case C-413/14-P Intel Corp v Commission EU:C:2017:632
6. Case T-155/06 Tomra Systems ASA v Commission [2012]
7. Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, para.120
8. Case C-393/92 Municipality of Almelo and others v NV Energiebedrijf Ijsselmij EU:C:1994:171