Exclusive dealing

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Exclusive dealing refers to when 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.

One form of exclusive dealing – known as third line forcing – is prohibited per se, meaning that it is prohibited no matter what its effect on competition.

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


Examples of exclusive dealing

  • Tied petrol stations that only deal with one petroleum supplier.
  • Public houses tied to breweries.
  • Franchisees forced to buy product from a host company instead of a local provider.



References:

1.http://en.wikipedia.org/wiki/Exclusive_dealing


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