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Exclusive dealing

In economics and law, exclusive dealing arises when a supplier entails the buyer by placing limitations on the rights of the buyer to choose what, who and where they deal. This is against the law in most countries which include the USA, Australia and Europe when it has a significant impact of substantially lessening the competition in an industry. 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. While primarily those agreements imposed by sellers are concerned with the comprehensive literature on exclusive dealing, some exclusive dealing arrangements are imposed by buyers instead of sellers.

Exclusive dealing can be considered as a barrier to entry especially in market that operate under imperfect competition, which is either Monopoly or Oligopoly where there is price and product differentiation as well as an imbalance of market power between incumbent, entrants and competitors due to the existing of vertical integrations within the market, leading to market inefficiencies.

Alternative methods of exclusive dealing are prohibited by Section 47 of the CCA. Broadly, anti-competitive vertical transactions are  prohibited

All exclusive trade is recorded only if it can be demonstrated, to have the impact of substantially lessening competition (s 47(10)).

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, and they were therefore wary of any offer or attempt to introduce the secret ballot ahead of a substantial extension of the franchise.

Exclusive dealing agreements under the Article 102 of the Treaty on the Functioning of the European Union are the Vertical agreements that bind the customer to purchase all or most of a specific type of goods or services only from the dominant supplier. The term exclusive dealing agreement refers to an arrangement under which the supplier is restricted in their ability to supply anyone other than the specific down-stream customer and vice versa. The Commission stated in Guidelines on Vertical Restraints 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. An exclusive purchase agreement is not per se illegal under Article 102 (see Case C-413/14) 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. 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 and Case C-393/92.

In economics and law, there are many forms of exclusive dealing, however the three most commonly known are:

De Facto, also known as partial exclusive dealing, occurs in the presence of:

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