![]() ![]() Sometimes exclusive dealing can both provide benefits and at the same time impede the ability of a manufacturer's rivals to compete effectively. Higher entry barriers make it easier for existing firms to exploit whatever power they have to raise prices above the competitive level because they have less to fear from potential new entrants. To put the matter more technically, the arrangements may "foreclose" outlets or supplies to potential entrants, thereby raising entry barriers. As then-Judge Breyer explained, exclusive dealing can harm consumers by thwarting entry or inhibiting the growth of existing rivals:Įxclusive dealing arrangements may sometimes be found unreasonable under the antitrust laws because they may place enough outlets, or sources of supply, in the hands of a single firm (or small group of firms) to make it difficult for new, potentially competing firms to penetrate the market. For example, exclusive dealing may allow one manufacturer, in effect, to monopolize efficient distribution services and thereby prevent its rivals from competing effectively. Other benefits can occur as well, as when an exclusivity arrangement assures a customer of a steady stream of a necessary input.īut exclusive dealing also can be anticompetitive in some circumstances. ![]() For example, a manufacturer may be unwilling to train its distributors optimally if distributors can take that training and use it to sell products of the manufacturer's rivals. Exclusive dealing is frequently procom-petitive, as when it enables manufacturers and retailers to overcome free-rider issues misaligning the incentives for these vertically-related firms to satisfy the demands of consumers most efficiently. Firms may agree to deal exclusively in contracts prohibiting one party from dealing with others, (5) or the exclusive-dealing arrangement can take other forms, as when a seller enacts policies effectively requiring customers to deal exclusively with it. (4) But it also may involve a seller dealing exclusively with a single buyer.Įxclusive dealing also occurs between sellers and consumers, as when a consumer agrees to purchase all its requirements of a particular product from a single supplier. (3) And many franchise outlets agree to buy certain products exclusively from a franchisor. For example, a manufacturer may agree to deal with a distributor only if the distributor agrees not to carry the products of the manufacturer's competitors. (2) It often requires a buyer to deal exclusively with a seller. (1)Įxclusive dealing is common and can take many forms. IntroductionĮxclusive dealing describes an arrangement whereby one party's willingness to deal with another is contingent upon that other party (1) dealing with it exclusively or (2) purchasing a large share of its requirements from it. Return to Table of Contents Chapter 8 - EXCLUSIVE DEALING I. Update: Justice Department Withdraws Report on Antitrust Monopoly Law () ![]()
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