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5. Exclusive dealing

What is exclusive dealing?

‘Exclusive dealing’ includes exclusive purchasing obligations, which refers to where an undertaking requires its customers to purchase all or a substantial portion of its requirements for a particular product from the undertaking. It may also take the form of a conditional or otherwise loyalty-inducing rebate. Where an exclusive purchasing obligation is imposed by an undertaking with substantial market power, this may prevent other competitors from selling their products to those customers, and potentially foreclose such competitors.

 

Exclusive dealing also includes exclusive supply obligations or incentive arrangements with a similar effect. Where an undertaking with substantial market power uses such arrangements to foreclose competitors by preventing them from accessing particular inputs, this may raise competition concerns if the exclusive supply locks up most of the efficient input suppliers in the market, and the competitors of that undertaking would be unable to secure the inputs from alternative suppliers.

 

[Source: Commission’s Guideline on the Second Conduct Rule Paras 5.24-5.25 & 5.27]

 

When does exclusive dealing raise competition concerns?

Exclusive dealing is commonly used in commercial arrangements and in most cases will not harm competition. Competition concerns may only arise where:

 

  1. the undertaking with substantial market power has imposed exclusive purchasing obligations on many customers.
  2. it is likely that consumers as a whole will not derive a benefit from such exclusive dealing; and
  3. the relevant exclusive dealing obligations, as a whole, prevent the entry or expansion of its competitors because of, for example, the exclusive purchasing locking up a significant part of the market and foreclosing its competitors.

[Source: Commission’s Guideline on the Second Conduct Rule Para 5.28]

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