Exclusive dealing is where a business imposes conditions on another business it deals with (such as their supplier or purchaser) that restricts their ability to deal with others.
For example, a business may supply or offer to supply you with goods or services on the condition that you:
- don't buy goods or services from their competitors
- don't supply goods or services to certain people or businesses, such as their competitors
- must buy goods or services from an unrelated business
- don't supply goods or services in certain areas.
Exclusive dealing can also arise where a business offers incentives, such as discounts.
Whether exclusive dealing is likely to substantially lessen competition will depend on a range of factors, including the number of alternative sources for those goods or services.
Substantial lessening of competition: Baxter Healthcare (Baxter) was the only Australian manufacturer of sterile fluids and faced little competition from importers for that product. Baxter also manufactured dialysis fluids, but there was a lot of competition in that market with several other suppliers in Australia.
Baxter made a conditional offer to hospitals, offering a large discount on sterile fluids to hospitals if they agreed to also buy most of their dialysis fluids from Baxter. This offer was found to be exclusive dealing that was likely to substantially lessen competition in the dialysis fluids market as it made it unlikely that hospitals would deal with other suppliers of these fluids (ACCC v Baxter Healthcare Pty Ltd).
Little impact on competition: Sunita runs a small office supplies wholesale business. Her business faces intense competition from many similar wholesalers and large retailers. Sunita offers customers that agree to acquire all of their office supplies from her business a 20% discount. Sunita's conduct isn't illegal because it isn’t likely to substantially lessen competition in the wholesale office supplies market.
For more information, visit Exclusive dealing