Tertiary education program

Conditional acquisition

A business that attaches either of the following conditions to the acquisition of goods or services, or to the offer to acquire at a particular price, has engaged in conduct caught by the definition of exclusive dealing:

  • a condition that prevents the supplier from supplying goods or services to certain people or classes of people
  • a condition that prevents the supplier from supplying goods or services in particular places.

A business also engages in exclusive dealing if it refuses to acquire goods or services, or refuses to acquire goods or services at a particular price, because the potential supplier has not accepted one of the conditions set out above.

The competition test

Whether the imposition of such conditions, or the refusal to acquire, will have an anti-competitive effect depends on a range of factors. Some important factors are:

  • the number and range of alternative customers
  • the degree of market power held by the customer
  • the number and range of alternative sources of supply of similar products.

As with conditional supply, the imposition of such conditions to the acquisition of goods and services may also breach the prohibition against the misuse of market power (for further information, see Module 3).

Example

Paula runs a small niche electronics retail store in South Australia. Paula has built her business by providing high levels of customer service and advice to her customers. Paula found that many customers would come to her store for advice and then purchase products from her competitors at lower prices. Paula now only deals with suppliers who agree not to supply their electrical products to other retailers in South Australia.

Paula's conduct amounts to exclusive dealing as she is acquiring products on the condition the suppliers do not deal with her competitors. However, it is unlikely that her conduct is illegal as it won't substantially lessen competition. There are many other suppliers of electrical products that her competitors can source supply from.