Exclusive dealing

  • Exclusive dealing happens when one business trading with another puts conditions on the other’s freedom to choose what it buys or sells, who it does business with, or where it trades.
  • Exclusive dealing is common in business arrangements.
  • Exclusive dealing is only illegal when it substantially lessens competition.

What the ACCC does

  • We take reports of potentially anti-competitive behaviour, including exclusive dealing.
  • We investigate exclusive dealing arrangements that are potentially anti-competitive.
  • We enforce the law on exclusive dealing and can take court action against businesses that break the law.

What the ACCC can't do

  • We don’t intervene directly in disputes between businesses.

About exclusive dealing

Exclusive dealing happens when one business trading with another business puts conditions on the other’s freedom to choose:

  • who it does business with
  • what business it does
  • where it does business.

For example, a supplier refuses to supply or refuses to give a particular price or discount, unless the purchaser agrees:

  • to buy products or services from an unrelated business, known as third line forcing
  • to buy all its range of products, even if the customer only wants to buy one, known as full line forcing
  • not to buy or resell products or services from the supplier’s competitors
  • not to resell the supplier’s products or services in certain areas, or to certain customers.

When a purchaser places restrictions on a supplier, this is also exclusive dealing.

For example, a purchaser refuses to buy from a supplier unless the supplier agrees not to supply the purchaser’s competitors.

When exclusive dealing is allowed

Exclusive dealing is common in business arrangements. Often, it is legal because it doesn't substantially lessen competition.

Example 1 of exclusive dealing that isn't illegal

Scenario

An independent electronics store decides it will only buy from suppliers that agree not to supply its competitors. Because there are many other retailers and suppliers in the market, competition isn’t affected.

Relevant factors

While this is exclusive dealing, it isn’t illegal because it won't substantially lessen competition. There are many other retailers and suppliers in the market.

Example 2 of exclusive dealing that isn't illegal

Scenario

An office supplies retailer usually buys pencils from Business A and Business B. They are 2 of many available pencil suppliers. Business A tells the retailer it will only supply pencils if the retailer stops buying from Business B. The retailer stops buying pencils from Business B.

Relevant factors

Business A’s behaviour is exclusive dealing. However, it isn’t illegal, because it won’t substantially lessen competition. There are many other pencil suppliers in the market.

When exclusive dealing is illegal

Exclusive dealing is illegal when it has the purpose, effect or likely effect of substantially lessening competition. This is more likely when:

  • the product or service can’t be bought elsewhere
  • the business setting the conditions is powerful.

For example, a business tries to stop another business from competing by telling its supplier not to sell a competitor something essential that the competitor can’t buy elsewhere. This can have both the purpose and effect of substantially lessening competition.

Seeking an exemption

A business planning an exclusive dealing arrangement that risks breaking competition law can seek an exemption by lodging a notification with the ACCC.

Notification is an exemption process and gives protection from legal action.

We assess whether the conduct is likely to substantially lessen competition and, if so, whether it is still in the public interest.

See also

Exclusive dealing notification guidelines

Exemptions

Competition and anti-competitive behaviour

Misuse of market power

Small business education program

Small business and the Competition and Consumer Act

Competition and Consumer Act 2010

  • Section 47 Exclusive dealing.

Report exclusive dealing

Problem with a supplier or another business engaging in exclusive dealing?

Make a report to the ACCC