Exclusive dealing refers to when a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies in a given area. When the sales outlets are owned by the supplier, exclusive dealing is because of vertical integration

Vertical integration

In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...

, where the outlets are independent exclusive dealing is illegal (in the US) due to the Restrictive Trade Practices Act, however, if it is registered and approved it is allowed.

Exclusive dealing can be a barrier to entry

Barriers to entry

In theories of competition in economics, barriers to entry are obstacles that make it difficult to enter a given market. The term can refer to hindrances a firm faces in trying to enter a market or industry - such as government regulation, or a large, established firm taking advantage of economies...

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One form of exclusive dealing – known as third line forcing – is prohibited per se, meaning that it is prohibited no matter what its effect on competition.

Third line forcing involves the supply of goods or services on condition that the purchaser acquires goods or services from a particular third party, or a refusal to supply because the purchaser will not agree to that condition.

Examples of exclusive dealing

• Tied petrol stations that only deal with one petroleum supplier.
• Public houses tied to breweries.
• Franchisees forced to buy product from a host company instead of a local provider.

See also

• Anti-competitive practices
  Anti-competitive practices
  Anti-competitive practices are business or government practices that prevent or reduce competition in a market .- Anti-competitive practices :These can include:...
  
  
• Competition policy
• Fair Trading Act
• Vertical restraints
  Vertical restraints
  Vertical restraints are competition restrictions in agreements between firms or individuals at different levels of the production and distribution process. Vertical restraints are to be distinguished from so-called “horizontal restraints,” which are found in agreements between horizontal competitors...