exclusive dealing


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exclusive dealing

a business practice whereby a supplier contracts distributors/ retailers to sell his products on an exclusive basis (i.e. to refrain from handling the products of rival suppliers). Retailers are rewarded for sole representation in a variety of ways including preferential discounts, back-up services and loans. The practice of exclusive dealing may help the supplier boost his sales and protect market share because distributors have an undivided commitment to the product. However, if undertaken by a DOMINANT FIRM, the practice may serve to limit competition in a market by depriving rival suppliers of distribution outlets. See ANTICOMPETITIVE PRACTICE, COMPETITION ACT, 1980, OFFICE OF FAIR TRADING.

exclusive dealing

a type of ANTICOMPETITIVE PRACTICE/RESTRICTIVE TRADE PRACTICE whereby a supplier contracts distributors to deal only in his products to the exclusion of competitors’ products. Exclusive dealing may be beneficial in some cases by allowing distribution costs to be lowered but, if exclusive dealing is pursued by several large firms in a market, the access of smaller suppliers and potential entrants to established distributive outlets may be severely restricted. Under the COMPETITION ACT 1980, exclusive dealing can be investigated by the OFFICE OF FAIR TRADING and (if necessary) by the COMPETITION COMMISSION, and prohibited if found to unduly restrict competition.