Exclusive dealing

What is exclusive dealing?

Exclusive dealing occurs where a dominant undertaking requires a retailer, wholesaler, or other customer to purchase its products exclusively, or to a large extent only from it, limiting or preventing that customer from dealing with competing suppliers. In certain circumstances, this may amount to an abuse of a dominant position contrary to section 5 of the Competition Act 2002 (as amended) and Article 102 TFEU.

Exclusive dealing may be abusive where a dominant undertaking seeks to foreclose its competitors by restricting their ability to sell to customers.

Exclusive dealing can take several forms. This includes:

• explicit exclusivity clauses that require a customer to purchase exclusively or to a large extent only from the dominant undertaking;
• stocking requirements that prevent a customer from stocking or selling competing products; and
• conditional rebates or incentives that reward a customer for purchasing all or most of its requirements from the dominant undertaking.

Conditional rebates or other incentives may amount to exclusive dealing where they effectively reward customers for obtaining all or most of their requirements from the dominant undertaking and make switching to competitors less attractive.

How is exclusive dealing assessed?

In assessing whether exclusive dealing amounts to an abuse of dominance, the following factors are particularly relevant:

• Whether the arrangement imposes exclusive or near-exclusive dealing obligations, or produces equivalent effects through incentives or other obligations;
• The capacity of the arrangement to foreclose actual or potential competitors;
• The duration of the arrangement and the extent to which customers can realistically switch suppliers;
• The coverage of the arrangements, including whether they affect a significant share of customers or demand; and
• In some cases, whether an equally efficient competitor could realistically compete for customers despite the exclusive arrangements, taking account of the market context and structure.

Effects‑based assessment and justifications

The existence of exclusive purchasing arrangements does not, in itself, breach competition law, particularly where the undertaking is not dominant or where competition in the market remains effective.

The assessment of exclusive dealing under Irish and EU competition law is effects-based. The mere existence of an exclusive dealing arrangement does not, in itself, constitute a breach of competition law.

In practice, the combined effect of the duration of exclusivity and the proportion of demand it covers is particularly important in determining whether competitors may be foreclosed.

A dominant undertaking may be able to demonstrate that exclusive dealing gives rise to objective justifications or efficiency benefits, provided that:

• such benefits outweigh any anti-competitive effects; and
• the conduct is necessary and proportionate to achieve those efficiencies.

Where exclusive dealing leads to the weakening or elimination of competitive pressure, consumers may ultimately be harmed through higher prices, reduced choice, or lower quality goods and services. Competition law intervention seeks to prevent dominant undertakings from using exclusive dealing as a means to shield themselves from competition.

If you believe you have evidence of an undertaking engaging in abusive exclusive dealing, you can contact the CCPC.