In Economics and Law, exclusive dealing arises when a supplier entails the buyer by placing limitations on the rights of the buyer to choose what, who and where they deal.[1] This is against the law in most countries which include the USA, Australia and Europe when it has a significant impact of substantially lessening the competition in an industry.[2] When the sales outlets are owned by the supplier, exclusive dealing is because of vertical integration,[3] where the outlets are independent exclusive dealing is illegal (in the US)[4] due to the Restrictive Trade Practices Act, however, if it is registered and approved it is allowed. While primarily those agreements imposed by sellers are concerned with the comprehensive literature on exclusive dealing, some exclusive dealing arrangements are imposed by buyers instead of sellers.[5]
Exclusive dealing can be considered as a barrier to entry[6] especially in market that operate under imperfect competition, which is either Monopoly or Oligopoly where there is price and product differentiation as well as an imbalance of market power between incumbent, entrants and competitors due to the existing of vertical integrations within the market, leading to market inefficiencies.
^Sass, Tim R. (April 2005). "The competitive effects of exclusive dealing: Evidence from the U.S. beer industry". International Journal of Industrial Organization. 23 (3–4): 203–225. doi:10.1016/j.ijindorg.2005.01.006.
