Exclusive dealing arrangement

Definition

Exclusive dealing arrangements are essentially requirements contracts in which a seller agrees to sell all or a substantial portion of its products or services to a particular buyer, or when a buyer similarly agrees to purchase all or a portion of its requirements of a product or service from a particular seller. 

Overview

Exclusive dealing is not per se or presumptively illegal under either the Sherman Act, 15 U.S.C. §§ 1-7, or the Clayton Act, 15 U.S.C. §§ 12-27.  Antitrust concerns related to exclusive dealing arrangements are based on the possibility that performance of the contract will foreclose competition in a substantial share of the line of commerce affected. 

To determine whether a particular exclusive arrangement operates as an illegal restraint on trade, courts apply the rule of reason articulated by Justice Brandeis in Board of Trade of City of Chicago v. U.S., 246 U.S. 231 (1918).  "The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.  to determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable.  The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts."  See Id.

See Antitrust Law for more information.

 

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