Exclusive dealing

Overview

Section 47 of the CCA prohibits various forms of exclusive dealing. Broadly, it captures two types of anti-competitive vertical transactions:

(1) the conditional supply (or acquisition) of goods or services (conditions may relate to the ability to re-supply, exclusivity, limits on ability to acquire from competitors etc)

(2) refusing to supply for specified reasons (eg, because purchaser refuses to agree to a conditional supply).

Exclusive dealing is captured only if it can be demonstrated that it substantially lessens competition (s 47(10)). Note that prior to November 2017 third line forcing was prohibited per se.

Future reform? Given the potential overlap between the new section 46 (introducing an effects test for misuse of market power) and anti-competitive agreements generally, the Harper Panel (2014) recommended repealing s 47 altogether; although this recommendation was not rejected (the Government indicated it would consider it after determining whether to modify s 46) there has been no modification or repeal of s 47 as part of the Harper legislative reforms, other than the removal of the per se ban on third line forcing.

Specific conduct captured as exclusive dealing includes:

(1) Supplying on condition as to acquisition or re-supply (s 47(2)). This captures various forms of full line forcing. Thus, for example, it is exclusive dealing to supply goods or services on the condition that the recipient will not (or will not except to a limited extent) acquire goods or services directly or indirectly from a competitor. It also captures supplying on conditions as to re-supply - including customer and territorial restrictions (eg, supplying on condition that the acquirer will not re-supply to particular person or in particular places)

(2) Refusing to deal because a customer will not agree to the kind of restriction mentioned above: s 47(3).

(3) Acquisitions restrictions (same as above but in reverse): ss 47(4) and 47(5).

(4) Third line forcing (sections 47(6) and 47(7)), capturing the supply of goods or services on condition that the customer acquire other goods or services from a third party (or refusing to supply because the customer will not agree to such an acquisition).

(5) Exclusive dealing in relation to leases and licences: ss 47(8) and 47(9).