What Do You Mean By Exclusive Supply Agreement

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The main anti-competitive concern is that such agreements could eliminate the market to such an extent that they could compete with competition and affect competition. Such a foreclosure could impede the efficiency, entry, existence or scalability of competing competitors, which could increase the power of the foreclosure company in an anti-competitive manner[xvii]. In most industries, there are economies of scale so that companies can reduce their costs, which is called the minimum efficiency scale[xviii]. Similarly, foreclosure may deprive their rivals of profitability if, without foreclosure, a competing expansion would have allowed them to offer a variety of products that can be manufactured or sold together more efficiently than separately. Even if competitors are able to achieve their minimum scale and volume of production, foreclosure that excludes competitors from suppliers[xix] or the most efficient means of distribution[xx] can also affect the efficiency of competition by increasing their costs. Most of the market can affect the effectiveness of competition by simply slowing down the expansion of competition, although this does not completely prevent expansion [xxi]. Similarly, foreclosure may take the form of cooperation between seller and buyer to exploit downstream buyers by excluding competing competition[xxii]. On October 8, 2019, the French Competition Authority (“FCA”) sanctioned Procter & Gamble (“P&G”), Coty and Chanel and their wholesalers with €176,000 for the implementation of exclusive import agreements in the overseas territories. WHAT YOU NEED TO KNOW – MAIN POINTS TO REMEMBER since March 2013, (…) Exclusive purchase agreements that require a distributor to sell the products of a single manufacturer can have a similar impact on a new manufacturer and prevent it from bringing its products to enough outlets for consumers to compare its new products with those of the leading manufacturer.

Exclusive purchase agreements can violate antitrust law if they prevent new entrants from competing for sales. For example, the FTC found that a pipe fittings manufacturer had unlawfully maintained its monopoly on locally produced ductile iron pipe fittings by requiring its distributors to purchase domestic tube or pipe fittings exclusively from it and not from its competitors attempting to enter the domestic market. The FTC noted that the manufacturer`s policy prevented a competitor from making the sales necessary for effective competition. In another case, the Ministry of Justice challenged the exclusive agreements of an artificial tooth manufacturer with a market share of at least 75%. These exclusive contracts with key dealers effectively prevented small competitors from selling their teeth to dental laboratories and, ultimately, from being used by dental patients. In similar situations, newcomers may face significant additional costs and delays in getting merchants to abandon exclusive agreements with the leading company or find another way to introduce their product to consumers. The harm to consumers in these cases is that the monopolist`s actions prevent the market from becoming more competitive, which could lead to lower prices, better products or services, or new choices. Agreements which are prohibited under Article 101(1) and which do not comply with Article 101(3) shall be null and void from the outset pursuant to Article 101(2). Article 101(1) prohibits restrictive agreements, decisions by associations of undertakings and concerted practices.

In particular, such agreements, which set purchase or sale prices, control the market, maintain a party in an advantageous position, subject contracts of other parties that are not related to the subject matter of such a contract are prohibited. [lvi] The contract does not define a “company”. In Hofner and Elser v. Macrotron GmbH[lvii], the Court of Justice of the European Communities has ruled that the concept of an undertaking covers any entity carrying out an economic activity, irrespectical of the legal form of the entity and the way in which it is financed. .

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