Exclusive Supply Or Purchase Agreements

Exclusive supply agreements are defined in section 3.4.c) of the Competition Act, 2002 („Act“) as agreements preventing buyer from purchasing/exchanging goods other than seller`s. Exclusive supply agreements supplementing the seller. Exclusive supply agreements are also called „single branding“ or „quantity obligation agreements“. Under European competition law, an agreement that leads the buyer to obtain more than 80% of his needs from a given seller/supplier constitutes an agreement on a „single branding“ 1. Exclusive distribution describes an agreement in which the willingness of one party to treat another party in a partisan manner depends on whether that other party (1) deals exclusively with it or (2) concerns a large part of its needs. (1) Exclusive agreements may be judged under both Article 3(4) and Article 4 of the Act. First use by the French competition authority of the instruments put in place by the Macron and Egalim laws, in order to make legally binding commitments by four large food distribution companies aimed at reducing the competition concerns raised by their joint purchasing agreements on the retail brand (…) The Act provides that the Economic Development Committee (EDC) may, in consultation with the JCRA, grant block exemptions that exempt certain categories of agreements that may meet the legal criteria for exemption. So far, no block exemptions have been imposed by the EDC. But it is now widely accepted that the assumptions needed to support this argument are not always accurate. For example, if buyers „are not able to coordinate their actions to defeat the tactic,“ a monopolist may „make sacrifices to sell at a low price; No single victim can stop exclusion, so no victim has bargaining power. (66) In other words, in certain circumstances, buyers may accept ineffective exclusive distribution agreements, as each buyer believes that, whatever he does, other buyers will agree. Therefore, buyers will not necessarily object to exclusive transactions that harm them collectively.

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