Home Page / The Law / Exclusive Dealing

Exclusive dealing imageExclusive Dealing (forcing)

 

About exclusive dealing

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).

Most forms of exclusive dealing (including full line forcing) are captured only if it can be demonstrated that they substantially lessen competition (s 47(10)). However, third line forcing is captured regardless of its anti-competitive effect.

Note: The Harper Review's Final Report recommends the repeal of s 47, subject to the proposed changes to s 46 (misuse of market power) being adopted. In the event those changes are not adopted it recommends simplification of the provision. Either way, it recommends removing the per se prohibition of third line forcing conduct. See overview of Harper Panel draft recommendation in relation to exclusive dealing (relating to simplification). View the final recommendation here (recommendation 33) or a comparison of the draft and final report recommendations here.

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

Third line forcing

Sections 47(6) and 47(7) prohibit third line forcing. This conduct is prohibited whether or not it can be demonstrated to have an anti-competitive effect. Essentially, third line forcing captures 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).

Notification

Recognising potential benefits associated with exclusive dealing, a system of notification and authorisation is available.

Authorisation may be provided on public benefit grounds (s 88).

More commonly, parties will notify the ACCC of conduct that might fall within the various definitions of exclusive dealing (s 93) and, while the notification stands, they will not be held in breach of s 47 (see s 47(10A)).

The ACCC can only remove the notification if it is satisfied

  • (for exclusive dealing other than third line forcing): the conduct has the purpose, effect, or likely effect of substantially lessening competition and it is not likely to result in a benefit to the public which would outweigh those anti-competitive effects (s 93(3)) (current cost is $2,500)
  • (for third line forcing): the likely benefit to the public will not outweigh the likely detriment to the public arising from the proposed conduct (current cost of notification is $100)

 

The law - key provisions

 

Cases relating to exclusive dealing

Australia

External linkAustralian Association of Pathology Practices Incorporated [2004] ACompT4 (authorisation)

Australian Competition and Consumer Commission v Baxter Healthcare [2007] HCA 38 (29 August 2007)

ACCC v Bill Express Ltd (in liq) (2009) 180 FCR 105; [2009] FCA 1022
Third line forcing - including 2007 amendments

External linkACCC v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402
Exclusive dealing (third line forcing)

External linkACCC v Link Solutions Pty Ltd (No 3) [2012] FCA 348

External linkApplication by Co-operative Bulk Handling Limited (No 3) [2013] ACompT 3
Appeal against revocation of exclusive dealing notification - public benefit v SLC

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 (2 December 1986)
Third line forcing

External linkKAM Nominees Pty Ltd v Australian Guarantee Corporation Ltd (1994) 123 ALR 711

External linkRe Ku-ring-gai Co-operative Building Society (No. 12) Ltd [1978] FCA 50; (1978) 36 FLR 134
Exclusive dealing (third line forcing)

Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd (1987) 74 ALR 581

External linkO'Brien Glass Industries Ltd v Cool & Sons Pty Ltd (1983) 77 FLR 441; (1983) 48 ALR 625

Outboard Marine Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) ATPR 40–327

External linkThe Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust [1990] FCA 163; (1990) 22 FCR 495 (LawCite)
Exclusive dealing (sub-sections 47(1), (8), (9) and (13))

Stationers Supply Pty Ltd v Victorian Authorised Newsagents Associated Ltd (1993) 44 FCR 35
Purpose of substantially lessening competition; exclusive dealing

External linkSWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd [1980] FCA 125; (1980) 48 FLR 445
Exclusive dealing (third line forcing)

External linkTrade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd. [1978] FCA 47; (1978) 35 FLR 372
Exclusive dealing (third line forcing)

Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193

Visy Paper Pty Ltd v ACCC [2003] HCA 59
Exclusionary provisions; exclusive dealing; anti-overlap

Useful cases decided in other jurisdictions

 

Articles relating to exclusive dealing

Australia-specific

Policy generally

 

Reports relating to exclusive dealing

Dawson Report 2003
Chapter 8 relating to per se prohibitions and including recommendations for the removal of the per se prohibition against third line forcing.

 

Guidelines

ACCC Guidance