16:22
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Simple English definitions for legal terms
exclusive dealing arrangement
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A quick definition of exclusive dealing arrangement:
An exclusive dealing arrangement is when a seller agrees to only sell their products or services to one buyer, or when a buyer agrees to only buy from one seller. This can limit competition and is against the law. However, it's not always illegal and depends on whether it harms competition. The court will look at whether the arrangement has any good effects that make up for the harm it causes.
A more thorough explanation:
An exclusive dealing arrangement is a type of contract where a seller agrees to sell all or most of their products or services to a particular buyer, or when a buyer agrees to purchase all or most of their requirements of a product or service from a particular seller. This means that the seller or buyer is restricted from doing business with other parties.
For example, a car manufacturer may agree to sell all of their cars to a particular dealership, or a grocery store may agree to purchase all of their produce from a particular supplier.
However, exclusive dealing arrangements can limit competition, which is why they are subject to antitrust liability under the Sherman Act or the Clayton Act. These laws aim to promote fair competition in the marketplace.
Exclusive dealing arrangements are not automatically illegal, but they are evaluated on a case-by-case basis using the Rule of Reason. This means that the court will consider whether the arrangement has any pro-competitive benefits that outweigh its negative effects on competition. If the arrangement is found to be anti-competitive, the parties involved may face legal consequences.