Exclusive Dealing

Also outlawed by the Clayton Act are so-called exclusive dealing agreements. Exclusive dealing agreements are sales on condition that the buyer or lessee not deal with the competitors of the seller or lessor. For instance, a cement company is not allowed to insert a provision in their contract with a construction company that forbids the construction company from doing business with the cement company’s competitors. Technically, such conduct would amount to a violation of the Sherman Antitrust Act, since the elements of agreement, restraint of competition, and interstate commerce effect are all present. However, by clarifying to expressly include a prohibition against exclusive dealing, Congress left no question as to the legal status of such corporate behavior.

A related context is that of “tying” arrangements. A tying arrangement exists where a buyer is given a low price only if the purchase another different product from another company, often a company whose profit margins affect the original seller. A common example of a tying arrangement is where a franchisee restaurant is forced to buy a product from a host company rather than local providers. The franchise may have come at a relatively low cost, but the franchisee is not allowed to shop for low food prices from local vendors. This in turn has the effect of restraining competition among local vendors, since the franchisee is not even allowed to buy from them at all.