Dealing with exclusive dealing

How should competition authorities treat exclusive dealing contracts? On 18 January 2008, TILEC organized a seminar on this topic. Paul Lugard, Head of Antitrust at Philips, gave a critical summary of the current legal framework, which has been shaped in recent years by several cases involving rebates rather than exclusivity clauses in their purest form. In his view, while the Community courts' case law has shown signs of a less rigid approach, the European Commission in its 2005 Discussion Paper about the application of article 82 missed an opportunity for suggesting a fully-structured consumer welfare test. Instead, the proposed approach resorts even more to proxies for anti-competitive foreclosure, potentially giving rise to numerous errors. David Spector (Paris School of Economics) presented his recent work extending the main theory of harm under exclusivity contracts (the so-called "naked exclusion" story) to the (typical) case where the potential victim is present at the contracting stage. It is shown possible for a firm to use exclusivity contracts in order to deprive a rival of the minimum viable size, exclude it from the market, and enjoy increased market power but such eviction is less likely than inefficient entry deterrence.