Examples of Anti-Competitive Practices

The following list is intended to illustrate the types of practices that might be considered anti-competitive. Whether such practices are anti-competitive is highly dependent on many other circumstances which would have to be determined by the OFT and therefore should not be regarded as automatically anti-competitive or prohibited. Businesses considering entering into such agreements may wish to seek legal advice in the first instance. The OFT has also published a comprehensive guide to competition law which can be found by clicking the link to our reports below.

• Exclusive supply dealing arrangements
  A supplier agrees to supply only one customer, usually in a certain geographical area. The customer in turn agrees not to stock or handle products of the suppliers’ competitors and perhaps not to compete with other customers of his supplier in their exclusive territories.
• Exclusive purchasing contracts 
  A customer agrees to buy his requirements exclusively from a single supplier. Contracts which do not specify exclusivity but require the customer to buy a specified proportion of his requirements or even a specified quantity in a period may also have anti-competitive effects.
• Long term supply contracts 
  Long term contracts which do not contain an exclusivity term can have a similar effect if the customer is faced with onerous termination provisions.
• Restrictive terms 
  These occur in contracts which prevent or restrict the customer from dealing with the suppliers competitors.
• Selective distribution systems 
  A supplier will deal with only a certain number of distributors or only those which can satisfy criteria he lays down on such matters as stock holding levels or pre- or post-sales service. Selective distribution systems will restrict competition between distributors, but they may enhance the efficiency with which a product is distributed and users’ needs are met. Whether the restrictions on competition between distributors are significant will depend primarily upon the degree of competition between the suppliers of the product. The market power of the supplier is therefore a crucial factor.
• Tie-ins 
  A second category of practices which can prevent or restrict competition is the tie-in. A tie-in exists when the supplier of one product or service insists that the customer must buy all or part of his requirements of some other product or service from the supplier. It may be convenient to customers to buy several items from one supplier and there may be cost savings from tie-ins. Sometimes the customer is required as a condition of supply of certain items in the range to buy all (or more of) the items in the range. This may restrict competition between the supplier and his competitors who offer a more limited number of items.
• Restrictions on the supply of parts or other inputs required by competitors 
  A third category of practice which can prevent or restrict competition can occur if vertically integrated firms refuse to supply items needed by competitors who are not engaged in the complete production process or may supply them only at prices which make it difficult for the competitor to sell the end product at a competitive price.

It should be noted that the above is not an exhaustive list and that any action which restricts traders from competing could be said to be anti-competitive. Also, discriminatory treatment of customers may distort competition between those customers and so it is important to look at the overall effect of any practice on a market rather than on the practice itself.