Section 2 Symposium: Howard Marvel on Safe Harbors for Short Term Exclusive Dealing Contracts
Exclusive dealing prevents the bait-and-switch behavior by dealers who convert customers drawn by one brand to the products of its rivals. Despite the red flag of “exclusive” in its title, the practice is ordinarily uncontroversial, indeed innocuous. Automobile manufacturers often pay incentives to encourage dealers to deal exclusively in their vehicles. Business format franchising ensures that large swathes of distribution are exclusive. And when exclusive dealing is denied to suppliers, the results can be catastrophic, as when the FTC massacred those manufacturers of hearing instruments that relied on exclusive dealers. The FTC sued five such firms for exclusive dealing, four of which agreed to drop it, and promptly died.