Clayton Act - Reciprocal Dealing Arrangements
When Reciprocal Dealing Contracts are Illegal Under the Clayton Act
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What are Reciprocal Dealing Contracts?
This is an agreement where a buyer offers to buy a sellers goods under the condition that the seller buys other goods from the original buyer. These agreements are only illegal under the Clayton Axct if there is a distinct anticompetitive objective with a substantial effect on the product market. Any pro-competitive justification may serve as a defense to a challenge to these practices.
Example: ABC Corp agrees to purchase machinery that distributes chemicals from a 123 Corp if the 123 agrees to purchase all of the chemicals from the ABC. This conduct will be illegal if a challenger can demonstrate that ABC and 123 have an anticompetitive objective that substantially affects the market for farmers purchasing these machines and chemicals.
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Discussion: How do you feel about banning reciprocal dealing agreements that deemed anticompetitive? Can you think of situations where such an agreement would have an anticompetitive effect in the market? Can you think of any pro-competitive justification for these arrangements?
Practice Question: ABC Corp and 123 Corp are manufacturers of material used in radios. ABC Corp supplies rubber materials to 123 Corp. 123 Corp supplies glass materials to ABC Corp. They have an exclusive, reciprocal dealing agreement. Under what conditions might this relationship be subject to challenge?