An Economic Analysis Of The Anti-Competitive Effects Of Exclusive Dealing

Exclusive dealing is prohibited for the first time as one kind of actions of abusive conducts by dominant undertakings in "Anti-monopoly Law of the People's Republic of China" which came into force on 1st August, 2008. Exclusive dealing refers to an abusive action of the dominant undertaking that exerts its market power to limit its counterpart's transaction. The counterpart is obliged to make deals only with the dominant undertaking but its competitors. As the frontier and most active area of Industrial Organization Theory, the theoretical study of exclusive dealing on anti-competitive effects, efficiency factors and its impact on consumer welfare have contributed to the antitrust legislation and its enforcement of exclusive dealing. Economists, however, did not get together on the market effect and the impact on social welfare of exclusive dealing. Exclusive dealing simultaneously has pro-competition effects and the strategic characteristic of restricting competition, which makes business complicated. In the investigation of the dominant undertaking in exclusive dealing, what kind of analysis the antitrust authorities takes can better assess the exclusive dealing is still in the question.This article tries to answer some of the questions above. First, I demonstrate the efficiency factors and anti-competitive effect of exclusive dealing. Secondly, I study the case of two domestic beer companies, China Resources Snow Breweries Company in Tianjin and China Resources Snow Breweries Blue Sword Company, which implemented exclusive dealings in Tianjin and Chongqing beer market respective. I adopt a set of economic effects-based analysis method to study the conditions, manners, market results and the impacts of social welfare of two exclusive dealings. The results show that the China Resources Snow Breweries Company in Tianjin has dominant market position. Its aim at restricting competition can be achieved and the exclusive dealing probably expels competitors from the Tianjin market or prevents potential competitors entering the market. It achieved the purpose of monopolizing the beer market, and the consumer's welfare will be lost. In contrast, China Resources Snow Breweries Blue Sword Company did not occupy a dominant market position. Its exclusive dealing nevertheless has increased the competition between the beer producers. No beer producer was crowded out of the market. The intervention of Chongqing Industrial and Commerce Administration are anti-competitive.