What Should You Do If A Supplier Wants You To Refuse To Deal With Its Competitors?

Many Nexstar Network members pay to be listed in directories that advertise “verified” and “rated” contractors for plumbing services.  One of our members had an indcident recently where one such directory reportedly told its customers that it will not list them if they do business with a competing directory.

In some situations, actions like this – specifically, a supplier’s refusing to sell products or do business with you unless you agree not to deal with the supplier’s competitors – are illegal.  For example, a federal antitrust law known as the Clayton Act states in part (Section 3) that:

“It shall be unlawful for any person … to … make a sale or contract for sale of goods, wares [or] merchandise … on the condition … that the … purchaser thereof shall not use or deal in the goods, wares [or] merchandise … of a competitor …, where the effect of such … sale, or contract … may be to substantially lessen competition or tend to create a monopoly in any line of commerce.”

Other federal and state antitrust and unfair competition laws, as well as federal and state courts, have condemned similar behavior.

Restrictions on dealing with a supplier’s competitors are not always illegal.  A supplier may limit a customer’s right to buy from a competitor if there is a legitimate business reason for doing so – for example, if the supplier is offering the customer a discount or other benefit and can only recoup the benefit if the customer agrees to an exclusive relationship for some period of time.  But if the supplier does not need to restrict the customer in order to compete, and is doing so only in order to gain an unfair advantage over other competitors, its attempt to limit the customer’s ability to do business with its competitors may be illegal.

If a directory or another supplier that is offering a product tells you it will only do business with you if you agree not to do business with other competitors, and if doing business with competitors is important to you, consider consulting a lawyer before you agree to the supplier’s demand.  You may have more options than you think!

This blog post by Nexstar Network is not intended to provide legal advice or a legal opinion on any specific issue.  Your legal rights depend on your individual situation and on the individual facts relevant to your situation.  If you have questions about your rights in a particular situation, you should consult your own attorney.      

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Ed is the marketing manager for Nexstar. He draws on his experience as an award-winning New York ad executive to create campaigns and marketing kits for contractors. He also works with businesses to craft and implement customized marketing plans.