The Competition Council has developed the “Guide to Vertical Agreements” for public debates to help companies which, on a case-by-case basis, must assess the compatibility of the vertical agreements they wish to (…) Section 3(5)(i) provides for a limited exception that allows the holder of an intellectual property right to impose `reasonable restrictions` necessary for the protection of intellectual property rights. In RKG Hospitalities Pvt. Ltd v. Oravel Stays Pvt. Ltd9, the CCI considered that the exclusivity imposed by the franchisee was justified given that the know-how was shared with the franchisee. Some pro-competitive effects/justifications that the CCI may consider in the case of exclusive supply agreements include cases where the supplier makes buyer-specific investments, such as investments in production lines, etc. to serve a particular buyer or if the buyer will be offered a discounted price based on the obligation to take over a certain quantity, etc. Exclusive supply contracts prevent a supplier from selling inputs to another buyer. Where a buyer is in a monopoly situation and obtains exclusive supply contracts, so a newcomer may not be able to receive the inputs necessary to compete with the monopoly, contracts may be considered an exclusionary tactic contrary to Section 2 of the Sherman Act. For example, the FTC prevented a large drug manufacturer from imposing exclusive 10-year contracts for an essential ingredient to produce its drugs, for which suppliers would have received a percentage of the drug`s profits. The FTC found that the drug manufacturer used exclusive supply agreements to prevent other drug manufacturers from moving away from the market by controlling access to the essential ingredient.
The drug manufacturer was then able to increase the prices of his drug by more than 3000%. Even if Honeyrose had felt compelled to accept outsourcing, it could have protected itself by negotiating a commitment from Lola`s to buy a minimum volume or value. While this did not satisfy total exclusivity, it could have offered reasonable protection against Lola`s decision of self-sufficiency. Unfortunately for Honeyrose, the agreement did not contain a minimum enforceable purchase obligation. On 26 December 2019, the New Caledonian Competition Authority adopted its first sanction decision. This is a practice that aims to maintain exclusive import agreements, sometimes accompanied by a non-competition clause, in violation of Article Lp. . .