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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

A dominant supplier of software tells retailers that they will receive its popular product only if they also agree not to stock any rival's products. Which statement is most accurate?

Making supply conditional on retailers not stocking rivals' products is likely an abuse of a dominant position because it forecloses competitors from the market. Dominance itself is not unlawful, but a dominant firm cannot set any terms it wishes, and the test concerns harm to competition.

  1. AThis is likely an abuse of a dominant position, because it forecloses rivals from the marketCorrect
  2. BThis is not an issue, because a dominant firm is always free to set any terms it chooses
  3. CThis is only a problem if the supplier's profits fall as a result of the policy

Explanation

Being dominant is not itself unlawful, but abusing that position is. Exclusive dealing that shuts rivals out of retail outlets is a typical abuse. The assertion that a dominant firm may set any terms is wrong, and the harm tested is to competition, not to the firm's own profit.

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