What is a Refusal to Deal?
A refusal to deal or a concerted refusal to deal is an agreement between competing companies, or between a company and an individual or business, that stipulates that they refuse to do business with another. A refusal to deal violates the Sherman Antitrust Act and other antitrust laws, and is illegal in the United States.
Types of Refusal to Deal Agreements
There can be a horizontal refusal to deal, which is an agreement between competitors not to compete; and a vertical refusal to deal, which is an attempt to control or leverage the market by only doing business with certain parties. This does not mean that a business is always prohibited from refusing to do business with another company. Businesses have the right to use their discretion in choosing whom to do business with. However, if this choice is made through a conspiracy with another competitor, business, or individual, they will likely be breaking the law.
A refusal to deal is a violation of the antitrust laws because it harms the boycotted business by cutting them off from a facility, product supply, or market. By harming the boycotted business in this way, the competing businesses controls or monopolizes the market by unreasonably restricting competition.
Ins and Outs of Refusal to Deal Agreements
A refusal to deal can be an agreement between competing companies to boycott another company by refusing to do business with them, or it can be the use of coercion to keep an individual or business from doing business with another company. A refusal to deal may be against another competitor; for example, if one business refuses to do business with another company, customer or supplier, unless they agree to cease business with another company, the agreement would be a refusal to deal. Further, courts have found that there is refusal to deal when businesses refuse to do business with a competitor when this refusal unreasonably restricts competition.
A violation of the antitrust laws can result in hefty fines for your business. If you have unanswered questions, or need more legal information about a refusal to deal you should contact an experienced business attorney for assistance.