This term covers both non-compete obligations and quantity forcing. A non-compete obligation is an obligation or incentive scheme in a supply or distribution agreement which causes the buyer not to manufacture, purchase, sell or resell products which compete with the contract products or to purchase at least 80 % of his requirements of that type of product from the supplier. Quantity forcing on the buyer is a weaker form of a non-compete obligation, where incentives or obligations agreed between the supplier and the buyer make the latter concentrate his purchases to a large extent, but less than 80 %, on the brand(s) of one supplier. Single branding may take the form of a direct obligation not to purchase competing brands (often called ‘ties’), but may, for example, also take the form of minimum purchase requirements, quantity rebate schemes or loyalty rebate schemes. The possible competition risks are foreclosure of the market to competing suppliers, facilitation of collusion between suppliers in the case of cumulative use and, where the buyer is a retailer, a loss of in-store inter-brand competition.
Source: Glossary of terms used in EU competition policy, Antitrust and control of concentrations, European Commission, 2002