Third line forcing and commercial contracts

Third line forcing is a form of exclusive dealing that is prohibited under the Competition and Consumer Act 2010 (Cth)(CCA).  It occurs where one corporation (Forcer) enters into a contract to supply goods or services to another (Forced Party), which includes an obligation to buy goods or services from an unrelated third party (Third Line Party).

It’s common in various commercial contracts including franchise and license agreements, for the issuer of the contract to attempt to limit or restrict who a party buys goods or services from. The reason for this is obvious in terms of the need to ensure that a uniform product is delivered to customers. The often cited example being the uniformity of the width of fries served at every McDonald’s throughout Australia and for that matter the world.

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