Economic Effects of Exclusive Dealing and Suggestions for Government’s Distribution Policy

Purpose: The purpose of this study is to overview the existing studies on the effects of exclusive agencies on the industrial structure, economic effect, producer profit, retail price, social surplus, which have been studied in the marketing field, legal economy, and industrial organization theory. Considering the implications of the results on the distribution structure of Korea, it is intended to present a normative distribution structure for distribution of specialty products in Korea. In addition, we will propose hypotheses for future empirical studies and suggest public policy measures for the government’s exclusive agency system. Research design, data, and methodology: By analyzing and comparing previous research papers on Exclusive Dealing & Non-Exclusive Dealing, the economic effects were summarized and government policies were proposed. Results: There are four research results on ED. ED has a profound effect on the industrial structure. The consensus view of most studies is that manufacturers will benefit from ED. ED raises the retail price. ED is judged to lower social surplus and consumer surplus. Although developed countries have reflected the impact of ED on their perceptions and policies, Korea still lacks research and policy. Implications: Based on the economic effect of ED, there are four implications. First, the supply of retail space is required to reduce the anti-competitive effect of ED. Second, as the time, cost, and inconvenience required to travel to retailers increase, competition decreases and consumer surplus decreases. Third, ED reduces consumer surplus by limiting consumers’ convenience in choosing a brand. Due to the absence of public policy regarding D, the anti-competitive effect of ED can be realized, leading to an increase in retail prices, and a decrease in consumer surplus and social surplus. Based on the implications, Korea needs institutional support for complex shopping malls and policies to promote e-commerce.