Auctions, Exclusive Contracts and Competition for the Market

"An auction is a very common method of selling assets, especially where the seller is uncertain of the value of the asset to potential buyers. Both private and public sector businesses use auctions to select between alternative suppliers or acquirers. Generally, although there may be unique or exclusive aspects to a particular asset or contract, unsuccessful bidders are not excluded from the market, or at least not for any significant period, and in many instances multiple supply contracts are awarded or further contracts become available within a relatively short period. Generally speaking, a competition assessment of such agreements considers whether parties to the agreement will be sufficiently constrained by the remaining competition in the market. In some cases, however, a contract may be exclusive and co-extensive with the market. When this occurs unsuccessful bidders will be locked out of the market, at least for the duration of the contract. This may confer substantial market power on the single supplier/acquirer and so give rise to competition concerns."