This is a tough one; kind of a 'catch 22'. But your best shot is to agree with the strategy. “Yes, limiting the number of agencies is a matter of survival, isn't it? And when you've got something that is working you don't want to change it do you? But competition is what makes business work, just like you have to compete for your next promotion or position, right?” Chances are you'll get a “yes” here and the opportunity to use this line, “I really want to work with your company. What can I do to get that opportunity?” This response really gets the message out that you want the business.
Another good reply. “Give me your most difficult position, let me do my best.” Then pitch reasons why your company would do a good job; computerized, 10 years in the biz, etc. Another very effective answer; “Why limit yourself? We work on a contingency basis; it costs you nothing until our candidate is actually working for you as a productive employee.”