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The Supreme Court's Leegin decision has now brought the rule of reason to all purely vertical intrabrand distribution restraints. But the rule of reason does not mean per se legality and occasions for anticompetitive vertically imposed restraints may still arise. Of all those that have been suggested the most plausible are vertical restraints imposed at the behest of a powerful dealer or group (cartel) of dealers. Although a vertical distribution restraint resembles a dealer cartel in that both limit intraband competition, a manufacturer restraining the distribution of its product shuns the excess dealer profits a dealer cartel would seek. Accordingly, a knowledgeable and un-coerced manufacturer who restricts rivalry among dealers must do so for some other reason, such as to facilitate dealer services. In fact, however, manufacturers have been known to restrain intrabrand competition - especially through resale price maintenance - not to achieve more effective distribution but rather to appease dealer interests in excess profits. Whatever the social benefits of a distribution restraint that serves a manufacturer's self-interest, a competition-limiting restraint extracted by dealer power can be harmful. Vertical restraints reflecting dealer power could well be ignored by antitrust law if they were rare, insignificant in magnitude, or readily detected and remedied under other branches of antitrust law. But we doubt that dealer power is that rare and are troubled by an apparent history of price-enhancing resale price maintenance for the benefit of dealers. At least some of the claimed justifications for it actually reflect dealer power, and antitrust rules controlling horizontal combinations cannot themselves prevent those distribution restraints that result from the power of a single dealer. Requiring the plaintiff to prove that the challenged restraint is explained solely and exclusively on cartel, dealer power, or other non-efficiency grounds would be an attractive policy option for those who think such instances are rare. This option allows prompt validation of many such restraints. On the other hand, requiring the defenders to offer a plausible and legitimate business reason for every restraint would allow the antitrust tribunal easily to condemn those restraints obviously lacking justification but would complicate many cases in which dealer power is unlikely. Depending on the restraint, challengers might be required to prove specified indicia of dealer power, or, for legally less favored restraints, such power might be presumed subject to rebuttal by disproof of the same specified indicia. In sum, presumptions must be developed that will both clarify and simplify the fact finding process.
This work focuses on the various types of vertical restraints by which a seller limits a purchaser's freedom to choose. Topics include tying arrangements, exclusive dealing and requirements contracts, and full-line forcing.
This book investigates under which circumstances vertical unbundling can lead to a more efficient market result. The assessment is based on an interdisciplinary approach combining law and economics. Drawing on the assessment, circumstances are subsequently presented under which unbundling might become necessary. Additionally, less severe means of regulatory intervention are suggested in order to protect competition. Given its scope, the book is chiefly intended for scholars and practitioners in the field of economic policy and regulation law; in addition, it will give interested members of the public a unique opportunity to learn about the underlying rationales of regulation law and regulation economics.
This volume provides a review of reforms of the EC's traditional treatment of vertical agreements.
This book explores the legal framework for vertical supply and distribution agreements under the competition law regimes of the United States (US), the European Union (EU), the People's Republic of China (PRC) and Hong Kong. The fierce scholarly debate relating to the treatment of vertical relationships between businesses operating at different levels of production or distribution is fuelled both by ideology and by the mixed effects these restrictions may have on competition. As a consequence, it is one of the areas in which the influential Chicago and Harvard Schools disagree most vehemently. The opposed views have resulted in significant swings in the law and policy affecting these contracts in the US and the EU, two of the world's most experienced antitrust jurisdictions. In China, where competition legislation was adopted only in 2007, vertical restrictions have already attracted the attention of both public and private enforcers. It remains to be seen how the Hong Kong Competition Ordinance, in force only since 2015, will be applied to vertical agreements. The book re-visits this classic dispute with the aim of providing a thorough understanding of the controversy and the merits of the solutions explored over decades of competition law enforcement in the US and the EU. It also assesses the validity of those solutions for younger antitrust regimes by focusing on China, one of the most active new jurisdictions, and Hong Kong, which is just beginning to develop. Chapter 1 considers the mixed effects of vertical agreements and the goals of competition policy. Chapter 2 highlights the influence of policy and economics in the law, and explores the prominent schools of thought which have shaped the current regulatory framework for vertical agreements. Chapter 3 assesses of the extent to which economic analysis should play a role in competition policy towards these restrictions. Chapter 4 covers the relevant enforcement and procedural issues, and Chapter 5 attempts to reconcile the development of an economic, effects-based approach with the attainment of other goals of antitrust affecting the relationship between suppliers and buyers.
In recent years divergence between United States ("US") and European Union ("EU") competition policy has garnered a lot of attention. One particular area where these differences are evident is the treatment of vertical restraints. In the USA, an antitrust plaintiff must show that a vertical agreement is likely to harm competition - that is, reduce economic welfare. EU competition law, on the other hand, places a lower burden on the European Commission ("EC"). The EC recently has promulgated a block exemption regulation ("BER") that defines circumstances under which vertical arrangements are automatically exempted under Article ("Art.") 81(3); still, European competition law condemns many more vertical agreements than does US antitrust law. "Dominant" firms entering into vertical agreements receive even harsher treatment under EU competition law. Because the Guidelines to the BER explicitly exclude dominant firms from exemption under Art. 81(3), it appears that Art. 81 proscribes dominant firms from entering into vertical agreements that restrict the behavior of the contracting parties. Additionally, Art. 82 discourages dominant firms from entering into vertical agreements. This paper uses a Bayesian framework to analyze the disparate treatment of vertical arrangements in the USA and EU. The practice of antitrust is the problem of inferring the competitive consequences of various types of market conduct. We argue that an optimal enforcement estimator would minimize an expected social loss function, where the expectation is taken over the posterior probability that a given practice is anticompetitive, given evidence in a particular case. Empirical literature informs priors, whereas theory informs the likelihood. We show how differences in antitrust treatment of vertical practices can be explained by different loss functions, even when each jurisdiction shares the same beliefs regarding the theoretical and empirical effects of vertical restraints.