Vertical Agreements

Vertical Agreements - www.swapnotes.com Vertical Agreements Overview Two major issues o(1 vertical resale price maintenance o(2 vertical non-price

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Vertical Agreements Overview Two major issues o (1) vertical resale price maintenance o (2) vertical non-price restraints (For ex. vertical territorial divisions; location clauses, etc.) Vertical arrangements are analyzed as Ks in restraint of trade under §1 of the Sherman Act Often, it is difficult to determine whether something is a “price” or “non-price” restraint o 90% of the time, defendants will win if the restraint is characterized as “non-price” Vertical restrictions may also facilitate both (1) supplier collusion, or (2) dealer collusion o Although this usually requires extensive concerted action and may be unlikely “Free riding ” – when a company is able to take advantage of the services (like advertising) offered by someone else w/o paying for them Purposes of Vertical Restrictions They may increase efficiency of distribution system and help a supplier lower its costs [good] They may increase a suppliers market power and enable it to earn monopoly profits [bad]
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This note was uploaded on 02/14/2008 for the course LAW 7557 taught by Professor Crane during the Fall '07 term at Yeshiva.

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Vertical Agreements - www.swapnotes.com Vertical Agreements Overview Two major issues o(1 vertical resale price maintenance o(2 vertical non-price

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