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Vertical Agreements

Vertical Agreements - www.swapnotes.com Vertical Agreements...

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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]
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