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Competition Policy

C/E/504. All vertical restraints should be completely lawful. Discuss

WORDS:

2050

DATE:

2010

PRICE:

29.99 GBP

Vertical restraints are defined by Terhorst (2000) as restrictions that are established through the means of agreements between two or more business agents. The purpose of the paper is to assess the rationale and argument for and against vertical restraints and explain the implications of the approach proposed by Bork (1978). When Bork introduced his argument regarding making all types of restraints legal, the rationale of restraints was to remove any downstream pricing distortions and optimise the level of investments and transaction costs. However, the further development of the US and European markets led to the growth of the bargaining power of retailers. The paper concludes that every case should be viewed separately with the consideration of possible benefits and negative consequences for different key stakeholder groups. Moreover, it is articulated that policy makers should consider the separate and compound impact of vertical arrangements on the market equilibrium and arising market dynamics.

KEYWORDS: Vertical restraints, market dynamics, market conditions, transactions, business agreements,