The Economics of Vertical Restraints in Distribution

Anti-trust policy in the United States and other countries towards vertical restrictions on distribution (restrictions placed by manufacturers on retailers’ prices and quantities), has been fragmented and unsettled. This is, in part, because of a lack of consensus on what these restraints represent. On the one hand, vertical restraints have been explained as devices of monopolistic control of cartel coordination. On the other, restraints have been viewed as devices that can be used as purely vertical instruments to implement ‘efficient’ forms of distribution.