How Do Cartels Use Vertical Restraints? Reflections on Bork's The Antitrust Paradox
Margaret Levenstein and
Journal of Law and Economics, 2014, vol. 57, issue S3, S33 - S50
In The Antitrust Paradox, Robert Bork discusses vertical restraints and policy responses to naked and ancillary price fixing. Empirical research finds that vertical restraints are generally welfare enhancing. We examine cartels that used vertical restraints to support collusion. We find that one-quarter of a sample of convicted contemporary international cartels used vertical restraints. Some of these cartels used vertical restraints to control downstream firms who might otherwise have undermined collusion. In other cases, distributors themselves had market power and received a share of cartel rents in return for their willingness to exercise that power as part of a cartel. This raises questions for antitrust policy toward vertical restraints in highly concentrated industries or in those with a history of cartel activity.
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