1 - Introduction

Abstract

This chapter discusses vertical integration and vertical contractual restraints. Some major breakthroughs in the economic theory of vertical integration and control have occurred over the past decade, which has improved the understanding of the causes for and consequences of these practices. It can be argued that these new discoveries have encouraged some economists to take a slightly more conciliatory view of the legal professions historical opposition to vertical integration. At the same time, some judicial and administrative decisions may have signaled a considerable reduction in the level of hostility toward vertical integration and control exhibited by the courts and the antitrust enforcement agencies. The potential for negative welfare effects has modified the antitrust policy recommendations of most economists regarding the appropriate treatment of vertical integration by an input monopolist from a policy of per se legality to a rule of reason approach under which each case is considered separately. The basic trend in the economics profession toward a more wary yet consistent attitude concerning vertical control appears to be mirrored by concurrent developments in the legal treatment of vertical restraints.