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Abstract
This chapter describes the legal treatment of ownership integration. The two avenues to higher profits include the reduction of costs permitted by vertical integration and the enhanced exploitation of existing market power. The first alternative is one that should be applauded, as it clearly leads to increases in consumer welfare. Provided that the existing market power is legal, the second option may or may not be of antitrust concern depending upon the effect on social welfare. If the existing market power is not legal, that fact should be challenged directly and treated as the horizontal issue that it is. In interpreting the antitrust laws, the courts have raised several objections to vertical integration based upon this possibility. The major objection involves vertical market foreclosure, which allegedly occurs when a supplier acquires one of its customers because the supplier's rivals are foreclosed from competing for the acquired firms business. The courts persist in employing the notion of vertical market foreclosure when deciding vertical control cases. The court seems to think that vertical integration could create monopoly power by denying competitors access to essential inputs.
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