Vertical Trade Restraints. I. Introduction and definitions II. Resale price maintenance III. Nonprice restraints IV. Summary. I. Introduction. A. Def.: Devices that sellers at one level of a market use to eliminate competition at a lower (i.e., downstream) level.
I. Introduction and definitions
II. Resale price maintenance
III. Nonprice restraints
A. Def.: Devices that sellers at one level of a market use to eliminate competition at a lower (i.e., downstream) level.
B. Types: 1. Resale price maintenance
2. Nonprice restraints
1. May create a retailer cartel
2. May enforce a manufacturer cartel
3. May enhance a brand image
4. Protects franchise investment
5. May protect full service from free riding by dealers who don’t provide service.
6. May be a niche for entrants and small fry:
Sandura v. F.T.C., 1964
1. From Dr. Miles Medical Co. v. John D. Park & Sons, 1911: A seller may not control the resale price of anything it has already sold, because this
a. Creates restraint of trade at the retail level, and
b. Violates the common-law ban on “restraints upon alienation.”
2. From U. S. v. Colgate Co., 1920: A seller may refuse to sell to any buyer for any reason, up to failure to observe an announced price.
(It will be observed that these principles
are likely to conflict in their effect on the question of RPM!)
B. The “Fair Trade” era, 1937-1975
1. From protection of product image and goodwill to protection of small business.
2. Miller-Tydings Act, 1937;
McGuire Act, 1953
3. Products and channels affected
4. Collapse due to: (a) “Discount houses”
(b) Advertising as a promotional alternative.
A. Types: Territorial and location restrictions
B. White Motor Co. v. U. S.,1963
1. Nature of the restraints and summary judgment
2. Rule of Reason as an outcome
3. The Schwinn interlude, 1967-1977
C. Back to the Rule of Reason: Continental TV v. GTE Sylvania, 1977
1. Facts; nature of the restraints
2. Reconsideration and reinstatement
D. Protecting competition or collusion: the strange cases of
1. U. S. v. Sealy, 1966
2. General Motors v. U. S., 1966.
3. Matter of Toys ‘R’ Us, 1998