BLR #5: Per Se Illegal 2 Set Min. Resale Price 4 Next Level
Even if not part w/title, can't set min. resale price
Rule of rsn 4 max resale price
Rsns 2 want min. resale price
Create high quality image
Elim. free riders of discount retailers
Avoid dealer concentration
Eff. terr. size
Promote interbrand competition
Coord. among mfgr is facilitated
Really actual hz'al restraint among dealer
BLR #6: Per Se Lawful Sole Outlet Arr.
Mfgr prom's dealer that that dealer would B the only dealer +
No attempt 2 monopolize +
Lots of interbrand competition @ both mfgr. & retail levels
BLR #7: Rule of Rsn
Vertically imposed terr., customer, / location restrictions
Gen'ly ok if mfgr shows benefit of interbrand competition outweighs loss of intrabrand competition
Agmt / Jt. Axn
BLR #8: Unilateral Terms By Mfgr / Seller Lawful
Seller may dec. 2 whom & what terms it will sell in advance
Must have no purpose 2 create / maintain monopoly
Seller can unilaterally refuse 2 deal in future 4 not following terms even if those terms illegal if accomplished by jt. axn of seller & buyer
Gen'ly used 2 avoid per se illegality 2 fix vertical price min.
Seller agrees 2 sell prod. Z only if buyer also takes prod. Y
Prod. Z is tying prod.
Prod. Y is tied prod.
BLR #9: Tying is Almost Always Illegal if All 4 Conditions Met
Two sep. prod's involved
Prod's R tied so can't get prod. Z w/o prod. Y
Mkt pwr in mkt 4 tying prod.
Patent / copyright of prod. but disfavor /
Inference from forecl. /
Suff. pwr 2 restrain appreciably /
Ability 2 incr. price & has competitive adv. than other competitors/
Suff. pwr 2 make forcing buyer 2 take unwanted prod. probable /
Appreciable econ. pwr is most recent test
Forecl. of seller's competitors in mkt 4 tied prod.
Not insubst'l amt
Subst'l vol. of commerce is most recent test
O'Connor's Rule of Rsn 4 Tying Formula (not maj. yet)
Two sep. prod's tied
Pwr in tying mkt
Suff. pwr 2 forecl. / create subst'l threat of mkt pwr in tied mkt
Forecl. in tied mkt
Subst'l threat of mkt pwr in mkt 4 tied prod.
Calls 4 mkt analysis
Can't Incr. Mkt Pwr by Tying in Sit's
If competitive mkt 4 both tied & tying prod., then can't incr. value beyond fair mkt value
If tying & tied prod. used in fixed proportions, then can't incr. value even if monopoly pwr in tying prod.
Patent & Tying
Holder has monopoly of invention by prohibiting others from using, making, / selling it
Can't use patent in 1 prod. 2 gain monopoly of another prod.
Can't enforce patent 2 all if viol. antitrust laws, even if never had dealing w/infringer
Tying Ok 4 Quality Control If
Specifications won't work
Specifications will b less eff. than tying
Motives 4 Tying
Selling own prod.
Sells prod. Q but restrains buyer
From buying prod. Q from anybody else besides me +
To buying only prod. Q
Tying agmt by forcing more of unwanted prod.
Total reqt K by forecl'ing competitors
BLR #10: Rule of Rsn If
Amt of mkt sh. forecl'ed 2 seller's competitors is rsbl +
Length of K is rsbl +
Longer the K, more illegal
Benefits 2 competition outweighs the disadv.
Could have eff. in dist.
Steady stream of reliable source
Stuck w/price during K term
Combine Complementary Items Needed 2 Prod. End Prod.
Complementary item if makes something complete / make up whole
Assured source of supply
Run dist. more eff'ly
More longterm K's
Hard 2 manage
Barrier 2 entry if entire ind. is vertically integ'ed
Polit. disadv. b/c workers get big block of polit. pwr
Methods of Vertical Integ.
De novo where enter sep. mkt
Merger / acq. existing co.
Excl. dealing K's of long term total reqt K
Charact's of Methods
De novo & merger is perm. but excl. dealing is less perm.
Law pref's de novo over merger b/c more competition
Law pref's excl. dealing over merger b/c less perm.
Law gen'ly law pref.'s de novo > excl. dealing
This material is copyrighted by the author. Use
of the material for profit is expressly prohibited
without the written permission from the author.
Ms. Haeji Hong
May 12, 1998