Which of the following Is Not an Example of Vertical Agreement

Vertical agreements are widely accepted because they raise fewer competition concerns than horizontal agreements. Horizontal agreements are concluded between two current or potential competitors. If the bottom line is that your deals are likely to drive down prices or increase production market-wide — even taking into account their impact on competitors — you probably don`t have to worry. To illustrate this point, I would like to return to the metaphor of the merchant who organizes an auction. The distributor chooses between the exclusion agreement and all other alternatives of the manufacturer or its competitors. However, we cannot conclude from the facts that the exclusion regime has certain advantages in terms of efficiency and that it won the auction, that the concessionaire accepted the agreement because it was more effective than the alternatives. Overall, other agreements could have been even more effective and therefore could have won the auction if the incentives that had not been offered with a view to participating in the manufacturer`s over-competitive profits had not been offered. Article 101(1) TFEU prohibits agreements between undertakings which have as their object or effect the restriction, prevention or distortion of competition within the EU and which affect trade between EU Member States[3]. This prohibition applies to all agreements between two or more undertakings, whether competing or not.

Those who would prefer a shield of market power note that vertical agreements at the throat often have efficiency gains and that exclusion and efficiency are often two sides of the same coin. To the extent that exclusion agreements in one form or another offer the manufacturer exclusive or preferential access to wholesale suppliers, they are appropriate, for example, to achieve efficiency gains through supplier loyalty, the elimination of stowaways or economies of scale. But precisely because efficiency gains are so widespread and easy to spot, it might be appropriate to condemn naked exclusion agreements for which no plausible effectiveness can be demonstrated. These cases, and the different types of exclusion agreements at stake, raise a variety of different doctrinal issues. But they raise similar conceptual questions. Since we cannot observe the payment of over-competitive profits, we must assess exclusion agreements ourselves without relying on the market to tell us whether they are globally anti-competitive or anti-competitive. Thus, if (i) exclusion, (ii) market power, and (iii) efficiency are inextricably linked, the right solution is a more comprehensive analysis of the rule of reason — one that weighs the anti-competitive consequences of agreements against their pro-competitive or efficiency-enhancing effects. Parties may include contractual restrictions or obligations in vertical agreements to protect an investment or simply ensure day-to-day business operations (e.g. B, distribution, supply or purchasing agreements). 13.

This is the exclusion of competitors, whether the manufacturer itself possesses or can acquire market power. The two are likely to coincide in most cases. However, (i) the exclusion criterion is less stringent and easier to apply than the market power criterion because it focuses on competitors (competitors) and not on competition in the market as a whole, and (ii) the beneficiary of an exclusion agreement may not have market power in the same market, especially if it uses inputs in several markets. Third, if there are plausible efficiency gains, are exclusion agreements likely to create or maintain market power for the manufacturer? Otherwise, the agreements would have to be legal, because without such market power, the compensation needed to persuade distributors to reach an agreement would obviously not consist of a share of the non-competitive profits generated by the agreements. The distributor`s participation and the existence of the agreement could therefore be regarded as the result of the efficiency gains created by the agreement. In this case, we are willing to tolerate exclusionary effects because it has long been clear that antitrust law “protects competition, not competitors.” (16) Therefore, when applying the ground rule to vertical exclusion agreements, we should make an analysis very similar to that used by agencies when examining efficiencies in merger cases. First of all, we should assess the impact of exclusion agreements on competitors or, to be more precise, on their production on the market. Assuming these effects, we should then ask ourselves whether the efficiency gains created by the agreements will increase the beneficiary`s producer to such an extent that market-wide production on the market where the agreements will create or maintain market power will be higher overall than if exclusion agreements were prohibited. (21) Otherwise, the agreements are illegal. However, the articulation of this theoretical thesis does not put an end to our work. It is the responsibility of law enforcement authorities to implement the theory operationally. While the theory suggests that proof of market power should always be required to condemn a vertical exclusion agreement, such a requirement may not be optimal.

In the case of vertical exclusion agreements, such as exclusive distribution agreements. B between a manufacturer and its distributors, the question is quite different. In such a case, the question arises as to whether the total production on the market in which the producer is likely to acquire market power will be increased or decreased, taking into account both the exclusion of competing producers — which reduces their production — and the efficiency gains — which could increase the output of the producer who is a party to and benefits from the agreements. .