Revitalizing Antitrust in Its Second Century: Essays on Legal, Economic, and Political Policy

By Harry First; Eleanor M. Fox et al. | Go to book overview

the response of a certain class of marginal consumers to the conduct of distributors, while the general effect of vertical restraints on efficiency depends on the response of all consumers, inframarginal as well as marginal. 46 As a result, the connection between the interests of manufacturers and consumers is broken, and the mere fact that manufacturers impose vertical restraints does not necessarily indicate that they serve the interests of consumers.

For too long, economic discussions of these issues have focused on the positive economics of vertical restraints and presumed that the normative economics followed directly. Implicit in the conventional analysis is the assumption that all consumers are identical. The analysis described here emphasizes that the normative economics is more complicated and depends on the particular preferences of different groups of consumers. If style or quality certification is desired by marginal consumers but not by their inframarginal counterparts, then the latter group receives few benefits from the additional services provided but still must pay for them. As a result, consumers generally may see their satisfaction diminished despite the gains that accrue to manufacturers. 47

What is evident is that the normative aspects of the current conventional wisdom regarding vertical restraints must be amended. No longer should we assume that they follow directly from the positive economic analysis. Rather, as in other areas of antitrust law, we need to consider directly the normative questions themselves. The simple finding that market restraints arise from purely "vertical" processes is not sufficient to provide an answer. One cannot conclude, therefore, that vertical arrangements are generally benign.


NOTES

I appreciate the helpful comments of H.E. Frech, Joseph Fisher, and Clement Krouse on earlier drafts of this chapter.

1.
See, e.g., United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375-80 ( 1967), overruled by Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 38, 58 ( 1977); Brown Shoe Co. v. United States, 370 U.S. 2949, 323-34 ( 1962).
2.
See, e.g., U.S. Dep't of Justice Vertical Restraints Guidelines, 50 Fed. Reg. 6263 ( Feb. 14, 1985), reprinted in 48 Antitrust & Trade Reg. Rep. (BNA) No. 1199, at 3 (Special Supp. Jan. 24, 1985) [hereinafter Vertical Restraints Guidelines]; see also R.Bork , The Antitrust Paradox 288-98 ( 1978); Posner, "The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality", 48 U. Chi. L. Rev.6, 8 ( 1981).
3.
See, e.g., Posner, supra note 2, at 23-24.
4.
R. Bork, supra note 2, at 291-98; R. Posner, Antitrust Law: An Economic Perspective 196-201 ( 1976).

-315-

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