AAI Working Paper No. 05-04. Economists Respond to FTC Staff Paper on Vertical Restraints

Abstract. This paper offers a critique of a recent paper on vertical restraints by four Federal Trade Commission staff members. The FTC staff based much of their analysis on a survey of 22 previously published case studies. We argue that the sample of 22 is biased toward cases in which vertical restraints had benign effects and show that, even in that biased sample, there were more anti-consumer effects than the paper authors imply. We then review several other important cases in which vertical restraints clearly reduced economic efficiency and/or injured consumers. We conclude from this analysis that the rule of reason approach should be continued and articulate some indicia that need to be considered in choosing cases for enforcement.

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