How Do Cartels Use Vertical Restraints? Reflections on Bork's the Antitrust Paradox

Posted: 5 Apr 2014 Last revised: 30 May 2015

See all articles by Margaret C. Levenstein

Margaret C. Levenstein

University of Michigan at Ann Arbor - Survey Research Center; The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Valerie Y. Suslow

Johns Hopkins University - Carey Business School

Date Written: March 1, 2014

Abstract

In The Antitrust Paradox, Robert Bork discusses policy responses to naked and ancillary price fixing as well as vertical restraints. Empirical research finds that vertical restraints are generally welfare-enhancing. We examine cartels that used vertical restraints to support collusion. We find that one quarter of a sample of convicted contemporary international cartels used vertical restraints. Some of these cartels used vertical restraints to control downstream firms who might otherwise have undermined collusion. In other cases, distributors themselves had market power and received a share of cartel rents in return for their willingness to exercise that power as part of a cartel. This raises questions for antitrust policy toward vertical restraints in highly concentrated industries or those with a history of cartel activity.

Keywords: Robert Bork, Antitrust Paradox, collusion, cartel, vertical restraints, resale price maintenance, distribution, ancillary agreements, price fixing

JEL Classification: K21, L13, L41, L42

Suggested Citation

Levenstein, Margaret C. and Suslow, Valerie Y., How Do Cartels Use Vertical Restraints? Reflections on Bork's the Antitrust Paradox (March 1, 2014). Journal of Law and Economics, Vol. 57, No. S3, The Contributions of Robert Bork to Antitrust Economics (August 2014), pp. S33-S50; Ross School of Business Paper No. 1231. Available at SSRN: https://ssrn.com/abstract=2420024

Margaret C. Levenstein (Contact Author)

University of Michigan at Ann Arbor - Survey Research Center ( email )

500 S. State Street
Ann Arbor, MI 48109
United States
734-615-9088 (Phone)
734-647-1186 (Fax)

HOME PAGE: http://www-personal.umich.edu/~maggiel

The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Ann Arbor, MI 48109
United States
734-764-8336 (Phone)

Valerie Y. Suslow

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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