Cartels and Vertical Restraints: Horizontal and Vertical Working in Tandem

Abstract

Our earlier examination of explicit horizontal European Commission (EC) cartel cases from the 1990s and early 2000s found that a surprisingly large fraction (one quarter) of cartels were making use of vertical relationships to sustain, and sometimes to disguise, their collusive behavior. The EC was not specifically searching for evidence of vertical restraints, as documenting such behavior was not necessary to make the legal case of a violation of competition rules against horizontal price-fixing or market allocation. Rather, documentation of vertical restraints occasionally appeared in the EC’s descriptions of the organization and functioning of each cartel. Observers often miss the role of vertical relationships because both the economic and legal frameworks encourage us to characterize interfirm relationships as either horizontal or vertical. In this paper we look more broadly for evidence of vertical relationships that support collusion, across other antitrust jurisdictions and legal regimes, as well as revisiting the EC cases. We find that horizontal and vertical relationships often work in tandem to enable anticompetitive behavior and reduce efficiency. We provide a classification of the types of vertical interactions that facilitate collusion, and then turn to a qualitative analysis of selected cartel cases to draw insight into how vertical restraints can be used to support a dampening of competition.

Note: 83 Antitrust Law Journal No. 1 (2020). Copyright 2020 American Bar Association. Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Keywords: antitrust, price-fixing, cartels, collusion, vertical restraints

JEL Classification: L13, L41, L42