International Competition Policy

International Competition Policy

Maintaining Open Markets in the Global Economy

Michael A. Utton

The book begins by setting out the principles of competition and trade policies, and then goes on to address the impact of market globalisation on what are usually thought of as traditional antitrust concerns. These include the analysis of the difficulties arising from collusion and other restrictive practices, government sponsored ‘voluntary co-operation’, vertical restrictions and market access, pricing strategies of dominant firms and international mergers, all illustrated with a number of prominent case studies. The author concludes with an illuminating discussion on the feasibility of international co-operation on competition policy, the faltering progress that has been made so far and the prospects for future advances.

Chapter 5: Vertical Restrictions and Market Access

Michael A. Utton

Subjects: economics and finance, competition policy, industrial economics, international economics

Extract

I INTRODUCTION In recent years the analysis of vertical restrictions has been developing rapidly and as a result policy attitudes have also been changing. A great deal of emphasis has been placed on the efficiency improving effects that various restrictions can have to overcome free rider problems and other externalities. The analysis can be applied to a wide range of restrictions imposed on the trading relations between manufacturers and their suppliers, and manufacturers and their distributors. Included on the list are selective distribution, exclusive dealing, territorial restrictions, tying and full-line forcing, and minimum price imposition backed in many instances by refusal to trade if the strict conditions are not met. The great variety of these restraints, used singly or in combination, and differing according to industry, make for a complex analysis and requires subtlety of antitrust treatment. At the national or regional level a softening of policy emphasis has therefore occurred, in recognition of the ways in which vertical restrictions may enhance efficiency (Comanor and Rey, 1997: 353). In contrast, at the international level there have been increasing claims that those same restrictions impede the entry of foreign products, foreclosed from the market by lack of access to distribution channels confined exclusively to domestic products. In some cases the complaints may extend to the home government which, while encouraging the active pursuit of antitrust policy towards domestic firms, may either do nothing to ensure equal treatment for foreign firms or, worse, connive at discrimination against them. This claim most clearly...

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