Surrogates for Vertical Integration

This chapter focuses on the various surrogates for vertical integration that firms can employ: fancy pricing-techniques, “non-pricing” tying and reciprocity agreements, minimum-price-setting-resale-price-maintenance (RPM) clauses, maximum-price-setting-RPM clauses, vertical territorial restraints, vertical-customer-allocation clauses, single-brand exclusive dealerships, long-term full-requirements contracts, long-term total-output-supply contracts, and sales/distributorship-renewal policies. This chapter examines the economic efficiency, liberal-moral-rights-violativeness, and impact on the instantiation of various conceptions of the moral good of the various surrogates for vertical integration it considers. The chapter concludes that many of these surrogates for vertical integration increase economic efficiency, that some fancy pricing-techniques and some exemplars of some other types of vertical-integration surrogates do decrease economic efficiency even relative to the conduct that would be substituted for them, that few exemplars of these vertical-integration surrogates that decrease economic efficiency are liberal-moral-rights-violative (exceptions are price discrimination that manifests contrived-oligopolistic or predatory pricing, tie-ins and reciprocity agreements that conceal illegal conduct, and the at-most tiny percentage of vertical territorial restraints and customer-allocation clauses that manifest reseller efforts to secure producers’ help in enforcing the resellers’ horizontal price-fixes), that the appropriate analysand for analyses of the competitive impact of the use of these surrogates is the impact of a rule allowing all members of a set of product-rivals to use them, that such rules will rarely if ever lessen competition, that with the exception of government efforts to prevent uses of surrogates for vertical integration that are liberal-moral-rights-violative and the possible exception of some government efforts to deter the use of conventional price discrimination, government efforts to deter the use of surrogates for vertical integration are not likely to be morally desirable.