Appendix A. Vertical Restraints Guidelines

• Pages: 261-286

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APPENDIX A

VERTICAL RESTRAINTS GUIDELINES

As Adopted by the

National Association of

Attorneys General

1. PURPOSE AND SCOPE OF THE GUIDELINES

These Guidelines explain the general enforcement policy of the fifty

state attorneys general who comprise the National Association of

Attorneys General (“NAAG”)1 concerning resale price maintenance

agreements and non-price vertical restraints of trade subject to Sections 1

and 2 of the Sherman Act,2 Section 3 of the Clayton Act3 and analogous

provisions of the antitrust laws of those States which have enacted them.4

In most states the Attorney General is the primary or exclusive

public enforcer of the state’s antitrust laws. The Attorneys General also

represent their states and the natural person citizens of their states in

federal antitrust litigation.5

1. The Attorneys General of American Samoa, Guam, the Northern Mariana

Islands, Puerto Rico and the Virgin Islands and the Corporation Counsel

of the District of Columbia are also members of NAAG.

2. Sherman Act Section 1, 15 U.S.C. § 1 prohibits concerted activity in

restraint of trade. Section 2, 15 U.S.C. § 2 prohibits monopolization,

attempts to monopolize and conspiracies to monopolize any part of trade

or commerce.

3. Clayton Act Section 3, 15 U.S.C. § 14 states in pertinent part “It shall be

unlawful ... to lease or make a sale or contract for sale of ... commodities

... on the condition, agreement or understanding that the lessee or

purchaser thereof shall not use or deal in the commodities of a competitor

or competitors of the seller or lessor where the effect ... may be to

substantially lessen competition or tend to create a monopoly in any line

of commerce.”

4. Citations to the antitrust laws of the States are set forth in 6 Trade

Regulation Reports (CCH) ¶ 30,000 et. seq.

5. Clayton Act Section 4C, 15 U.S.C. § 15c states in pertinent part:

(1) Any attorney general of a State may bring a civil action in the

name of such State, as parens patriae on behalf of natural persons

residing in such State, in any district court of the United States

having jurisdiction of the defendant, to secure monetary relief as

provided in this section for injury sustained by such natural

262 State Antitrust Enforcement Handbook

Vertical restraints are arrangements among businesses operating at

different levels of an industry, e.g., between a manufacturer and a

distributor or between a wholesaler and a retailer. They restrain the way,

or price at which, these firms may buy , sell or resell goods and services.

These guidelines focus primarily on resale price maintenance

agreements, as well as exclusive dealing arrangements6 and other

foreclosure restraints such as tie-ins, which condition the sale of one

product or service on the purchase of a second distinct product or

service.

These guidelines embody a general enforcement policy of NAAG

and its members. Individual Attorneys General may vary or supplement

this general policy to allow for variations in precedents among the

federal circuits, differences in state antitrust laws and the exercise of

their individual prosecutorial discretion. The Guidelines are not a

substitute for properly submitted amici curiae briefs, which focus on the

facts of particular cases. The “rule of reason” inquiry which the

Supreme Court requires to determine the legality of non-price restraints

persons to their property by reason of any violation of sections 1

to 7 of this title.

6. Exclusive dealing arrangements, as the term is used in these Guidelines,

include agreemen ts that a seller deal exclusively with a particular buyer

or group of buyers or that a buyer deal exclusively with a particular seller

or group of sellers. Examples of exclusive dealing arrangements are

exclusive distributorships (also referred to as “exclusive distribution

territories”), requirements contracts and exclusive outlet provisions.

These restraints, especially when air-tight, completely or substantially

foreclose intrabrand competition.

Other vertical restraints such as location clauses, customer restrictions,

areas of primary responsibility and profit pass-over arrangements may

unreasonably restrain trade, but have less tendency to do so. For

example, the imposition of areas of primary responsibility will allow a

supplier to realize most of the objectives of an exclusive distributorship

without extinguishing intrabrand competition. In particular cases these

less suspect restraints may be imposed with anticompetitive intent or may

unreasonably restrain trade. A location clause may effectively foreclose

any intrabrand competition. A pass-over arrangement may have no

purpose other than the penalization of extraterritorial sales with no

countervailing interbrand benefit. See, e.g., Eiberger v. Sony Corp. of

America, 622 F.2d 1068, 1076-81 (2d Cir. 1980). In such cases the

analysis detailed in Section 4 will be applied.

It should be noted that no case has held that any non-price vertical

restraint is per se lawful.