A. NAAG Vertical Restraints Guidelines

• Pages: 2827-2849

Appendix A-iii

CONTENTS

1. Purpose and Scope of the Guidelines............................................................. 1

2. Categorization of Restraints........................................................................... 3

2.1 Categorizing Price and Non-price vertical restraints ....................... 4

2.2 Categorizing Horizontal and Vertical Restraints.............................. 5

2.3 Dual Distribution.............................................................................. 6

3. The Potential Effects of Non-price Vertical Restraints of Trade................... 6

3.1 Economic Theories Concerning the Effects of Vertical Restraints.. 7

3.2 Pro-competitive Effects of Non-price Vertical Restraints................ 8

3.2A Increasing Interbrand Competition ............................... 8

3.2B Eliminating Free-riding................................................. 9

3.2C Retailer Certification of Quality ................................... 9

3.2D New Entry ................................................................... 10

3.3 Anticompetitive Effects of Non-price Vertical Restraints ............. 10

3.3A Elimination of Intrabrand Competition....................... 10

3.3B Facilitation of Collusion.............................................. 10

3.3C Exclusion of Competitors............................................ 10

3.3D Allocative Inefficiency from Retail Promotion

Induced by Vertical Restraints.................................... 11

3.3E Reinforcement of Oligopolistic Behavior ................... 11

4. The Rule of Reason Analysis of Non-price Vertical Restraints of Trade.... 11

4.1 Intrabrand Effects........................................................................... 12

4.2 Fungible and Highly Differentiated Products ................................ 12

4.3 Multiple Exclusive Distributorships............................................... 12

4.4 Dealer Involvement in the Imposition of a Restraint..................... 13

4.5 The Requirement and Performance of Additional

Services under Vertical Restraints ................................................. 14

4.6 Natural Longevity v. Contractual Longevity of Restraints ............ 14

4.7 Concentration and Coverage of the Markets.................................. 15

4.8 Indicia of Tacit Collusion or Conscious Parallelism...................... 16

4.9 Entry Barriers................................................................................. 16

4.10 Effect on Consumer Choice ........................................................... 17

4.11 Miscellaneous Factors.................................................................... 17

5. Tying Arrangements .................................................................................... 17

5.1 Tying Arrangements Which Are Per Se Unlawful......................... 18

5.1A Distinct Products......................................................... 18

5.1B Impact on Commerce .................................................. 19

5.1C Market Power Sufficient to Make “Forcing”

a Probable Outcome.................................................... 19

5.2 Analysis of Tying Arrangements Under the Rule of Reason......... 20

5.2A Degree of Product Differentiation of the

Tying Product.............................................................. 20

5.2B Coverage and Entry Barriers ....................................... 20

6. Market Definition ........................................................................................ 20