Vertical Restraints Facilitating Horizontal Collusion: ‘Stretching’ Agreement in a Comparative Approach

Posted by Social Science Research Network

Vertical Restraints Facilitating Horizontal Collusion: ‘Stretching’ Agreement in a Comparative Approach Murilo Lubambo (University College London)

Abstract: This article discusses the approaches of the European Union (EU) and of the United States (US) to the notions of agreement and concerted practice applied to horizontal collusive consequences of vertical restraints. I conclude that networks of vertical restraints blur the differences between vertical and horizontal agreements; therefore, both options of attack are available for enforcers in the EU and the US context. If the analysed vertical restraints are parallelly adopted by agreement, they should be deemed illegal as long as they restrict competition producing collusive consequences. In the absence of explicit coordination to adopt the practice, I suggest first looking for a stretched concept of horizontal agreement or a broadly interpreted concept of concerted practice, including unilateral ‘communication’ that intentionally reduces uncertainty. Even when the analysed practices are adopted individually and not by all firms, they can represent a commitment to focal points, observable by market players, thus amounting to communication of intent. If that is not possible, I then propose that an analysis of market power, incentives, coercion and induction should guide the finding of an illegal vertical agreement and base the analysis of the consequences. The agreement/concerted practice path is an appropriate, feasible and coherent way to deal with vertical restraints facilitating horizontal tacit coordination, but that does not exclude alternative effective enforcement mechanisms.