Vertical Restraints and Antitrust Policy

Antitrust policy toward vertical restraints is the biggest substantive issue facing antitrust. (The biggest procedural/institutional/ administrative issue is overlapping enforcement authority-federal, state, and foreign, especially EU.) The Justice Department's suit against Microsoft put the issue on the map. I shall touch on exclusive dealing, tying, bundling, and loyalty rebates, but I warn the reader that the touch will in places be quite light. I want to begin by correcting the widespread impression that the issue of what if anything to do about vertical practices is an issue between the Chicago school of antitrust policy and the so-called postChicago school in any but an historical sense. The possibility that vertical practices, or as I would prefer to call them unilateral abuses of market power, can reduce economic welfare was recognized almost half a century ago by Aaron Director (the doyen of Chicago antitrust thinking) and Edward Levi in their discussion of the Standard Fashion