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60 Antitrust L.J. 67 (1991-1992)
Vertical Restraints: De Facto Legality under the Rule of Reason

handle is hein.journals/antil60 and id is 143 raw text is: VERTICAL RESTRAINTS: DE FACTO LEGALITY UNDER THE RULE OF REASON DOUGLAS H. GINSBURG* I have been asked to discuss the effect of Continental T.V., Inc. v. GTE Sylvania Inc.' upon antitrust jurisprudence. While that case has no doubt had some very broad and general effects, my discussion concerns the effect it has had specifically upon the subject to which it was immediately addressed: the law governing vertical nonprice restraints on the distribu- tion of products. These are restraints, such as territorial, locational, and customer restrictions, and selective dealing arrangements, that a party at one level in the chain of distribution imposes upon another at a lower level with respect to a particular brand. In this article, I report the results of an inquiry into how the federal courts of appeals have applied the rule of reason to vertical nonprice restraints under GTE Sylvania, and the results that they have generated. From those results, I conclude that non-monopolists have been effectively freed from antitrust regulation of vertical nonprice restraints. I. BALANCING IN GTE SYLVANIA In GTE Sylvania the Supreme Court established that vertical nonprice restraints are to be treated as different in kind from similar restraints imposed as the result of a horizontal agreement. The principal reason given for the distinction is that a vertical restraint, acting upon only one of multiple brands competing in a product market, does not pose the same threat to consumer welfare as a restraint imposed by an agreement among the manufacturers or retailers of the various competing brands. [W]hen interbrand competition exists, said the Supreme Court, it provides a significant check on the exploitation of intrabrand market power.'2 *Judge, U.S. Court of Appeals for the District of Columbia Circuit. The author is grateful to Erik S. Jaffe for his prodigious research effort. '433 U.S. 36 (1977). 21d. at 52 n.19.