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VERTICAL RESTRAINTS (OR RESTRICTIONS)

Statistics Directorate    
Definition:
Vertical restraints (or restrictions) refers to certain types of practices by manufacturers or suppliers relating to the resale of their products.

The usual practices adopted in this regard are resale price maintenance (RPM), exclusive dealing and exclusive territory or geographic market restrictions.

Under exclusive dealing and/or exclusive territory, a single distributor is the only one who obtains the rights from a manufacturer to market the product.

Context:
A significant debate exists in the economic literature as to whether this confers monopoly power on the distributor. Usually, the distributor's market power is limited by inter- brand competition. The manufacturer's purpose is normally to provide incentives to the distributor to promote the product and provide better service to customers.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.

Hyperlink:
http://www.oecd.org/dataoecd/8/61/2376087.pdf

Statistical Theme: Financial statistics

Created on Thursday, January 3, 2002

Last updated on Monday, March 17, 2003