The Anticompetitive Effects of Vertical Most-Favored-Nation Restraints and the Error of Amex

15 Pages Posted: 14 Feb 2019 Last revised: 27 Mar 2019

See all articles by Dennis W. Carlton

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: February 1, 2019

Abstract

This paper illustrates the underlying economic logic behind the anticompetitive effects of what Ralph Winter and I have labeled vertical most favored nation restraints in Carlton and Winter (2018). Those are restraints in which one supplier tells a retailer that the retailer cannot set the retail price of its product higher than that of a rival, even if its wholesale price is higher than that of its rival. I explain the possible anti-competitive effect of such restraints. I then apply the reasoning to credit cards and finally, using the economic framework developed, explain the economic errors in the Court’s recent Amex decision.

Keywords: Antitrust, Most-Favored-Nation Restraints, American Express

JEL Classification: L00, L14, L22, L40, L41, L42, L49

Suggested Citation

Carlton, Dennis W., The Anticompetitive Effects of Vertical Most-Favored-Nation Restraints and the Error of Amex (February 1, 2019). Columbia Business Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3328628 or http://dx.doi.org/10.2139/ssrn.3328628

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