Unpacking Antitrust: What Are Vertical Restraints?

The Short Answer: Companies that operate on different levels of the supply or distribution chain are vertical to one other. For example, a parts supplier and manufacturer. A manufacturer and a distributor. A distributor and retailer. Vertical companies don't compete with one another. They're more likely business counterparties.

An agreement reached by two or more vertical actors that restrains competition can be illegal under the antitrust laws. Whether a vertical agreement is illegal is generally determined according to the rule of reason—a balancing test that weighs harm to competition against the procompetitive justifications behind the restraint.

Have I Reached an Agreement?