The Justice Department yesterday unveiled a new set of guidelines for vertical antitrust restraints that could make it easier for some manufacturers and distributors to enter into exclusivity arrangements without fear of antitrust prosecution.
Department officials downplayed the release of the long-awaited guidelines as representing no change in law or policy, but the announcement was immediately attacked by Sen. Howard Metzenbaum (D-Ohio), a longtime foe of Reagan administration antitrust policy.
"These guidelines will encourage restraints which limit free and open competition," Metzenbaum said in a statement. "This apologia for restrictive business practices will cost consumers in higher prices and fewer choices."
Under the new guidelines, the Justice Department said it would set up "safe harbors" of vertical trade practice, with the main one specifying that the department will not challenge any vertical arrangement that involves firms with less than 10 percent of the particular market. "This provision reflects the antitrust division's belief that where firms have less than a 10 percent market share, a vertical practice carries no anticompetitive danger," said J. Paul McGrath, the assistant attorney general for antitrust. "The 10 percent screen should dispose of the vast quantity of vertical cases." The other "safe harbor" protections involve more complicated technical criteria.
The guidelines apply to companies operating at different points in the chain between manufacturer and consumer. Vertical restraints restrict the conditions under which one or more companies in the chain can sell merchandise or services. For example, a manufacturer could restrict the territory in which one distributor could sell a product, or require a distributor to buy products only from that manufacturer (or vice versa). The guidelines also affect "tying arrangements," under which a seller requires that a buyer purchase one product as a condition of purchasing another item.
The department said vertical restraints can help competition by lowering distribution costs, allowing the entry of new manufacturers into markets.