Chicago School analysis on vertical restraints

Abstract

In the early 1930s, an ideological movement developed at the University of Chicago that, having started by focusing on the economy, became known as the Chicago Economic School. One of the cornerstones of this school was the renewal of competition policy to the consumer welfare (consumer welfare), understood here in a broad sense. For Bork, economic efficiency corresponds to the maximization of wealth, which is equivalent to the welfare of the consumer, since it allows lower costs, lower prices and increased production of products and services desired by the consumer. The Chicago School role in vertical restraints rehabilitation, using empirical analysis, in order to demonstrate its competitive and efficiency effects, hitherto considered anti-competitive, exerted a significant influence on US competition law and, in recent years, in European competition law, justifying the analysis of its main characteristics. The explanation found by Chicago School, which, unlike the Harvard School, was able to point to efficiency as a justification for these practices, called by Williamson nonstandard, is based on the overcoming by Chicago School of the perfect competition model advocated by price theory. The Chicago School's analysis of these restrictions also accepts the existence of market failures in the relationships between distributors and producers resulting from the transaction costs. This paper aims at demonstrating the existence of a continuity relationship between the Chicago School and the Theory of Transaction Costs, showing that the approach by the Chicago School to vertical restrictions reveal, in several aspects, the proximity to the Transaction Cost Theory and the rejection of the perfect competition model. The analysis of economic aspects of vertical restraints performed by Chicago School, forestalling the Transaction Cost Theory, assumes particular importance as it has been shaping the US and European antitrust policy towards vertical agreements, challenging the competition law approach in the 21st Century.