Legal Definitions - vertical restraint

Definition: Vertical restraint is a type of restraint of trade that occurs when two or more firms at different levels of distribution (such as a manufacturer and a retailer) agree to limit competition in some way.

For example, a manufacturer might require a retailer to only sell their products and not those of their competitors. This limits competition and can lead to higher prices for consumers.

Vertical restraints can be legal if they are considered reasonable and in the best interests of both parties and the public. However, if they produce a significant anticompetitive effect, they can violate antitrust laws.

Overall, vertical restraints are a way for firms to control the distribution of their products and limit competition, which can have both positive and negative effects on the market.