A cooperation agreement between parties at different levels of commerce, but in the same chain of distribution. A vertical scheme violates antitrust law if it involves price-fixing or any other recognized restraint on trade.
See Antitrust Law
Vertical scheme
One type of vertical scheme is an exclusive-dealing arrangement between a manufacturer and a retailer. For instance, an office supply store promises to only sell paperclips made by a single company. In exchange, the company promises to sell paperclips only to this particular store.
Other vertical schemes can be much more complex. For instance, a producer of crude oil might promise preferential prices to a single refinery. The refinery could convert some of the crude oil into plastic, and promise to sell all of the plastic to a single bottle manufacturer. The bottle manufacturer offers preferential prices to a single beverage company. The beverage company can now mark down its prices on water, outsell its competitors, and make record profits. The beverage company can then lend money to the crude oil producer at no interest to compensate it for the ultra-low prices made available to the refinery. Through various instruments, each party at these different levels of commerce can benefit economically because they are part of the same distribution chain that turns crude oil into the plastic bottles used to store water. Competitors that are excluded from this distribution chain then have an incentive to challenge this vertical scheme in court as a violation of antitrust law.
"Fruehauf Corporation . . . the nation's largest manufacturer of truck trailers, petitions to review and set aside a decision and order of the Federal Trade Commission (“FTC”) finding that Fruehauf's 1973 acquisition of Kelsey-Hayes Company . . . a manufacturer of components for the motor vehicle and related industries, violated § 7 of the Clayton Act, 15 U.S.C. § 18 . . . ."
"A vertical merger, unlike a horizontal one, does not eliminate a competing buyer or seller from the market. It does not, therefore, automatically have an anticompetitive effect, or reduce competition. Accordingly, a vertical merger, as distinguished from price-fixing boycotts, or similar arrangements between competitors, does not amount to a Per se substantial lessening of competition."
"[T]he competitive significance of a vertical merger results primarily from the degree, if any, to which it may increase barriers to entry into the market or reduce competition by (1) foreclosing competitors of the purchasing firm in the merger from access to a potential source of supply, or from access on competitive terms, (2) by foreclosing competitors of the selling firm . . . from access to the market or a substantial portion of it, or (3) by forcing actual or potential competitors to enter or continue in the market only on a vertically integrated basis because of advantages unrelated to economies attributable solely to integration. The ultimate objective, however, is to determine whether and how the particular merger in issue may lessen competition, i. e., what its anticompetitive effect on the market, if any, is likely to be."