Document Type

Article

Publication Date

1979

Center/Program

Center for Law and Economic Studies

Center/Program

Center for Contract and Economic Organization

Abstract

Vertical restrictions between franchisors and their dealers have long been a thorny problem in antitrust law. Richard Posner's characterization of the case law as a "fiasco" and a "doctrinal shambles"1 is echoed by many other commentators.2 Perhaps partly because of the intellectual confusion in the area, the Supreme Court recently made an apparently sharp change in direction. In Continental T V, Inc. v. GTE Sylvania Inc.3 the Court reversed the decade-old Schwinn4 per se doctrine, holding that at least some vertical restrictions deserve a rule of reason test. Whether this decision will prove a more durable precedent than Schwinn remains to be seen. Robert Bork, an enthusiastic supporter of the overthrow of Schwinn, has counseled caution in projecting the implications of GTE Sylvania,5 and the FTC's interpretation of the case in its decisions regarding territorial restrictions by soft drink bottlers suggests that the magnitude of the change from the Schwinn standard indeed might have been exaggerated.6 Even if GTE Sylvania is not subsequently overturned, the next few years will see a continuing flow of litigation to define the boundaries of the rule of reason test as applied in this new context.

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