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The Legality of Vertical Restraints by the Rule of Reason and the Character of the Specific Investments

Author

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  • Agamirova, Maria Å.

    () (National Research University — Higher School of Economics)

  • Dzagurova, Nataliya B.

    () (National Research University — Higher School of Economics)

Abstract

The underinvestment in the specific assets due to the “hold up” is one of the key issues in the theory of the firm. Till the very end of the twentieth century discussing the “hold up” problem researchers considered only the so-called “selfish” relation-specific investments. But later their attention was switched to the analysis of another specific investments type, named “cooperative” or “cross” investments, which is much more risky than the selfish investments. Besides that, the riskiness of such investments depends on their specifity degree — the specific investments can be partly specific or full specific. In its turn, the degree of specifity determined by the partners’ ability to benefit from selfish or cooperative specific investments in contacts with “alternative” contractors. If such gains equal zero, that specific investments (cooperative or selfish) are full specific to the “main” partner. Respectively, if the gains from partnership with “alternative” contractors are more than zero, that such specific investments are partly specific to the “main” partner. Unfortunately the present regulatory documents, determining the application the rule of reason, don’t take into account the character of specific investments. The negative consequences of such approach are illustrated in the first part of the article, where the court’s decision in case of Pierre Fabre Dermo-Cosmetique SAS (PFDC) v. President de l’Autorite de la concurrence, Ministre de l’Economie, de l’Industrie et de l’Emploi is analyzed. The second part of the article is dedicated to the discussion of possible solutions of this problem.

Suggested Citation

  • Agamirova, Maria Å. & Dzagurova, Nataliya B., 2016. "The Legality of Vertical Restraints by the Rule of Reason and the Character of the Specific Investments," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 122-137, December.
  • Handle: RePEc:rnp:ecopol:ep1666
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    References listed on IDEAS

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    1. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 1-48.
    2. Oliver Hart, 2013. "Noncontractible Investments and Reference Points," Games, MDPI, Open Access Journal, vol. 4(3), pages 1-20, August.
    3. Дзагурова Наталия Борисовна & Агамирова Мария Евгеньевна, 2014. "Критерии Разграничения Эгоистических И Кооперативных Специфических Инвестиций," Journal of Institutional Studies Journal of Institutional Studies (Журнал институциональных исследований), CyberLeninka;Общество с ограниченной ответственностью «Гуманитарные перспективы», vol. 6(4), pages 65-76.
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    9. Chiara Fumagalli & Massimo Motta & Thomas Rønde, 2009. "Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion," Working Papers 2009.120, Fondazione Eni Enrico Mattei.
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    More about this item

    Keywords

    cooperative relation-specific investments; vertical restraints; antitrust; rule of reason; e-commerce;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • K - Law and Economics

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