┌─────────────────────────────────────────────────────────────────────────┐
│                                                                         │
│                                                                         │
│                                                                         │
│           _  __             ____                           _            │
│          | |/ /___ _   _   / ___|___  _ __   ___ ___ _ __ | |_          │
│          | ' // _ \ | | | | |   / _ \| '_ \ / __/ _ \ '_ \| __|         │
│          | . \  __/ |_| | | |__| (_) | | | | (_|  __/ |_) | |_          │
│          |_|\_\___|\__, |  \____\___/|_| |_|\___\___| .__/ \__|         │
│                    |___/                            |_|                 │
│                                                                         │
│                                                                         │
│                                                                         │
│                                                                         │
└─────────────────────────────────────────────────────────────────────────┘

SILICON VALLEY ANTITRUST V.5
BOALT HALL SCHOOL OF LAW (2015)
Hanno Kaiser

CLASSIFICATION OF AGREEMENTS (VERTICAL/HORIZONTAL; UPSTREAM/DOWNSTREAM)

                ┌───────┐                  ┌───────┐
   / \    │     │Farmer │<---Horizontal--->│Farmer │
    │     │     └───────┘                  └───────┘
    │   Goods       │                          │    
    │    flow       │                      Vertical 
    │    down       │                          │    
    │     │        \ /                        \ /    
    │     │     ┌───────┐                  ┌───────┐
    │     │     │Miller │ From Miller's    │Miller │
    │     │     └───────┘ perspective:     └───────┘
    │     │         │     - UPSTREAM:          │    
    │     │         │       Wheat market       │    
    │     │         │     - DOWNSTREAM         │    
    │     │        \ /      Bread market      \ /   
    │     │     ┌───────┐                  ┌───────┐
    │     │     │ Baker │                  │ Baker │
    │     │     └───────┘                  └───────┘
  Money   │         │                          │    
  flows   │         │                          │    
    up    │         └─────────────┬────────────┘    
    │     │                       │                 
    │     │                      \ /                 
    │     │                 ┌───────────┐           
    │    \ /                │ Consumers │           
                            └───────────┘           

THE SIMPLIFIED ANTITRUST ECONOMY (UPSTREAM/DOWNSTREAM)
- Goods flow "downstream" from raw material to finished product
- Money flows upstream
- Finished goods (= consumer goods) are most valuable; the consumer "consumes"
  their value
- How does the consumer get money to pay for the goods? In the form of wages,
  paid by the Baker, the Miller, and the Farmer. The Consumer's labor is another
  upstream input into the making of products, as they flow downstream.

VERTICAL AND HORIZONTAL AGREEMENTS
- "Cooperate vertically, compete horizontally"
- Vertical agreements are essential for adding value to goods and pushing them
  from the raw material stage down to the consumer (e.g., material supplier,
  manufacturer, wholesaler, retailer, customer)
- Vertical agreements are essential for the functioning of the economy; they are
  ubiquitous and encouraged
- Horizontal agreements among competitors, however, are in a suspect class.
  Competitors are supposed to compete, not enter into agreements. (Many horizontal
  agreements are, of course, benign.)
- The legal treatment of vertical and horizontal agreements is therefore
  different:

  * Vertical agreements are analyzed exclusively under the ROR [1]
  * Horizontal agreements are in a "suspect class" and are analyzed under the ROR
    or the PER SE rule
	
[1] Arguably, "per se tying" is an exception, but not really. Tying requires a
    showing of market power and of foreclosure effects in the tied product market.
    Those are typical ROR inquiries. The "per se" nature of tying is a holdover from
    old case law.