Page 77 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

restraints from a procompetitive one. Note that it is not sufficient to simply

look at the effects of the vertical restraint on rivals. Regardless of whether
the network has anticompetitive or procompetitive effects, rivals will

experience a decline in market share.

Vertical restraints, even when used by a dominant firm, can promote
efficiency. One such use is the prevention of free riding. For example, a

manufacturer may use exclusive dealing to prevent dealers from promoting
its product to lure consumers into the store but then selling them a rival's

product. Alternatively, a manufacturer may require dealers to set a higher
retail price to induce retailers to provide important service to consumers or to

carry additional inventories to reduce the chances that consumers will be

unable to find the product if demand is particularly strong. Finally, upstream
manufacturers may use exclusive territories to provide its retailers with a

stronger incentive to promote its product, thereby promoting an increase in

interbrand competition at the expense of intrabrand competition.
Abuse and intellectual property. Competition policy and intellectual

property rights (including patents, trademarks, copyrights, registered
industrial designs, and integrated circuits) are receiving increasing attention

from policymakers. Intellectual property rights have figured importantly in
several recent competition law cases in western jurisdictions. There are

various reasons for this phenomenon. First is the growing importance of

knowledge-based industries and the role of technology in such industries.
Second, as the world has shrunk and the notion of distinct national markets

has become less reflective of commercial realities, there appears to be a
growing focus on intellectual property rights as a way to facilitate market

control.
In most cases the exercise of intellectual property rights is consistent

with the goals of competition policy. Such rights generally strengthen

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