Enforcing the Competition Law in Namibia A Toolkit - cuts ccier

4.6 Vertical AgreementsVertical anticompetitive agreementsinvolve businesses operating atsuccessive stages of a productionprocess. Simply put, in a verticalarrangement, for example bilateral,one party is the supplier of inputs tothe other party’s business activity.Vertical agreements are, generallyspeaking, treated less severely thanhorizontal ones, often under the ruleof reason by competition authorities.Vertical agreements are,generally speaking, treatedless severely than horizontalones, often under the rule ofreason by competitionauthorities. The CompetitionAct 2003 of Namibia doesnot deal with verticalrestrictive agreements in adirect manner.However, to be sure, certain vertical agreements, which have adverse impacton competition in the market, have been uniformly condemned, such as thatof tied sale, exclusive dealing or resale price maintenance.Vertical anticompetitive agreements, which come under competition scrutiny,are usually contractual arrangements between suppliers (manufacturers) anddistributors (retailers), which extend beyond simple arms-length pricing. Theyare usually motivated by the desire for vertical control within a principalagentrelationship, where the principal (the manufacturer) imposes contractualobligations on its agent (the retailer) when delegating responsibility for sellingits good. 41 This is in distinction from vertical restraints based upon dominance,which will be dealt with separately under a section on abuses of dominance.Such agreements may have a benign effect, e.g. by removing pricing distortions,optimising investment levels and eliminating avoidable transaction costs. Theymay also have an adverse effect not only by foreclosing markets to new entrants(which is the standard criticism) but also by dampening competition betweenexisting rivals through restrictions on inter-brand and/or intra-brandcompetition. 42RESTRICTIVE BUSINESS PRACTICESSimilarly as horizontal restraints, it is often viewed that market power at oneor both levels is a necessary condition for vertical restraints to have a substantialadverse effect on competition. With market power present, a number of otherfactors, notably the effects on competition of the subject agreement, and anyindicator of efficiency, which might offset the agreement’s adverse effect oncompetition, should also be taken into account while dealing with these typesof vertical restraints. 43The Competition Act 2003 of Namibia does not deal with vertical restrictiveagreements in a direct manner. The Act merely says, that prohibited agreementsand prohibited practices include parties in vertical relationship, being anundertaking and its suppliers or customers or both. 44Enforcing the Competition Law in Namibia: A Toolkit 37