Pushkinskaya st. 43. office 10
Rostov-on-Don, Russia
344082
e-mail: info@hjournal.ru 
tel. +7(863) 269-88-14

cubsEN (2)

The Impact of Institutional Changes on the Vertical Interaction in Trade

The Impact of Institutional Changes on the Vertical Interaction in Trade

Journal of Institutional Studies, , Vol. 9 (no. 4),

The Law on Trade was adopted in Russian Federation in 2009. Its main aim was to protect suppliers because suppliers have significantly less bargaining power than retailers (the weak position of suppliers in the bargaining power due to the difficulty of switching to alternative buyers, i.e., outside options (Dzagurova, Agamirova, 2014). The process of adoption of the law and its further application was accompanied by discussions among economists (Avdasheva, 2012; Radaev, 2009, 2010, 2011a, 2011b, 2011c, 2012; Novikov, 2009). On 15 July 2016, the new version of law “On the Principles of State Regulation of Trade in the Russian Federation” from 28.12.2009 has been enacted. This article analyzes the impact of change in regulation norms on the parties engaged in vertical interaction. In particular, the new law limits the premiums that suppliers pay to retailers for the sale of certain amount of goods and services from 10% to 5%. Besides that, it became a common practice to include promotion, logistics, preparation, processing and packaging in rewards. Also, changes involved extended payment terms reduction. However, new regulation norms can create serious problems for small suppliers whose rights had to be protected. In particular, it happens because of the absence of a classification of such vertical restraints that take into account the motives of the parties involved.


Keywords: antitrust law; retailers; suppliers; vertical restraints; relation-specific investments; adverse selection; Federal Law-№ 273; Federal Law-№ 381

References:
  • Agamirova, M. E. (2015). European methodology of analysis vertical restraints under rule of reason in context of cooperative relation specific investments. Journal of Institutional Studies, 7(3), 64–75. (In Russian).
  • Agamirova, M. E. and Dzagurova, N. B. (2014). The classification of vertical restraints. Modern Competition, 6(48), 20–30. (In Russian).
  • Agamirova, M. E. and Dzagurova, N. B. (2016). The legality of vertical restraints by the rule of reason and the character of the specific investments. Economic Politics, 11(6), 122–137. (In Russian).
  • Avdasheva, S. B. (2012). On the Preliminary Results of the Law on Trade. Bulletin of competition policy, 5. (In Russian).
  • Akerlof, G. A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics, 84, 488–500.
  • Bain, J. S. (1972). Essays on Price Theory and Industrial Organization. Boston, Little, Brown and Company.
  • Bain, J. S. (1968). Industrial Organization. Second Edition. New York, Wiley. 
  • Dzagurova, N. B. and Agamirova, M. E. (2014). Criteria for selfish and cooperative relation-specific investments distinction. Journal of Institutional Studies, 6(4), 65–76. (In Russian).
  • Mason, E. S. (1949). The Current Status of the Monopoly Problem in the United States. Harvard Law Review, 62(8), 1265–1285.
  • Dobson, P. W. (2005). Exploiting buyer power: lessons from the British grocery trade. Antitrust Law Journal, 2, 529–562.
  • Dobson, P. W. (2008). Buyer-Driven Vertical Restraints. in Report: The pros and cons of vertical restraints, pp.102–134.
  • Hovenkamp, H. (2010). Harvard, Chicago, and Transaction Cost Economics in Antitrust Analysis. Antitrust Bulletin, 55(3), 613–662.
  • Klein, B. (2009). Competitive Resale Price Maintenance in the Absence of FreeRiding. Antitrust Law Journal, 76(2), 431–481.
  • Mann, H. M. (1966). Seller Concentration, Barriers to Entry, and Rates to Return in Thirty Industries, 1950–1960. Review of Economics and Statistics, 48, 296–307.
  • Mathewson, F. and Winter, R. (1987). The Competitive Effects of Vertical Agreements: Comment. American Economic Review, 77, 1057–1062.
  • Mathewson, F. and Winter, R. (1998). The Law and Economics of Resale Price Maintenance. Review of Industrial Organization, 13, 57–84.
  • Novikov, V. V. (2009). Qui Prodest? (the unintended consequences of the implementation of the draft Law on Trade). Economic policy, 4, 190–199. (In Russian).
  • Posner, R. A. (1979). The Chicago School of Antitrust. University of Pennsylvania Law Review, 925–948.
  • Posner, R. A. (1977). The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision. University of Chicago Law Review, 45(1), 1–20.
  • Posner, R. (1999). The Problematics of Moral and Legal Theory. Cambridge: Harvard UP.
  • Radaev, V. V. (2009). Market power and market exchange: the relationship of retailers with suppliers. Russian journal of management, 7(2), 330. (In Russian).
  • Radaev, V. V., Kotelnikova, Z. V. and Markin, M. E. (2009). The Development of the Russian retail market: regulatory measures and their consequences (the Law on Trade in the mirror of research). Analysis LACY (Vol. 4). Publ., Higher School of Economics. (In Russian).
  • Radaev, V. V. (2010). The administration of market rules (as developed by the Federal law on trade). Public administration issues, 3, 535.
  • Radaev, V. V. (2011a). Who holds power in consumer markets: the relationship between retailers and suppliers in contemporary Russia. Publ., Higher School of Economics, 384. (In Russian).
  • Radaev, V. V. (2011b). How the new rules of exchange on markets are justified. Economics’ issues, 3, 104–123. (In Russian).
  • Radaev, V. V. (2011c). The return of the state regulation of internal trade in Russia: analysis of the process of development, discussion and the first consequences of the adoption of the Federal law on trade. State regulation of trade networks: basics and controversies. Analytics LACY (Vol. 8). Publ., Higher School of Economics, pp. 8–71. (In Russian).
  • Radaev, V. V. (2012a). Who benefited from the adoption of the Law on Trade? Public administration issues, 2, 33–59. (In Russian).
  • Radaev, V. V. (2012b). What’s changed the Law on Trade: a quantitative analysis. Economic policy, 1, 118–140. (In Russian).
  • Telser, L. (1960). Why Should Manufacturers Want Fair Trade? Journal of Law and Economics, 3, 86–105.
  • Silcock, T. (1938). Some Problems of Price Maintenance. Economic Journal, 48, 42–51.
  • Spengler, J. (1950). Vertical Integration and Antitrust Policy. Journal of Political Economy, 53, 347–352.
  • Williamson O. (1981). The Economics of Organization: The Transaction Cost Approach. The American Journal of Sociology, 87(3), 548–577.
Publisher: Ltd. "Humanitarian perspectives"
Founder: Ltd. "Humanitarian perspectives"
Online-ISSN: 2412-6039
ISSN: 2076-6297