A Study On Vertical Restraints Dominated By Large Foreign Retailers In China

Vertical restraints are competition restrictions in agreements between firms or individuals at different levels of the production and distribution process. During the last two decades, large retailers have grown quickly and become dominant in the supply chains of various industries all over the world. The dominant retailers not only impede the development of small and medium retailers, but also have more and more conflicts with suppliers by way of vertical restraints. With the retail industry grows rapidly, more and more scholars begin to focus on vertical restraints dominated by large-scale retailers. Large foreign retailers’expansion in China and their vertical restraints have caused serious consequences. Most researchers have done some research on allowance fee, and they have not analyzed vertical restraints dominated by large foreign retailers in China systematically.Researchers worldwide have increasingly paid heed on the influence of dominant retailers on suppliers and supply chains. The study has significant meanings on legislation of anti-poly law and maintenances of fairly-competing market. The main contents are as followed:(1)The first part is a review of previous studies. More attentions are paid to the research on vertical restraint dominated by retailers, especially with the quick expansion and dominant status in Chinese retailing of foreign retailers, the discussion on industrial relation effect and economic risks caused by opening retailing market makes the problem become highlighted topic. This paper reviews the research on vertical restraints dominated by retailers, what’s more, analyzes various welfare effects and the corresponding regulatory policy to provide some instructions and experience for anti-monopoly policies of retailing industry in China.(2)Based on the previous studies, this paper introduced a few kinds of forms of vertical restraints, then analyzed the effect of the vertical restraints dominated by large foreign retailers, including the effect to upstream suppliers and downstream consumers and small and medium-sized retailers. In this part, based on the conclusion that the results of cooperative game between retailers and suppliers will be better than the result of non-cooperative game, a game theory model of a dominant retailer and a supplier was built. With the change of variables, we can learn that the income from vertical restraints and the opportunity cost of finding alternatives are the main factors which influenced the behaviors of retailers and suppliers.(3) This part is aimed at providing theoretic support for policy deciding and proposing some new ideas about how to optimize the types of retail establishment. Meanwhile, large foreign retailers and suppliers need establish cooperative relations to broaden the integral and mutual interests, to form a win-win situation.Innovation of this paper:1. Innovation of game model. The model explains the reason when and why dominant retailers implement vertical restraints to suppliers.2. Based on the regulation by the government, Establishing cooperative relations is essential to solve the problem between large foreign retailers and suppliers...