Economic Effects Of Vertical Restraints In Car Sales

In recent years, automobile antitrust cases in China have happened frequently in which the behavior of vertical restraints is particularly prominent, there is a big relationship between this and our irrational longitudinal organizational structure in car dealership. In 2005,the implementation of the "auto brand sales management approach" established the exclusive license distribution model of single brand automobile in our country, based on the "approach" lack of constraints and punitive measures on automobile manufacturers, resulting in the strong position of automobile manufacturers objectively, and thus contributing to the monopoly closed pattern of the manufacturers to control vehicle sales and after-sales.China’s current longitudinal organizational structure facilitated the implementation of the behavior of vertical restraints competition,which included resale price maintenance, exclusive area, exclusive dealing and so on.However, the policy choices of vertical restraints have been a difficult decision for the relevant government departments. This is because the conclusion of the existed literature on the economic effects of vertical restraints is uncertain,while the study about the economic effects of vertical restraints in the field of automobile dealerships is rare. Therefore, this paper choose the economic effects of vertical restraints in car dealership as the research object, in order to provide relevant policy recommendations for antitrust policy legislation and law enforcement agencies.In this paper, the core mainly has three parts. First, this paper introduced vertical restraints enforcement mechanisms and efficiency effects of automobile sales, and summarized the longitudinal organizational structure of vehicle sales at home and abroad then paved the way to explain the performance of the automobile market in different countries from the longitudinal organizational structure. On this basis, while taking into account the car dealership vertical restraints generate efficiency effects, it also has anti-competitive effects, that is why weighing the net effect of vertical restraints is very necessary for the whole society. In this paper, we constructed models to analyze the relationship between longitudinal restrict competition within the brand and as well as the brand competition, the following conclusions are as follows:(1)Resale price maintenance within brands should give priority to efficiency effects in which antitrust agencies need to be carefully intervened; exclusive regions within brands are mainly anti-competitive effects, in this case, antitrust authorities is necessary to intervene.(2) when the implementation of vertical restraints means including multi-brand sales’ restrictions franchise,exclusive distribution and so on, the degree of difference between brands or between brands is low enough(that is, non the less intense price competition), monopolistic producers have more incentive to implement franchise to get high profits, market forces subsequently can be improved, but its benefits are at the expense of consumers’ private benefits and social total welfare, and those will increase with the improvement of difference degree between car brands and within the brands. Secondly, the recent monopoly case of Mercedes-Benz presented a problem about the maintenance of vehicle and parts dual resale price, this phenomenon should be attributed to Chinese unique organizational structure in automotive aftermarket: the monopoly franchise of Genuine Parts, the closure of information about maintenance technology, the distinctness of "lock-in effect" in after-sales. Then compared the maintenance of single vehicle resale price with the economic effects of dual resale price in vehicle and aftermarket, proposed that the present organizational structure of aftermarket utilize tie-in sale means that vehicle with accessories to achieve the maintenance of dual resale price, reduced vehicle prices while greatly improving the accessories’ price level and severely damaging consumers’ benefits.Furthermore, according to the analysis results of longitudinal restrictions on economic effects in car dealership, this paper presents relevant policy recommendations as follows:(1) the urgent need to adjust our longitudinal organizational structure in car dealership, where the key is to get rid of single distribution model, break the original accessories supply system designed by brand cars, disclose vehicle maintenance technology information;(2) intellectual property rights of vehicle business accessories should not be a exemptional reasaon to hurt competition;(3) anti-monopoly legislation and law enforcement agencies should pay attention to studies about vertical restraints on economic effects in car dealership in order to improve scientificity of legislation and enforcement.