To be sure, another legacy of the Chicago revolution was a more nuanced treatment of horizontal restraints as well. Decisions like BMI and Rothery move away from per se treatment of some horizontal restraints expressly to permit efficiencies. This slogan understates the competitive problems that can result from vertical restraints. Analyzing vertical restraints is complicated by the variety of forms they take. If the supplier lowers price to someone else, then the buyer's price will be lowered to match.
Coordination works better if firms have little incentive to cheat to begin with.
Industry witnesses pointed out that the most favored customer clauses set a price floor, and they would be reluctant to cut price to any customer, because they would then have to cut price to the federal government and to states with similar clauses in their contracts. These facilitating coordination effects were also one object of the FTC's Ethyl litigation, and the Department of Justice's consent order prohibiting anticompetitive practices in the electrical equipment industry. The second kind of horizontal effect from vertical practices is exclusion, or, more generally, raising rivals' costs. Vertical restraints can harm competition by creating conditions in which downstream firms must participate in, or accede to, what we might call an involuntary or coerced cartel. The restraints may increase the marginal costs of some downstream firms, inducing them to reduce output and raise price.