Vertical scheme examples

One type of vertical scheme is an exclusive-dealing arrangement between a manufacturer and a retailer.  For instance, an office supply store promises to only sell paperclips made by a single company.  In exchange, the company promises to sell paperclips only to this particular store.  

Other vertical schemes can be much more complex.  For instance, a producer of crude oil might promise preferential prices to a single refinery.  The refinery could convert some of the crude oil into plastic, and promise to sell all of the plastic to a single bottle manufacturer.  The bottle manufacturer offers preferential prices to a single beverage company.  The beverage company can now mark down its prices on water, outsell its competitors, and make record profits.  The beverage company can then lend money to the crude oil producer at no interest to compensate it for the ultra-low prices made available to the refinery.  Through various instruments, each party at these different levels of commerce can benefit economically because they are part of the same distribution chain that turns crude oil into the plastic bottles used to store water.  Competitors that are excluded from this distribution chain then have an incentive to challenge this vertical scheme in court as a violation of antitrust law.