Retail Distribution Channel Barriers to International Trade
Posted: 30 Jan 1999
Abstract
Disputes have arisen between the United States and Japan over alleged vertical distribution channel barriers to the importation of U.S. automobiles, auto parts, and color film into the Japanese market. This article provides an analytic framework for assessing the role of vertical restraints as barriers to international trade. It begins with an overview of the several revolutions that have occurred in retail distribution, noting the historical trend toward larger full-line stores more likely than small single-unit retailers to stock imported items. Because Japan has lagged in experiencing those revolutions, securing retail distribution channels is more difficult. How importers can overcome distribution channel barriers is examined through case studies of the entry into the U.S. market of Volkswagen and later Nissan. The difficulties of combatting vertical distribution channel restraints are illustrated through a survey of the Federal Trade Commission's efforts to open up exclusivity arrangements in U.S. auto parts markets. The analysis then turns to the Kodak - Fuji dispute, focusing on two main points -- the first mover advantage often held by market incumbents and ways by which those advantages can be overcome, and the necessity of establishing highly motivated on-site supervision of distribution activities in overseas markets. The article concludes that vertical distribution channel restraints are sufficiently complex and fact-dependent that efforts to enforce antitrust policies toward them, either extraterritorially or through international cooperation, are not likely to be successful.
JEL Classification: F13
Suggested Citation: Suggested Citation