The Jones Chemical Company is considering its next purchase of the cardboard barrels in which it packages much of its output. The salesman from Smith Paper Products suggests that his firm be given preference, since it purchases large quantities of chemicals from Jones. He even hints that those purchases will be increased if Jones will make the "right" decision in regard to its orders. This prediction proves to be correct, after Jones purchases its barrels from Smith. These firms are engaging in a common business practice which has come to be called "reciprocity." This modern industrial version of the ancient practice of "you scratch my back, and I'll scratch yours" may seem to be an innocuous and almost inevitable concomitant of the relationships which develop between firms having frequent dealings with each other. However, careful analysis indicates that reciprocity may have harmful effects upon competition and may violate several existing antitrust statutes. Once these conclusions are accepted, even thornier problems arise concerning the economic desirability and legality under the present law of mergers which increase a firm's potential for inducing reciprocity. Moreover, in regard to both such mergers and reciprocity itself, areas of doubt exist for which federal legislation seems to be the appropriate remedy.
Bernard E. Harvith,
Reciprocity and the Federal Antitrust Laws,
Wash. L. & Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol40/iss1/7