Abstract

"The 21st Century 'New Economy': A Legal and Business History of Vertical Disintegration"

Laura Phillips-Sawyer, University of Georgia (lphillipssawyer@uga.edu)

In in this paper I explore, and test, the historical interdependence of two things. On the one hand, this paper surveys the extent to which American production and distribution systems have moved away from being characterized by vertical integration toward, in the 21st century, more often being governed by a “network of contracts.” There are numerous examples of this phenomenon from high-profile firms, such as Dell, Apple, United Fruit, FedEx, and Amazon—each of which contracts out for specialty parts, assembly, and distribution services. This paper begins by highlighting those business strategies and seeks to explain the extent to which that strategy has penetrated other markets. On the other hand, the paper explains the types of business contracts used to facilitate this shift in business strategy and structure, such as exclusive dealing or exclusive distribution channel contracts. Drawing mainly from litigation records, this paper seeks to better understand how new types of contracts played an important role in what many economists and historians refer to as vertical disintegration. That phenomenon has typically been explained as an efficiency-oriented response to technological advancements; however, legal history suggests that these types of distribution-chain contracts emerged in the brick-and-mortar context to help save faltering, if not failing, firms. Thus, historical inquiry suggests that the deployment of these distribution agreements by some of today’s wealthiest and most powerful firms has an ironic origin story and, more importantly, may prompt some reevaluation of the contractual freedom granted to large scale firms. This conference paper comprises the final section of a longer history article (1945 to the present), which I am working to complete.