Vertical restraint is an agreement made between manufacturer and dealer to maintain healthy competition and term the guidelines of the business activities between them.

Conditions under which vertical restraints are socially desirable:

• When manufactures want that true image of his products should be shown to consumers and dealer should not mislead his consumers by manipulating advertisements.
• Dealer can advertise manufacturer products as high priced items. Consumer will either not buy the product or will have to pay high prices. This will reduce the demand of manufacturer's products.