Business Law Chapter 22

conglomerate merger

A combination of two firms that are in unrelated industries

cost justification defense

A defense to a price discrimination (Section 2 of the Clayton Act) case wherein the defendant seeks to justify charging different customers different prices due to that defendant's costs varying because of the differing quantities purchased by the customers, delivery fees etc.

indirect price discrimination

A form of price discrimination that is less readily apparent than direct forms of price discrimination

Federal Trade Commission

A government agency established in 1914 to prevent unfair business practices and help maintain a competitive economy.

government judgement

A judgement obtained by the government against a defendant for an antitrust violation that may be used as prime facie evidence of liability in a private civil treble damages action.

market extension merger

A merger between two companies in similar fields whose sales do not overlap

resale price maintenance

A per se violation of the Sherman Act in which a manufacturer enters into an agreement with retailers about the prices they will charge.

changing condition defense

A price discrimination defense that claims prices were lowered in response to changing conditions in the market for or the marketability of the goods.

probability of a substantial lessening of competition

A probability of a substantial lessening of competition after a merger, in which case the merger may be prohibited. The statute deals with probabilities; actual proof of the lessening of competition is not required.

division of markets

A restraint of trade in which competitors agree that each will serve only a designated portion of the market.

horizontal restraint of trade

A restraint of trade that occurs when two or more competitors at the same level of distribution enter into a contract, combination or conspiracy to restrain trade.

Section 4 of the Clayton Act

A section which provides that anyone injured in his or her business or property by the defendant's violation of any federal antitrust law (except the Federal Trade Commission Act) may seek damages.

backward vertical merger

A vertical merger in which the customer acquires the supplier

state action exemption

Activities of businesses that are mandated by state law are exempt from federal antitrust laws. The exemption is referred to as this.

vertical restraint of trade

Agreements between companies at different levels of manufacturing and distribution process that limits competition by restraining trade.

tying arrangement

An agreement between a buyer and a seller in which the buyer of a specific product or service becomes obligated to purchase additional products or services from the seller.

price fixing

An agreement between two or more firms on what price to charge, which reduces the usual effects of competition with respect to driving prices and profits down, is called

Section 2 of the Sherman Act

Bans monopolization, the wrongful acquisition of a monopoly.

treble damages

Damages that, by statute, are three times the amount that the fact finder determines is owed.

statutory exemptions

Exemptions from antitrust laws that are expressly provided in statutes enacted by Congress

Hart-Scott-Rodino Antitrust Improvement Act

HSR Act, is an amendment to the antitrust laws. It requires both parties to an intended acquisition, merger, or tener offer to file a "Notification and Report Form" with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice

unilateral refusal to deal

In this defenses to Section 1 of the Sherman Act, a party may refuse to deal with another party. This does not violate Section 1 because there has been no concerted action.

Section 5 of the FTC Act

Prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce

monopoly power

The ability of individuals or firms currently in business to prevent other individuals or firms from entering the same kind of business

act of monopolizing

The defendant's engagement in a willful act of monopolizing trade or commerce in the relevant market

group boycott

The refusal by a group of competitors to deal with a particular person or firm; prohibited by the Sherman Act.

rule of reason

The rule that to be illegal, an action must be unreasonable in a competitive sense and the anticompetitive effects must be demonstrated. Size alone is insufficient evidence to rule against a firm in antitrust lawsuits.

conscious parallelism

This defenses to Section 1 of the Sherman Act, occurs when two or more firms act the same, but without concerted action; They reached their decisions independently.

line of commerce

This is defined as the market that will be affected by a merger. It includes products or services that consumers use as substitutes for those produced or sold by the merging firms.

relevant geographical market

This is the geographic area in which the defendant and its competitors sell the product or service.

section of the country

This is the geographic market that will be affected by a merger. It includes the area that will feel the direct and immediate impact of the merger.

relevant product or service market

This market includes substitute products or services that are reasonably interchangeable with the defendant's products or services.

Section 1 of the Sherman Act

This prohibits contracts, combinations, or conspiracies that cause unreasonable restraints of trade. It requires concerted activity between two or more parties.

Section 7 of the Clayton Act

This section, as amended, provides that it is unlawful for a person or business to acquire the stock or assets of another "where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly

direct price discrimination

This type of price discrimination is prohibited by Section 2(a) of the Clayton Act. It prohibits a seller from discriminating in price between two or more different purchasers of commodities of like grade and quality where the effect may be to substantially lessen competition.

Noerr doctrine

Two or more persons may petition the executive, legislative, or judicial branch of the government or administrative agencies to enact laws or take other action without violating the antitrust laws

nonprice vertical restraints

Unlawful under section 1 of the Sherman Act if restraints anticompetitive effects outweigh procompetitive effects

Section 2 of the Clayton Act

commonly referred to as the Robinson-Patman Act. it prohibits price discrimination and discriminatory fees, payments, and services. The act applies only to products not to services.

implied exemptions

exemptions from antitrust laws that are implied by the federal courts.

forward vertical merger

merge with a customer/forward line of production

Section 2(a) of the Robinson-Patman Act

prohibits direct and indirect price discrimination by sellers of a commodity of a like grade and quality, where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

Section 3 of the Clayton Act

prohibits tying arrangements that involve sales and leases of goods.

meeting the competition defense

section2(b) permits a seller to have a lower price in one market than in another market to meet the price of a competitor in the lower-priced market.

Horizontal merger

the combination of two or more firms competing in the same market with the same good or service

vertical merger

the combination of two or more firms involved in different stages of producing the same good or service

per se rule

violation of section 1. conduct that is inherently anticompetitive, such as price fixing and group boycotts, and so automatically violates the Sherman Antitrust act. The courts must examine the pro and anticompetitive effects of a challenged restraint.