Ch 19: Antitrust Law and Promoting Competition
Jurisdictional Requirements of Sherman Act
1. Applies only to restraints that have a substantial impact on interstate commerce 2. Also extends to US nationals in other countries engaged in activities that have an affect on US foreign commerce
3 Antitrust Statutes
1. Criminal: Sherman Antitrust Act 2. Civil: Clayton Act 3. Civil: Federal Trade Commission Act
Problems with the Sherman Act
1. Language used is too general 2. Lackluster enforcement between 1920s and 1990s and then between 2000 and today
Clayton Act
Act that minimally restricted the use of injunctions against labor and legalized peaceful strikes, picketing, and boycotts -civil statute
Clayton Act, Sec 7: Mergers
Person or business entity can't hold stock and/or assets in another business entity where "effect may be to substantially lessen competition"
Clayton Act, Sec 2
Price Discrimination
who enforces anti-trust laws?
The DOJ, FTC, and U.S. Companies
monopoly power
a monopoly's ability to dictate what takes place in a market
Per Se Violations
blatant, unreasonable violations that are anticompetitive -ex: agreements by equal competitors to collusively fix prices or output
Clayton Act, Sec 8: Interlocking Directorates
can't have individuals serve as directors on boards of 2+ competing companies simultaneously
Sherman Act, Sec 1
concerned with finding agreements/contracts that: 1. restrain competition unreasonably 2. affect interstate commerce
horizontal restraints
contracts restraining competition between firms in same market and at same level of manufacturing and/or distribution process, ie: market rivals 1. Horizontal price-fixing contracts are per se violations 2. Horizontal big-rigging agreements are per se violations 3. Horizontal group boycott 4. Horizontal Market Division/Allocation 5. Horizontal Trade Association
Vertical Restraints
contracts restraining trade between firms in same market BUT at different levels in supply chain of manufacturing and distribution process
Violations Analyzed Under Rule of Reason
court reviews facts and considers these factors: 1. facts peculiar to this field of business 2. actual and probable effects of restraint 3. history of restraint 4. purposes of restraint 5. scope of restraint 6. convenience of consumers and suppliers 7. creation of new products
U.S. Department of Justice (DOJ)
enforces by civil AND criminal proceedings -both Sherman Act and Clayton Act
Federal Trade Commission (FTC)
enforces by only civil proceedings -only Clayton Act
Monopoly
generally used to describe a market in which there is a single seller OR very limited number of sellers, which gives it/them the greatest degree of market power
market power
power to control market price of its product
Section 1 prohibits:
prohibits contracts either horizontal or vertical restraints
Clayton Act, Sec 3: Exclusionary Practices
sellers can't condition sale or lease of goods on buyer's promise not to use or deal in goods of seller's competitor
1. Sherman Antitrust Act
this a criminal statute -has 38 sections, but major provisions are found in sections 1 and 2 -violators, if convicted, are guilty of a felony