CH 46
Failing company doctrine
A competitor may merge with a failing company if (1) there is no other reasonable alternative for the failing company, (2) no other purchaser is available, and (3) the assets of the failing company would completely disappear from the market if the anticompetitive merger were not allowed to go through.
Cost justification defense
A defense in Section 2(a) action that provides that a seller's price discrimination is not unlawful if the price differential is due to "differences in the cost of manufacture, sale, or delivery" of the product.
Meeting the competition defense
A defense provided in Section 2(b) that says a seller may lawfully engage in price discrimination to meet a competitor's price.
Section 2(b) of the Robinson Patman Act -
A defense that provides that a seller may lawfully engage in price discrimination to meet a competitor's price.
Section of the country
A division of the country that is based on the relevant geographical market; the geographical area that will feel the direct and immediate effects of the merger.
Noerr doctrine
A doctrine which says that two or more persons can petition the executive, legislative, or judicial branch of the government or administrative agencies to enact laws or take other action without violating antitrust laws.
Conscious parallelism
A doctrine which states that if two or more firms act the same but no concerted action is shown, there is no violation of Section 1 of the Sherman Act.
Federal Trade Commission (FTC)
A federal government administrative agency that is empowered to enforce the Federal Trade Commission Act.
Federal Trade Commission Act (FTC Act)
A federal statute, enacted in 1914, that prohibits unfair methods ofcompetition
Clayton Act
A federal statute, enacted in 1914, that regulates mergers and prohibits certain exclusive dealing arrangements.
Indirect price discrimination
A form of price discrimination (e.g., favorable credit terms) that is less readily apparent than direct forms of price discrimination.
Government judgment
A judgment obtained by the government against a defendant for an antitrust violation that may be used as prima facie evidence of liability in a private civil treble-damages action.
Product market extension merger
A merger between sellers of similar products.
Market extension merger
A merger between two companies in similar fields whose sales do not overlap.
Horizontal merger
A merger between two or more companies that compete in the same business and geographical market.
Geographical market extension merger
A merger between two regional brewers that do not sell beer in the same geographical area.
Conglomerate merger
A merger that does not fit into any other category; a merger between firms in totally unrelated businesses.
Vertical merger
A merger that integrates the operations of a supplier and a customer.
Resale price maintenance
A per se violation of Section 1 of the Sherman Act; occurs when a party at one level of distribution enters into an agreement with a party at another level to adhere to a price schedule that either sets or stabilizes prices.
Changing conditions defense
A price discrimination defense that claims pries were lowered in response to changing conditions in the market for or the marketability of the goods.
Relevant product or service market
A relevant market that includes substitute products or services that are reasonably interchangeable with the defendant's products or services.
Relevant geographical market
A relevant market that is defined as the area in which the defendant and its competitors sell the product or service.
Act of monopolizing
A required act for there to be a violation of Section 2 of the Sherman Act. Possession of monopoly power without such act does not violate
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.
Vertical restraint of trade
A restraint of trade that occurs when two or more parties on different levels of distribution enter into a contract, combination, or conspiracy to restrain trade.
Tying arrangement
A restraint of trade where a seller refuses to sell one product to a customer unless the customer agrees to purchase a second product from the seller.
Rule of reason
A rule that holds that only unreasonable restraints of trade violate Section 1 of the Sherman Act. The court must examine the pro- and anticompetitive effects of the challenged restraint.
Per se rule
A rule that is applicable to those restraints of trade considered inherently anticompetitive. Once this determination is made, the court will not permit any defenses or justifications to save it.
Section 5 of the Federal Trade Commission Act
A section that prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.
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 bring a private civil action and recover from the defendant treble damages plus reasonable costs and attorneys' fees.
Section 7 of the Clayton Act
A section which 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."
Antitrust laws
A series of laws enacted to limit anticompetitive behavior in almost all industries, businesses, and professions operating in the United States.
Unfair advantage theory
A theory that holds that a merger may not give the acquiring firm an unfair advantage over its competitors in finance, marketing, or expertise.
Potential competition theory
A theory that reasons that the real or implied threat of increased competition keeps businesses more competitive. A merger that would eliminate this perception can be enjoined under Section 7.
Potential reciprocity theory
A theory that says if Company A, which supplies materials to Company B, mergers with Company C (which in turn gets its supplies from Company B), the newly merged company can coerce Company B into dealing exclusively with it.
Unilateral refusal to deal
A unilateral choice by one party not to deal with another party. This does not violate Section 1 of the Sherman Act because there is not concerted action.
Colgate doctrine
A unilateral refusal to deal is not a violation of Section 1 because there is no concerted action with others. This rule was announced in United States v. Colgate &Co.17 and is therefore often referred to as the Colgate doctrine.
Forward vertical merger
A vertical merger in which the suppler acquires the customer.
Innocent acquisition
Acquisition because of superior business acumen, skill, foresight, or industry.
Nolo contendere
Antitrust defendants often opt to settle government-brought antitrust actions by entering a plea of nolo contendere in a criminal action.
Consent decree
Antitrust defendants often opt to settle government-brought antitrust actions by entering a plea of nolocontendere in a criminal action or a consent decree in a government civil action.
State action exemptions
Business activities that are mandated by state law are exempt from federal antitrust laws.
Statutory exemptions
Exemptions from antitrust laws that are expressly provided in statutes enacted by Congress.
Implied exemptions
Exemptions from antitrust laws that are implied by the federal courts.
Foreclosing competition
Foreclosing competitors from either selling goods or services to or buying them from the merged firm.
Probability of a substantial lessening of competition
If there is a probability that a merger will substantially lessen competition or create a monopoly, the court may prevent the merger under Section 7 of the Clayton Act.
Civil damages
In the case of violation of federal antitrust laws, government may seek civil damages.
Line of commerce
Includes products or services that consumers use as a substitute. If an increase in the price of one product or service leads consumers to purchase another product or service, the two products are substitutes for each other.
Natural monopoly
It refers to a small market that can support only one competitor, such as a small-town newspaper.
Celler
Kefauver Act - It widened the scope of Section 7 to include asset acquisitions.
Price fixing
Occurs where competitors in the same line of business agree to set the price of the goods or services they sell: raising, depressing, fixing, pegging, or stabilizing the price of a commodity or service.
Robinson
Patman Act - Section 2 of the Clayton Act is commonly referred to as the Robinson- Patman Act.
Direct price discrimination
Price discrimination in which (1) the defendant sold commodities of like grade and quality, (2) to two or more purchasers at different prices at approximately the same time, and (3) the plaintiff suffered injury because of the price discrimination.
Predatory pricing
Pricing below average or marginal cost.
Section 1 of the Sherman Act
Prohibits contracts, combinations, and conspiracies in restraint of trade. Also prohibits tying arrangements involving goods, services, intangible property, and real property.
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 to tend to create a monopoly in any line of commerce.
Section 2 of the Sherman Act
Prohibits the act of monopolization and attempts or conspiracies to monopolize trade.
Section 3 of the Clayton Act
Prohibits tying arrangements involving sales and leases of goods.
Hart-Scott-Rodino Antitrust Improvement Act
Requires certain firms to notify the FTC and the Justice Department in advance of a proposed merger. Unless the government challenges the proposed merger within 30 days, the merger may proceed.
Nonprice vertical restraints
Restraints of trade that are unlawful under Section 1 of the Sherman Act if their anticompetitive effects outweigh their procompetitive effects.
Section 16 of the Clayton Act
Section 16 of the Clayton Act permits the government or a private plaintiff to obtain an injunction against anticompetitive behavior that violates antitrust laws.
Private civil action
Section 4 of the Clayton Act permits any person who suffers antitrust injury in his or her "business or property" to bring a private civil action against the offenders.
Unfair methods of competition
Section 5 of the Federal Trade Commission Act prohibits "unfair methods of competition.
Price discrimination
Sellers often offer favorable terms to their preferred customers. Price discrimination occurs if a seller does this without just cause.
Minimum resale price
Setting minimum resale prices is a per se violation of Section 1 of the Sherman Act as an unreasonable restraint of trade.
Relevant market
The definition of the relevant market often determines whether the defendant has monopoly power.
Monopoly power
The power to control prices or exclude competition measured by the market share the defendant possesses in the relevant market.
Antitrust injury
To recover damages under section 4 of the Clayton Act, plaintiffs must prove that they suffered antitrust injuries caused by the prohibited act.
Treble damages
Triple the amount of the actual damages.
Backward vertical merger
When the customer acquires the supplier.
Group boycott
When two or more competitors at one level of distribution agree not to deal with others at another level of distribution.
