Chapter 12 Antitrust Law

What are the vertical restraints of trade? or When do violations occur?

(1) manufacturers restrain the freedom of reseller to distribute its product, or retail price maintenance. (2) restriction on the freedom of buyers to purchase the product, or exclusive dealing arrangements and tying contacts.

What's the two-part test that establishes a violation under the rule of reason?

(1) prove there was a contact, combination, or conspiracy in restraint of trade (2) prove that it was unreasonable

What are the 3 main anti-trust laws?

- Sherman Anti-trust act, sect. 1 - Sherman anti-trust act, sect. 2 - Clayton act, sect. 7

What are the purposes of the anti-trust laws?

- protect consumers, so they can buy products at a low price - Consumer preferences - promote competition among businesses and promote new businesses.

What are the four main examples of 'Per se' illegality?

-horizontal price fixing -horizontal division of territory -horizontal group boycotts -bid rigging

What are horizontal relationships relations in business?

-when there are relations among competitors, manufacturer & manufacturer, or retailer & retailer. -these pose anti-competitive dangers

What is 'Per se' illegality?

Activites that are so fundamentally anticompetitive and harmful thta they can never be considered reasonable. These activities are proven, then they automatically become illegal.

What's an anti-trust law?

Laws to limit anticompetitive business activity and promote vigorous competition.

Sherman Anti-trust Act of 1890, section 1

This act makes illegal every contract, combination, or conspiracy in restraint of trade.

What was the rule of reason in National Society of Professional Engineers v. United States (1978) ?

What was the rule of reason in National Society of Professional Engineers v. United States (1978) ?

What was rule of reason for the Sherman Anti-trust Act of 1890, section 1 ?

When the Supreme Court decided that this act didn't prohibit every restraint of trade, only the restraints that were considered unreasonable.

vertical price fixing (resale price maintenance)

When the supplier and buyer agree to prices at which goods will be resold.

horizontal price fixing

an agreement between competitors to set the price of a product or service, that ultimately distorys competition and competitive pricing.

Sherman Anti-trust Act, section 1

prohibits contract, combinations or conspiracies that restrain trade.

Sherman Anti-trust Act, section 2

prohibits monopolies

Clayton Act, section 7

prohibits trade-restraining acquisitions (acquisitions that would "substantially... lessen competition, or.. tent to create a monopoly").

What' s the 'rule of reason'?

synonimis with 'unreasonable'

bid rigging

when 2+ companies agree to set bid prices to avoid competitive bidding, which distorys competition and distorts competitive pricing.

horizontal group boycotts

when competing sellers prohibited from agreeing among themselves to boycott certain customers or resellers, which distorts competition by restricting goods or services available to consumers.

horizontal division of territory

when competitors agree to dividterm-16e territories, which leads to distorted competition where customers only have one supplier of a good or service.

What are vertical relations in business?

when there are relations between the buyer and the seller.