Antitrust Law

Remedies for misconduct

courts can impose the following: - restrain a company or individuals from certain conduct -force a company to sell part of its assets (break up company) -force a company to let others use its patents or facilities (licensing) -cancel or modify existing business contracts

Clayton Act

enacted in 1914, added to the Sherman Act. Intended to stop a business practice early in its use to prevent a firm from becoming a monopoly.

Cost justification

ex. differences in transportation cost

Product market

ex: banks are in credit market and checking account market

merger guidelines

factors that are considered in determining whether a merger will likely be challenged

Failing firm defense

if one firm is facing bankruptcy or other circumstances that threaten the firm, the court will look favorably on the merger

Monopsony

monopoly on the buyer's side

horizontal restraint of trade

occurs when businesses involved operate at the same level of the market an generally in the same market.

Sherman Antitrust act

passed in 1890 in response to the unpopularity of large business organizations such as standard oil trust and the Rockefeller company. The word antitrust comes from standard oil which was organized in the form of a trust.

Market share

percentage of the relevant market controlled by the firm

Vertical restraint of trade

relationships between buyers and sellers

Geographic market

relevant area where good is sold

price discrimination

selling of the same good at different prices to different buyers

Exemptions:

some nonprofit and agricultural organizations Sellers of exports have limited immunity

potential competition

the possibility that two companies can become competitors. this can be enough to stop a merger

maximum price controls

upheld by court, noting that low prices benefit consumers regardless of how the prices are set

Boycott

usually fall under per se price fixing

Violations of the Clayton Act

usually result in cease and desist orders

Predatory Bidding

when a strong firm can outbid rivals

territorial allocations

when each firm can excersise monopoly power in its region

Price fixing

when firms sell the same product and agree to fix the price. Even if the price is fair, if it is fixed upon by multiple firms, it is 100% violation

Horizontal merger

when two firms were competitors before they merged

Tying sales

where sale of one good is tied to the sale of another , forbidding buyer from daling with other possible buyers or sellers

Treble damages

winner gets 3 times their actual money damages, plus court costs and attorney's fees

Per se rule of illegality on verticle restraint guidelines:

1. seller has market power in the tying product 2. tied and tying products are separate 3. There is evidence of substantial adverse effect in the tied product market.

Todd v. Exxon Corp.

14 large oil companies organized surveys of salaries of managers at their companies and shared the information with each other. Todd sued and won on the basis that sharing this information is violation of the Sherman act.

Merger

2 firms becoming 1. before firms merge, they must notify the antitrust division of the department of justice or the FTC at least a month before if the value of merger is more than 70 million

the unfair methods of competition from FTC Act

Any business activity that may tend to create a monopoly by unfairly eliminating or excluding competitors from the marketplace

Predatory Pricing

Company A undercuts Company B in a place where they compete but sell the same product in place with no competition for much higher.

Dr Miles Case

Court held that a manufacturer can sell its product for whatever it would like, but cannot control future prices

Leegin Creative Leather Products v. PSKS

Made the RPM (verticle minimum price fixing) no longer per se illigal, but rather subeject to a rule of reason analysis.

Violations of the Sherman Act

Most severe penalties Usually involve price fixing or bid rigging by competitors Individuals can be fined 1 million and 1- years in prison. businesses can face up to 100 million

Spanish Broadcasting system of Florida v. Clear channel communications

SBS sued CC for taking employees, encouraging people not to advertise, made it difficult for SBS to enter new markets by bidding up prices. Court held that "even an act of pure malice by one business competitor against another does not state a claim under antitrust laws" because the actions of CC were not harming the competition market, but rather just SBS, it was legal.

Freeman v. San Diego Association of Realtors

SDAR joined a bunch of databases or some shit together in real estate. They changed the price from what was 10 dollars per subscriber to 44 dollars per sub. Freeman sued and court found SDAR guilty of price fixing.

Market power

The ability of one or more firms profitably to maintain prices above competitive levels for a significant period of time

Weyerhaeuser v. Ross simmons hardwood lumber

Weyerhouser was sued by ross simmons for outbidding them on logs so ross couldn't compete in lumber market. It was held that Weyerhauser was predatorily bidding and was charged.

Cartel

a collection of rival firms that come together and restrain trade by restricting output and raising prices

metting competition defense

a firm cuts its price in response to a competitiors cutting price first.

Federal Trade Commission

agency to investigate and enforce violations of the antitrust laws.

Parker Doctrine

allows state governments to restrict competition in industries such as public utilities. In this case, the state must have intended to restrict competition and perhaps fix prices.

Robinson Patman Act

ammends the clayton act seller cannot sell the same products to different buyers for different prices

INTERbrand competiiton

amongst manufacturers selling different brands of the same type of product (good)

Resale price maintenence

an agreement between a manufacturer, supplier and retailers of a product under which the retailers agree to sell the product at not less than the minimum price

INTRAbrand competition

between many sellers selling the same brand (bad)

Per se rule

certain business agreements or activities automatically are held to be illegal if found to exist

Rule of reason

contrasts per se rule the court looks at the facts surrounding business practices before deciding whether it helps or hurts competition.