Antitrust Law - Chapter 26

Price Discrimination - Defenses

(1) Cost Justification (2) Meeting the Price of Competition (3) Changing Market Conditions

Major Provisions of the Sherman Act

(1) Ever contract combined in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal [and a felony punishable by fine and/or prison]. (2) Every person who monopolizes, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.

Sherman Act - Section 1: Horizontal Restraints

Agreements among Sellers (or Buyers) that restrain competition between rival firms competing in the same market

The Clayton Act (aka Robinson-Patman Act)

Aimed at specific anti-competitive or monopolistic practices that the Sherman Act doesn't cover: (1) Price discrimination (2) Exclusionary Practices (3) Mergers (4) Interlocking Directorates

Tying Arrangements

An exclusionary practice. The conditioning of the sale of a product on the buyer's agreement to purchase another product produced or distributed by the same seller.

Monopolization - Intent requirement.

Anticompetitive behavior must be "willful acquisition of power." Intent may be inferred from evidence that the firm had monopoly power and engaged in anticompetitive behavior.

Jurisdictional Requirements of the Sherman Antitrust Act

Any activity that substantially impacts interstate commerce. Also extends to US nationals working abroad who are engaged in activities that have an effect on U.S. foreign commerce.

The Sherman Antitrust Act

Common law actions intended to limit restraints on trade and regulate economic competition.

Monopoly Power

Exists when one firm has sufficient market power to affect or control prices and output.

Group Boycotts

Horizontal Restraint and Per Se Violation. Agreement between two or more sellers to refuse to deal with a particular person or firm.

Horizontal Market Division

Horizontal Restraint and Per Se violation. Competitors in same market agree each will have exclusive rights to operate in designated territory.

Price Fixing

Horizontal Restraint and a Per Se Violation. Agreement between competing firms in the market to set an established price for the goods or services they offer.

Price Fixing

Horizontal restraint and Per Se violation. Agreement between competing firms in the market to set an established price for the goods or services they offer.

Monopolization - Relevant Market

In monopolization cases, it must be determined by a court before it can determine whether firm has dominant market share: (1) relevant product market, and (2) relevant geographic market

Monopolization: Attempts to Monopolize

Intended to exclude competitors and garner monopoly power, and had a "dangerous" probability of success.

Sherman Act - Section 2 deals primarily with...

Monopolization and attempts to monopolize

Vertical Restraints

Per Se anti-competitive agreements imposed by Sellers upon Buyers (or vice versa) that may include affiliates in the entire supply chain of production

Sherman Act - Section 1: Per Se Violations

Per Se violations are blatant and substantially anti-competitive.

Monopolization

Requires two elements: * The possession of monopoly power and the willful acquisition and maintenance of the power.

Trade Associations

Rule of Reason is applied to determine if Act is violated. Concentrated industry: small firms control a large percentage of market sales.

Sherman Act - Section 1: Rule of Reason

Rule of reason agreements do not unreasonably restrain trade and are therefore lawful. Factors that courts consider are: * The Purpose of the Agreement * Parties' ability to implement the agreement * Potential effect of agreement on completion * Whether the parties could have relied on less restrictive covenants to achieve their purpose

Differences Between Sections 1 and 2 of the Sherman Antitrust Law

Section 1: requires 2 persons, agree to restrain trade. Section 2: requires only 1 person, and concerned with "monopoly power" in the marketplace.

Price Discrimination

Section 2 of the Clayton Act. Price discrimination is the charging of different prices to competing buyers for identical goods. Exceptions: Charge of lower price was temporary and in good faith to meet another seller's equally low price to the buyer's competitor.

Predatory pricing

Section 2 of the Sherman Antitrust Act. Predatory Pricing attempts to drive a competitor from the market by selling products at prices substantially below the normal costs of production.

Exclusionary Practices

Section 3 of the Clayton Act. The seller forbids a buyer to purchase products from the seller's competitors, that will "substantially lessen competition or tend to create a monopoly."

Horizontal Mergers

Section 7 of the Clayton Act. Occur between firms at the same level in the production and distribution chain. If a horizontal merger creates an entity with a significant market share, the merger may be considered illegal because it increases market concentration.

Vertical Mergers

Section 7 of the Clayton Act. Occur between firms at different levels in the production and distribution chain (Ex: a company merging with one of its suppliers or retailers).

Interlocking Directorates

Section 8 of the Clayton Act. When an individual serves on the board of directors of two or more competing companies simultaneously. * Prohibited if the two firms meet certain size requirements. * If either of the corporations has capital, surplus or undivided profits or sales aggregate more than $28,883,000

Territorial Or Customer Restrictions

Vertical Restraint and judged under Rule of Reason. Imposed by manufacturers on the sellers of the products, to insulate dealers from direct competition with each other.

Resale Price Maintenance Agreements (RPMA)

Vertical Restraint and usually a Per Se violation. Agreements between manufacturer and a distributor or retailer in which the manufacturer specifies the retail price at which retailers must sell the manufacturer's products.

Monopolization - Unilateral Refusals to Deal.

Violate the Sherman Act if: the firm refusing to deal has (or is likely to acquire) monopoly power, AND the refusal is likely to have an anticompetitive effect on a particular market.