Antitrust Policy Identifications
vertical integration
Large market shares attained not by merger but by various business practices in which the firm engages ν Is size alone, however attained, a violation of section 2 of the Sherman Act?
Two competing tests for bundle (3rd and 9th circuit)
LePages - if you offer a bundle that your competitor is not able to match that is unlawful under section 2(3) Its not just that you offer a bundle that your competitor is not able to match, there has to be an allegation of below cost pricing 9th - bundle has to have allegation of below cost pricing (discount attribution standard)
tying
Tying exists when a seller of a product (the tying product) required as a condition of sale that the customer purchase a second product (the tied product) as well; such arrangements tend to exclude independent producers from the market
Bell Atlantic v Twombly
Twombly (plaintiff) issued a complaint alleging that Bell Atlantic (defendant) violated Section 1 of the Sherman Act, which prohibits conspiracy for the purposes of restraining trade. The complaint alleged that Bell conspired with other local telephone companies by means of "parallel conduct" to inhibit the growth of upstart telecommunication companies and eliminate competition with each other. outcome: To state a claim under § 1 of the Sherman Act, the complaint must contain enough factual material to suggest that an agreement existed between the defendants.
stare decisis
"to stand by things decided": The principal that the precedent decisions are to be followed by the courts
Todd v Exxon
3 pronged test for proving attempted monopolization Court didn't really mean per se from the beginning; rule of reason standard was necessary - look at two things to see if info exchange is unlawful under section1 (1. Is the market susceptible to coordination? 2. What is the nature of the information being exchanged?)
3 pronged test for tie-in (Oconnor)
1. Do you have market power in tying product market (actual market power, not mushy economic power)? 2. Do you have substantial threat of acquiring in the product market? 3. Is there a coherent economic basis for treating the tied and the tying product as distinct? (this is where it failed) alleged tie was anesthesia to hospital services and court said there was no separate market for anesthesia services so there was no reasonable basis for treating them as separate
2 part test for exclusive dealing
1. Is there substantial foreclosure of arrival? (at least 40%) 2. Is there a harm to competition?
Test for monopolization (2 step)
1. Monopoly power in properly defined market (1:15) 2. Some exclusionary conduct spectrum sports
3 prong test for attempted monopoly
1. Predatory or anticompetitive conduct 2. Specific intent to monopolize 3. Dangerous probability of achieving monopoly power
3 prong test for proving attempted monopolization
1. Predatory or anticompetitive conduct 2. Specific intent to monopolize 3. Dangerous probability of achieving monopoly power
same test for predatory pricing to price discrimination
1. Price below appropriate cost 2. Likelihood of recoupment once driven competitor out of market
3 pronged test for illegality of tying
1. Two distinct items that are tied 2. Sufficient economic power in the tying product market 3. Not insubstantial amount of commerce affected in the tied product market if met then per se illegal IF 4. Does there exist a special justification for the particular tying arrangement? (not actually on it)
2 part exclusive dealing test
1. is there substantial foreclosure of arrival? 2. is there harm to competition?
2 step test for monopolization
1. monopoly power in properly defined market 2. some exclusionary conduct
3 pronged test for proving attempted monopolization
1. predatory or anticompetitive conduct 2. specific intent to monopolize 3. dangerous probability of achieving monopoly power
boycotts and refusals to deal
A boycott, or refusal to deal, is treated along with vertical integration, exclusive dealing, and tying as an exclusionary practice; boycotts are often implemented to express opposition to some practice which a group may want to protest, but can also be used to stifle competition.
Robinson Patman Act
A seller charging competing buyers different prices for the same "commodity" or discriminating in the provision of "allowances" — compensation for advertising and other services — may be violating the Robinson-Patman Act. This kind of price discrimination may give favored customers an edge in the market that has nothing to do with their superior efficiency. Price discriminations are generally lawful, particularly if they reflect the different costs of dealing with different buyers or are the result of a seller's attempts to meet a competitor's offering. The Supreme Court has ruled that price discrimination claims under the Robinson-Patman Act should be evaluated consistent with broader antitrust policies. In practice, Robinson-Patman claims must meet several specific legal tests: The Act applies to commodities, but not to services, and to purchases, but not to leases. The goods must be of "like grade and quality." There must be likely injury to competition (that is, a private plaintiff must also show actual harm to his or her business). Normally, the sales must be "in" interstate commerce (that is, the sale must be across a state line).
ancillary restraint of trade
Ancillary—those agreements where such elimination is only subordinate to other ends but which might make the chief aim of the transaction more effective
Northern Securities v US
Believing that the formation of Northern Securities amounted to an antitrust violation, the United States (the government) (plaintiff) brought a suit against Northern Securities, alleging that the formation of a holding company to purchase two competing railways violated § 1 of the Sherman Act. outcome: The formation of a holding company to purchase two competing companies constitutes a combination in violation of antitrust law.
Bell Atlantic v Twombly
Bell atlantic was first case to involve the 1996 act - pi were telephone and internet customers who claimed to receive subpar internet service Telecommunications act of 1996 - telephone and internet customers complained they didn't get good service; ILECs conspiring; conduct was still individual self-interests; court said that of course this was a violation bc they conspired with competitors, but that had to show more to Allegation: ILECS conspiring to provide insufficient service with SILECS (were supposed to provide competition to ILECs) court said alleged agreement was perfectly consistent with ILECs individual economic self-interest; they were sufficiently vigorous in providing competition to their competitor; court said "of course they were... who in their right mind would want to provide assistance to their competitors" unwilling to infer that defendants had agreement with each other; have to have more than just showing of conduct to prove case
vertical integration list
Brown Shoe company v US 1962 Ford Motor Company v US 1972
Brown shoe company v US
Brown and Kinney merger;Brown and Kinney merger; what came out; idea looking at product market and geographic market and concept of looking at practical indicia to declare the product market and what it should be and the third was measuring market concentration and figuring out broader market concentration and the idea of stopping trend towards monopolization in its incipiency Example of merger and aggressive antitrust involvement outcome: In a fragmented market, the government may block a merger that achieves a very small percentage of market control if the merger reflects a potential trend toward concentration in the industry.
bundling
Bundling (distinct from tying) you don't have a hard tie but you get a discount if you buy a bundle
US v Colgate
Colgate & Company (Colgate) (defendant) is a corporation that manufactures and sells soap and toilet products in the United States. Colgate had a policy of conditioning the sale of products to retailers by urging retailers to resell Colgate's products at prices established by Colgate. Colgate would send out letters and telegrams to retailers, detailing the requested prices for Colgate's products. If Colgate found that a retailer was selling Colgate's products at a lower price, Colgate would place the retailer on a suspended list and refuse to sell more products to the retailer until the retailer made assurances to adhere to Colgate's pricing policy. The United States (plaintiff) brought a complaint against Colgate, alleging that Colgate's resale-pricing policy violated the Sherman Act. outcome: The Sherman Act does not expressly prohibit a manufacturer from unilaterally conditioning sales on the fixed resale price of products. " I will only sell to wholesalers who will sell at these prices, and if a wholesaler refuses the manufacturer can unilaterally refuse to deal with them" court said that difference between reaching agreement with wholesaler and choosing unilaterally not to deal with them
conscious parallelism
Conscious parallelism - pricing strategies among competitors in an oligopoly that occurs without an actual agreement between the players
Brunswick v Pueblo Bowl-o-mat
Court held antitrust plaintiff cannot recover the harm resulting from an increase in competition; Bowl o mat didn't like Brunswick buying out their failing bowling alleys and keeping them in business and the defendant was a bowling alley that was facing increased competition as a result of Brunswick; cant prohibit pro-competitive practices (pueblo said they were being harmed by Brunswick) court said no the antitrust laws don't allow plaintiff to recover cause by increase in competition, can only get relief for that which the antitrust laws are meant to prohibit (decrease in competition)
US v Von's grocery company
Crude analysis of concentration and decreasing # of grocery stores was going to prevent further trend toward concentration; extreme example; Justice Stewart dissented saying more economic analysis was needed and answer was too simplistic; said case would deter entry of small stores bc it would make it hard to get capital out by making it less likely to get into business very aggressive merger—court struck down mergers of Vons - crude analysis of concentration , counted grocery stores and halted the acquisition and further trend toward concentration The merger of two of the largest and most successful retail grocery companies in a market area characterized by a steady decline, before and after the merger, in the number of small grocery companies, combined with significant absorption of small firms by larger ones, is a violation of § 7 of the Clayton Act.
vertical price fixing and market division
Dr. Miles Medical Company v John Park and sons company 1911 US v Colgate 1919 US v park davis 1960 Kiefer-stewart v seagram 1951 US v Arnold Schwinn 1967 Continental TV v GTE Sylvania 1977 Monsanto v spray rite 1984 Business electronics corp v sharp 1988
monopolization through governmental procedures
Eastern railroad presidents conference v Noerr Motor freight 1961 California Motor transport company v trucking unlimited 1972 FTC v Superior court trail lawyers association 1990
exclusive dealing
Exclusive dealing A form of vertical integration by contract as opposed to vertical integration by merger - a producer contracts with a distributor, and the distributor agrees not to handle the goods of competing producers
boycotts and refusals to deal list
Fashion originators guild of America v FTC 1941 Lorain journal v US 1951 Klor's v Broadway-Hale 1959 Aspen skiing company v aspen highlands skiing corporation 1985 Northwest wholesale stationers v Pacific stationery 1985 FTC v Indiana Federation of dentists (1986) Verizon v Trinko
Learned Hand
Hand went off the rails a bit despite some good rhetoric - having a monopoly thrust upon you is not unlawful - merely being a monopolist is not unlawful ; you must have some kind of unlawful conduct to go with it ; have to have exclusionary or anticompetitive conduct to go with it to be considered in violation of section2 (Alcoa)
tying list
Henry v AB Dick 1912 International Salt Company v US 1947 US v loew's 1962 Siegel v Chicken Delight 1971 Jefferson Parish Hospital v Hyde 1984 Kodak v image tech services 1992 Bundling LePages Price Squeeze Pacific Bell 2009
horizontal merger guidelines and five steps
Horizontal merger guidelines - not law, but they are a statement of enforcement philosophy by the DOJ and FTC ; they will be cited by courts and they can be broken down into 5 steps (57) 1. Define relevant market (relevant market and geographic market) 2. Identifying market participants and measuring market concentration 3. Assessing potential adverse anticompetitive effects 4. Considered defense offered by merging companies (buying powers, (timely like and efficient), failure) 5. Are there any unique factors that might come into play (is it a partial acquisition) - catch all - is there anything that's unusual about this that we should consider? Step 1 - hypothetical monopolist and SSNIP test (small but substantial non-transitory increase in price) used to test relevant product market and geographic market step 2- market participants; Herfindahl-Hirschman Index
horizontal restraints
Horizontal restraints include collusion and cartels, whether by sellers or buyers ( also see buyer power), in which competitors come together to restrain trade.(cartels—remain separate business entities)
Colgate doctrine
I will only sell to wholesalers who will sell at these prices, and if a wholesaler refuses the manufacturer can unilaterally refuse to deal with them
FTC v Indiana Federation of Dentists
In 1976, a group of dentists in Indiana formed the Indiana Federation of Dentists (the Federation) (defendant) and began a policy of ignoring requests from dental-insurance companies for the X-rays of patients. outcome: An agreement by an association of professionals to withhold information from insurers is an antitrust violation if the agreement has the effect of reducing competition among the association's members.
Fashion originators guild of America v FTC
In order to eliminate competition from knockoffs, FOGA threatened to boycott any retailer that sold competitive knockoff garments. outcome: A manufacturers' group boycott of retailers that sell competing products violates § 1 the Sherman Act.
mergers of competitors
In the case of mergers—integration of management and production facilities accompanies the combination of rival firms
info exchange four factors
Info exchange first area to be talked about when the court said "this is per se if" four factors are present (fungible product, few sellers, competition on price, inelastic demand)
info exchange
Information Exchange Per se if standard established 4 factors that establish information exchange: 1. Fungible product 2. Few sellers 3. Competition on price 4. Inelastic demand
conscious parallelism and market division list
Interstate circuit v US 1939 Theatre Enterprises v Paramount film distributing 1954 DuPont/Ethyl Corporation v FTC 1984 Bell Atlantic v Twombly 2007
dancing partners
Involved dancing partners - each of the major companies was paired with an independent smaller company and the major company was told to buy up excess oil produced by its dancing partner to keep the excess oil off the market, restricting output for the market and propping up the price for oil (socony vacuum)
monopolization through abuse of governmental procedures
Issue: whether attempts to persuade legislatures to adopt or retain laws that destroy the competition the Sherman Act promotes are protected by the right of petition guaranteed by the First Amendment
Justice O'Connors concurring opinion
Justice Oconnors - concurring opinion has had enduring life as a rule of law - per se illegal if is not actually per se, so it's a rule of reason; similar to exxon; Oconnor says let's call it what it is and apply a 3 part test for tie in, 3 part test for tie in: 1. Do you have market power in tying product market (actual market power, not mushy economic power)? 2. Do you have substantial threat of acquiring in the product market? 3. Is there a coherent economic basis for treating the tied and the tying product as distinct? (this is where it failed) alleged tie was anesthesia to hospital services and court said there was no separate market for anesthesia services so there was no reasonable basis for treating them as separate (Jefferson Parish)
3 tier test for high enough market share to have market/monopoly power
Learned Hand: 1/3 share is not high enough to worry about market share 2/3 share is probably still not enough but unwilling to say definitely not enough 90% share is definitely high enough to have market power or monopoly power
vertical price fixing and market division
Manufacturers sometimes place restrictions on the distribution of the commodities; An illegal arrangement in which parties at different levels of a system of production and distribution act to fix the market price of goods Forms of restriction 1. To fix a uniform retail price for the product (resale price maintenance) 2. To divide sales territories among distributors so that they do not overlap
US v Syufi
Movie theater case in vegas; Syufi bought out a number of competing movie theaters and the DOJ sued under s 7 (unlawful acquisitions) and s 2 (monopolization) for number of completed acqusitions ; court said there was a prospect of entry in las vegas market the DOJ failed under both sections to show that Syufi had power to control prices or exclude competition; power to control prices and exclude competition as standard for monopolization cases - entry in las vegas meant that mr syufi lacked that power and so the DOJ lost
naked restraint of trade
Naked—those agreements where parties have as their chief aim the elimination of competition Ancillary—those agreements where such elimination is only subordinate to other ends but which might make the chief aim of the transaction more effective illegal per se
predatory pricing and price discrimination list
Northeastern Telephone Company v AT&T 1981 Matsushita v Zenith radio 1986 Primary line price discrimination Utah pie company v continental baking 1967 Brooke Group v Williamson tobacco 1993 Secondary line price discrimination FTC v Morton salt 1948 Texaco v Rick Hasbrouck 1990
mergers of competitors list
Northern Securities v US 1904 Standard oil company v US 1911 US v US steel corp 1920 Brown Shoe company v US 1962 US v Vons grocery 1966 Brunswick v Pueblo bowl-o-mat US v General Dynamics
Interstate circuit v US
O'donnell letter; A letter written by O'Donnell, Interstate's manager, made two demands as a condition of Interstate's continued agreement to show a particular distributor's films, namely (1) that the distributor agree that on subsequent runs it would not permit its films to be shown in theaters charging an admission price of less than 25 cents and (2) that the distributor agree not to permit its first-run films to be shown on a double-bill with another feature film. outcome: court inferred agreement (p.82) - "without some understanding" 1. It wouldn't make economic sense to behave this way unless they knew their competitors were behaving similarly; not in their econ self-interest unless they knew everyone was doing it 2. It was a drastic change in their conduct and they all took it at the same time Evidence of a direct agreement to participate in a conspiracy is not necessary, but may be inferred from the acts of the conspirators.
predatory pricing
Predatory pricing - covered by section 2 of the Sherman Act Occurs when a firm intentionally reduces prices below costs of production in order to drive rivals from the market
price discrimination
Price discrimination - covered by Robinson-Patman act Price differences for the same product without any reference to costs; primary line and secondary line
US v US gypsum company
Robinson Patman defense;The United States (plaintiff) brought a complaint against a group of gypsum manufacturers (defendants), alleging that the manufacturers were colluding to restrain competition in violation of the Sherman Act. Specifically, the government challenged the manufacturers' practice of telephoning one another to confirm the prices of gypsum for specific customers. outcome: Intent is an element of a criminal antitrust offense that must be proven by evidence and not a legal presumption. Applied container corp per se if test and found them guilty of info exchange;** d argued that the info exchange was necessary to verify each other's prices as defense to rob pat act discrimination claim (it works to stop price discrimination between similarly placed customers; you can fix the price if someone else increases theirs first and you just match up to them) ; court said no bc you don't have to call them to confirm, just good faithful leap towards the increased prices and price fixing Court: no, rob patt act does not require you to call up your competitor and confirm their price charge, all that's required is a good leap of faith on your part that lowering price is necessary to keep customers interested; court was unwilling to hear defense
exclusive dealing list
Standard fashion company v magrane-houston 1922 Tampa electric v Nashville coal 1961 McWane v FTC
Clayton Act
The Clayton Antitrust Act is an amendment passed by U.S. Congress in 1914 that provides further clarification and substance to the Sherman Antitrust Act of 1890 on topics such as price discrimination, price fixing and unfair business practices; regulates general practices that may be detrimental to fair competition price discrimination exclusive dealing tying agreements mergers and acquisitions
McWane v FTC
The FTC filed separate complaints against the three largest U.S. suppliers of ductile iron pipe fittings, which are used in municipal water systems around the United States. The FTC charged that the three companies, McWane, Inc., Star Pipe Products, Ltd., and Sigma Corporation, illegally conspired to set and maintain prices for pipe fittings, and that McWane illegally maintained its monopoly power in the market for U.S.-made pipe fittings by implementing an exclusive dealing policy. outcome: Chief Administrative Law Judge D. Michael Chappell dismissed charges that McWane illegally conspired with its competitors to raise and stabilize DIPF prices but found that McWane violated the antitrust laws when it excluded competitors from the market for U.S. made DIPF (domestic DIPF
FTC v Morton Salt
The Federal Trade Commission (FTC) (plaintiff) sued Morton, arguing the quantity-discount system was a method of price discrimination in violation of the Robinson-Patman Act. outcome: Under the Robinson-Patman Act, a quantity discount can be unlawful price discrimination even if it is made available to all purchasers.
FTC Act
The Federal Trade Commission Act is the primary statute of the Commission. Under this Act, as amended, the Commission is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress and the public. A number of other statutes listed here are enforced under the FTC Act.
Telecommunications Act of 1996
The Telecommunications Act of 1996 is the first major overhaul of telecommunications law in almost 62 years. The goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other.
HORIZONTAL PRICE FIXING AND MARKET DIVISION list
US v Addyston Pipe and Steel 1898 US v Trenton Potteries 1927 Appalachian coals v US 1933 US v Socony Vacuum 1940 Golfarb v VA state bar 1975 Arizona v Maricopa County 1982 NCAA v board of regents of u of Oklahoma 1984 California Dental association v US
EXCHANGE OF PRICE INFORMATION list
US v Container corporation 1969 US v US gypsum company 1978 Todd v Exxon 2000
horizontal restrictions on distribution list
US v Sealy 1967 US v Topco 1972 Palmer v BRG of Georgia 1990
monopolization and the dominant firm list
US v alcoa 1945 US v united shoe machinery 1953 US v DuPont 1956 Berkey Photo v Eastman Kodak 1979 Spectrum Sports v McQuillan 1993 US v Syufi
Legion v PSKS
When one retailer, PSKS, discounted Leegin products below the minimum, Leegin dropped the retailer. PSKS sued, arguing that Leegin was violating Section 1 of the Sherman Act by engaging in anticompetitive price fixing. outcome: Dr. Miles should be overruled and that vertical price restraints are to be judged by the rule of reason
secondary line price discrimination
Where a firm charges a lower price to one customer than it does to another, thereby enabling the favored customer to have a competitive advantage over rivals. Competition is reduced at the customer level rather than at the level of the seller.
primary line price discrimination
Where a firm selling the product engages in price discrimination by charging a lower price to one customer than to another in a way that could foreclose the market to rivals and thereby reduce competition at the level of the price discriminating firm
conspiracy
a combination of two or more persons to accomplish an unlawful end by lawful means or a lawful end by unlawful means
State Attorney General
ability to enforce antitrust laws
theme from 40s to 60s
aggressive antitrust enforcement
Standard Fashion Company v Magrane-Houston
agreements with patterns retailers; Standard Fashion Co. (Standard) (plaintiff) sold clothing patterns for women and children to retailers. Magrane-Houston Co. (Magrane) (defendant) was a retailer that sold Standard patterns. The contract between Standard and Magrane prohibited Magrane from selling any patterns other than Standard patterns. Standard had similar agreements with two-fifths of all pattern retailers in the United States. After selling Standard patterns for a few years, Magrane decided to stop selling Standard patterns and to sell patterns by a rival company instead. Strict standard for exclusive dealing: almost a per se standard (almost because no such thing as per se illegality for section 2, just colloquial sense; - no such thing as per se illegality for section 2) but the SC in this case said that standard had 40% share of market, its exclusive contracts were unlawful exclusionary conducts under section 2 so it was a very strict standard for these exclusive dealing contracts outcome: An exclusive selling agreement that prohibits a retailer from selling competing products violates § 3 of the Clayton Act.
US v Trenton Potteries
alleged cartel in bathroom potteries; Trenton Potteries Company and 22 other corporations in the business of making pottery for use in bathrooms (the pottery companies) (defendants) coordinated to fix the prices of their products. Together, the pottery companies controlled 82 percent of the business for bathroom-pottery fixtures in the United States. outcome: A price-fixing agreement is a violation of antitrust law regardless of the reasonableness of the prices.
shared monopoly
anticompetitive behavior by firms, normally an oligopoly, in order to secure monopoly profits for the firms as a group
Enforcers
antitrust division of US department
DuPont/Ethyl Corporation v FTC
attempt to find independent basis for section 5;In the 1970s, changes to environmental policy caused the demand for lead antiknock compounds to fall drastically. At that time, the industry was highly concentrated. There were only four firms producing and selling the antiknock product. This created a naturally oligopolistic market structure that deterred price competition. outcome: Unilateral, parallel conduct by firms in an oligopolistic market does not constitute unfair competition within the meaning of § 5 of the Federal Trade Commission Act. Ethyl Corp v FTC Attempt to find independent basis for liability under section 5 (which it didn't have) Conduct that facilitates consciously parallel pricing without pro-competitive justification should be deemed to violate section5 (rule of reason for conduct that facilitates predatory pricing without an agreement ); SC disagreed, business practices are not unfair under section 5; predatory exclusionary conduct required to deem violation of section5
Palmer v BRG of Georgia
bar review courses; Bar review courses; per se unlawful market division under section1 BRG would take Georgia and Palmer would take the rest of the country; end of section 1 In 1980, HBJ gave BRG an exclusive license to use HBJ's content and trademark within Georgia. In exchange, BRG would give HBJ a share of BRG's revenue and a fee of $100 per enrollee. As part of the agreement, HBJ agreed not to compete with BRG within Georgia, and BRG agreed not to compete with HBJ outside of Georgia. After entering into this agreement, BRG raised its price from $150 to $400. Palmer (plaintiff) sued BRG and HBJ, alleging that the agreement not to compete was a violation of § 1 of the Sherman Act, 15 U.S.C. § 1. outcome: An agreement between competitors to halt competition in a geographic market of prior competition violates § 1 of the Sherman Act.
hypothetical monopolist test
can a hypothetical monopolist profitably impose a SSNIP?
US v park Davis
can't unilaterally refuse to deal with other wholesalers; Court said that you can unilaterally refuse to deal with other wholesalers who are competing with us ; court said no that's basically a combination with other wholesalers - Court unwilling to expand Colgate standard; court said although you can unilaterally refuse to deal with a wholesaler
US v DuPont
cellophane market; the United States (plaintiff) brought an action against du Pont, claiming that du Pont had monopolized the market for cellophane. Du Pont argued that the government's alleged product market was too narrow and that cellophane was a product within the larger market for flexible-wrapping materials. During the relevant period, du Pont maintained a share of 75 percent of cellophane production in the United States but only 20 percent of flexible-packaging production. outcome: A firm has monopoly power under § 2 of the Sherman Act if the firm controls price or competition in an identified market.
Monsanto v Spray Rite
complaint about undercutting retailer; Monsanto decided to stop selling any herbicide products to Spray-Rite after complaints from other distributors about Spray-Rite's discount pricing. Spray-Rite ceased operations as a herbicide distributor in 1972 and subsequently brought a lawsuit against Monsanto, alleging that Monsanto had violated § 1 of the Sherman Act by conspiring with distributors to fix the price of Monsanto's herbicide products outcome: An inference of concerted action under § 1 of the Sherman Act requires direct or circumstantial evidence that the defendant and others were engaged in an unlawful scheme to restrain competition. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977), recognized the distinction between price and nonprice restraints in agreements between manufacturers and retailers. Vertical price controls have an obvious anticompetitive effect that warrants per se treatment. Vertical nonprice controls are not always anticompetitive though. First, there must be some coordination between the manufacturer and other distributors. Second, a conspiracy to fix prices must be distinguished from an agreement aimed at non-price restrictions.
Klor's v Broadway-Hale stores
conspiracy not to sell klor's; As competition intensified, Klor's brought a complaint against Broadway-Hale, alleging that Broadway-Hale was conspiring with manufacturers and distributors of well-known home-appliance brands to boycott Klor's by either not selling to Klor's or by selling to Klor's at unreasonable prices. Klor's outcome: An agreement among manufacturers, distributors, and retailers to boycott a single business may violate the Sherman Act
Matsushita v Zenith Radio
conspiracy to monopolize American market by pricing below market level; Zenith Radio Corp. (Zenith) (plaintiff) and National Union Electric Corporation (NUE) brought suit against Matsushita Electric Industrial Co. (Matsushita) (defendant) and 20 other Japanese-owned corporations which manufacture and sell consumer electronics products (CEPs), alleging that the defendants were involved in a predatory pricing conspiracy in violation of the Sherman Antitrust Act and several other antitrust statutes. outcome: Because there is no plausible motive for the defendants to engage in this type of predatory activity, there is no reason to infer conspiracy.
Goldfarb v Virginia State bar
couple buying house wanted lower fee; The Goldfarbs brought a class action suit in federal court against the state and county bar associations, claiming that the minimum fee schedule amounted to illegal price fixing under the Sherman Act outcome: A minimum legal fee schedule established by a state or local bar association may constitute an anticompetitive practice that violates the Sherman Act.
US v Socony Vacuum
dancing partners; In 1935, Socony-Vacuum Oil Company, Inc., and several other midwestern oil companies (defendants) met and verbally agreed to divide up the spot market for gasoline so that each oil company would be matched with an independent refinery. Whenever spot-market gasoline became available, the designated oil company would purchase the gasoline at market price. outcome: Involved dancing partners - each of the major companies was paired with an independent smaller company and the major company was told to buy up excess oil produced by its dancing partner to keep the excess oil off the market, restricting output for the market and propping up the price for oil; per se unlawful - per se standard established
Northeastern telephone company v AT&T
definition of predatory pricing; Deliberate sacrifice of present revenues with purpose of driving out of the market; also acknowledged risks of predatory pricing Price cutting is the very conduct that the antitrust laws want to encourage - careful not to have false positives - don't condemn conduct
Appalachian Coals v US
detour of stressed coal industry; In the wake of the Great Depression, 137 coal producers reached an agreement to establish Appalachian Coals, Inc. (Appalachian Coals) (defendant) as the exclusive selling agent for their coal. Ownership in Appalachian Coals was to be divided among the coal producers based on the percentage of their production contribution. outcome: The nature and effect of an agreement that restrains competition between parties must be considered when determining whether an antitrust violation has occurred. Court was slayed by financial distress that was facing the coal industry so they judged it under rule of reason; open and notorious conduct - it was obvious what they were doing and it was obvious they didn't want to hide anything - their intent was to decrease output
Quick Look standard
either per se unlawful or rule of reason - third standard in between the two (middle ground)
Tampa Electric v Nashville Coal
electric/coal agreement; Tampa Electric Company (Tampa Electric) (plaintiff) was a public utility company that provided electricity in and around Tampa Bay, Florida. In May 1955, Tampa Electric entered into an agreement with Nashville Coal Company (Nashville Coal) (defendant), a producer of coal, which obligated Tampa Electric to buy from Nashville Coal all of Tampa Electric's coal needs for two units of a new electric plant for a period of 20 years. outcome: An exclusive-dealing arrangement does not violate § 3 of the Clayton Act unless the arrangement will substantially exclude competition in the affected market. Product market was coal, geo market covered most of south and into Illinois, court said in exclusive dealing cases you have to define relevant product market and relevant geographic market, and measure share and discover degree of foreclosure (how many sales are being foreclosed to competitors as a result of these dealings) ; defining the relevant market - there was not section 2 violation (only 1 percent of sales were being foreclosed through the dealing contracts) ; 11th circuit applied 2 part test: is there a substantial foreclosure of arrival and is there a harm to competition—needs to exclude competition to violate section 2
Business electronics v Sharp
electronic calculators; BEC sued Sharp and Hartwell, alleging that Sharp and Hartwell conspired to terminate BEC's dealership in violation of the Sherman Act. outcome: Vertical restraints of trade that do not contain some agreement about pricing are not per se illegal under § 1 of the Sherman Act.
Spectrum sports v Mcquillan
equestrian horshoe pad; attempted monopolization standard; In 1983, the sorbothane producers stopped selling sorbothane to the McQuillans. The sorbothane producers began to sell their own sorbothane horseshoe. The sorbothane producers also gave the McQuillans' athletic distributorship to Spectrum Sports, Inc. (Spectrum) (defendant). Unable to obtain sorbothane, the McQuillans went out of business. outcome:A claim for attempted monopolization in violation of § 2 of the Sherman Act requires a showing of the relevant market.
McWane v FTC
full support program to prevent dealers from dealing with the competitor, called stalk; 11th circuit applied exclusive dealing test
Brook group v Brown and Williamson Tobacco
generic cigarettes; failed because likelihood of recoupment;. A price war broke out between the two products, and Brown eventually established a lower effective price by offering volume rebates to wholesale distributers. In response, Liggett brought a suit against Brown, alleging antitrust violations based on predatory-pricing practices. outcome: A plaintiff alleging an antitrust violation based on predatory pricing must show that the defendant had a reasonable probability of recouping the losses suffered during the predatory-pricing period. (failed on recoupment) Same test for predatory pricing to price discrimination; 1. Price below appropriate cost 2. Likelihood of recoupment once driven competitor out of market (failed because of point 2)
flailing firm defense
idea that whenever the firm's competitive significance was historically, going forward it probably wouldn't have that effect
california dental association v FTC
if FTC sues you under section 5 they can win if the conduct is illegal under one of the other antitrust statutes (no independent basis for finding of illegality under section 5 EXCEPTION: attempted price fixing, as section 1 actually requires agreement and so they can sue for that conduct under section 5) ; if I pick up the phone and call for an agreement, but that attempt can be brought suit under section 5 without being deemed illegal under the Sherman act
LePages
if you offer a bundle that your competitor is not able to match that is unlawful under section 2(3) Its not just that you offer a bundle that your competitor is not able to match, there has to be an allegation of below cost pricing 9th - bundle has to have allegation of below cost pricing (discount attribution standard)
ILECS
incumbent local exchange carriers
O'Donnell Letter
interstate circuit
US v Alcoa
learned hand goes off the rails; Learned Hand; 3 tier test for high enough market share to have market/monopoly power 1/3 share is not high enough to worry about market share 2/3 share is probably still not enough but unwilling to say definitely not enough 90% share is definitely high enough to have market power or monopoly power Hand went off the rails a bit despite some good rhetoric - having a monopoly thrust upon you is not unlawful - merely being a monopolist is not unlawful ; you must have some kind of unlawful conduct to go with it ; have to have exclusionary or anticompetitive conduct to go with it to be considered in violation of section2 Learned Hand: " A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight, and industry" - "the successful competitor, having been urged to compete, must not be turned upon when he wins" - really excellent statement of idea that being a monopolist is not unlawful You have to have exclusionary or anticompetitive conduct to go along with monopoly power - not unlawful otherwise - you have not violated section 2 Hand says ALCOA can engage in exclusionary conduct by expanding output and opening new plants—head scratcher—technically the very conduct that the antitrust ought to be encouraging Holding that was a conundrum - we don't focus on holding in ALCOA but rather Hand's 3 pronged test and the idea that monopoly power does not mean you have violated section 2 outcome: Yes. Alcoa and Aluminum are liable for conspiring to form an illegal monopoly with foreign nations outside the United States' borders because their conduct was intended to and did negatively impact the manufacture and sale of aluminum within the United States.
US v Shoe Machinery Corporation
leasing of shoe making equipment; United Shoe Machinery Corporation (USMC) (defendant) was the leading manufacturer of machinery for making shoes. However, USMC never sold machinery to customers and only allowed customers to lease machinery. The leasing agreements were long term and tended to discourage the lessees from switching to USMC's competitors. The United States (plaintiff) sued USMC, alleging that USMC had monopolized the market for shoe machinery in violation of the Sherman Act. outcome: A defendant has violated § 2 of the Sherman Act if the defendant has the power to exclude competition and that power reduces actual and potential competition.
theatre enterprises v Paramount film distributing
movie theaters declined to show movies in suburbs ;Movie theaters declined to show movies in suburbs, preferring to show in downtown; makes perfect sense to behave this way (court) bc the contributors were acting in independent self-interest - drew distinction in what was happening in interstate circuit (unlike in interstate circuit where the conduct would only make sense if the distributors knew that they were doing the same thing; in this case it makes perfect sense for the film distributors to behave this way)—court talked about why a movie distributor would want to show their movie downtown as opposed to the suburban theaters and where the distributor was acting in their economic self-interest; cannot infer conspiracy - sharp distinction between this case and interstate circuit outcome: Conscious parallel business activity between competitors is not conclusive proof of an antitrust violation.
US v Addyston Pipe and Steel
naked vs ancillary restraints of trade; Addyston Pipe reached an agreement with five other pipe manufacturers (defendants) to divide up competition throughout the United States and fix prices within those territories in order to exclude new competitors. outcome: An agreement whose main purpose is restraining trade will not be shielded from Sherman Act liability under the common law exception for ancillary trade restraints. Per se standard: all we care about is if you reached the agreement, and IF you reached the agreement, then its unlawful automatically (per se) reasonableness doesn't matter, or if you were broke/poor
Berkey Photo v Kodak
new camera product info; Berkey eventually brought a lawsuit against Kodak, claiming that Kodak's release of the 110 camera and Kodacolor II film was an impermissible use of Kodak's monopoly power in the camera-film market to monopolize the consumer-camera market. outcome: A monopolist's failure to disclose information about a new product's technology and format is not an unlawful act of monopolization under the Sherman Act.
Lorain Journal v US
newspaper/radio issue; The Journal adopted a policy of denying advertising space to any business that advertised with WEOL. outcome: If a firm with existing monopoly power uses its market power to destroy a new competitor, the firm commits attempted monopolization in violation of § 2 of the Sherman Act.
Jefferson Parish Hospital v Hyde
o'connor concurring opinion; In 1971, East Jefferson Hospital (Jefferson Hospital) (defendant) entered into an agreement with Roux & Associates (Roux) that established Roux as the exclusive provider of Jefferson Hospital's anesthesiological services. Under the agreement, any fees for anesthesiology were billed separately to patients, with payments divided between Jefferson Hospital and Roux. Under the agreement, only anesthesiologists from Roux were able to practice anesthesiology at Jefferson Hospital. outcome: A tying arrangement is not a per se violation of antitrust law if the company lacks market power in the tying market. Oconnors concurring opinion mattered
state oil v khan
o'connor on resale price; held that vertical maximum price fixing was not inherently unlawful, thereby overruling a previous Supreme Court decision, Albrecht v. Herald Co., 390 U. S. 145 (1968). However, the Court concluded that "[i]n overruling Albrecht, the Court does not hold that all vertical maximum price fixing is per se lawful, but simply that it should be evaluated under the rule of reason, which can effectively identify those situations in which it amounts to anticompetitive conduct."
US v Arnold Schwinn
per se unlawful vertical restraints of trade; Court said vertical price restraints mean this is the same for terr. Restraints; per se unlawful just like vertical price restraints In United States v. Schwinn & Co., 388 U.S. 365 (1967), the United States Supreme Court held that a per se antitrust violation occurs when a manufacturer sells a product to a distributer subject to customer or location restrictions on the product's resale.
Arizona v Maricopa County
physicians published maximum fee schedule;The Foundation established a set of maximum fees that member-doctors could accept as payment for medical services that were provided to patients covered by medical-insurance plans approved by the Foundation. outcome: The per se rule against price fixing applies to horizontal agreements that set maximum prices for goods.
Warehouser
predatory bidding case; same test as for predatory pricing
Utah Pie company v Continental Baking
price discrimination; low prices in salt lake city to drive Utah pie out of the market; Utah Pie accused the defendants of price discrimination in the Salt Lake City market. Utah Pie alleged the defendants charged substantially lower prices in the Salt Lake City market than in other areas of the country. outcome: A plaintiff can make a claim for price discrimination under the Robinson-Patman Act even if the plaintiff had increased sales during the period of alleged discrimination. Robinson Patman act violation - lowering prices led to drastically declining price structure, liability didn't include requirement that there be below cost pricing (dissent from stewart) risk of false positives, and Utah pie wasn't on verge of going out of business and this was court protecting competitor not competition
Kiefer Stewart v Seagrams
price maintenance per se rule; Keifer stewart - the per se rule against price maintenance... Price maintenance applies to maximum and minimum prices
Pacific Bell
price squeeze
price squeeze
price squeeze is two claims mashed together (refusal to deal and predatory pricing)
Pacific Bell 2009
price squeeze- pacific bell supplier and competitor of link line; pacific bell was charging low prices at retail for competing products and charging high prices to linkline to everyone but link line so they couldn't compete; price squeeze is two claims mashed together (refusal to deal and predatory pricing) and it failed on both counts (trinko) so price squeeze not accurate, no allegation that pb was charging below costs, and trinko tells us pb doesn't have to deal with competitors
section 7
prohibits mergers and acqusitions that may tend to lessen competition or lead to monopoly - early cases before clayton act courts tried to use section 1 of Sherman act to judge acquisitions and it was a mess; this gave courts a tool to challenge mergers and acquisitions
section 5
prohibits unfair methods of competition; doesn't have independent basis for illegality, when the FTC sues you under section 5 they can win if the conduct complained of is also illegal under the Sherman act prohibits unfair or deceptive acts or practices in or affecting commerce
Northwest wholesalers v Pacific stationery
purchasing coop excluded member for not meeting standards; In 1977, Pacific's controlling ownership changed hands without notification to Northwest, in violation of membership rules. In 1978, Northwest expelled Pacific from the cooperative. In response, Pacific brought a lawsuit against Northwest, claiming that the cooperative expulsion was a group boycott in violation of the Sherman Act. outcome: A per se antitrust analysis may only be applied to a group boycott if the defendant's activity is of a type likely to produce primarily anticompetitive effects.
Sherman Act section 1
puts greater emphasis on the actual nature of constraining interstate trade -- per se violations and rule of reason violations every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade is declared to be illegal price fixing cartels price sharing conscious parallelism market division halt of competition in geographic market
NCAA v Board of Regents of U of Oklahoma
quick look standard (either per se unlawful or rule of reason - third standard in between the two (middle ground) . In 1981, the NCAA adopted a new television-broadcast plan that limited the ability of individual members to sell broadcast rights to college football games. outcome: An agreement to fix product prices or output may be assessed under the rule of reason rather than the per se rule in a market if some cooperation among competitors is required for the market to function.
Aspen skiing company v Apsen Highlands Skiing Corporation
refusal to deal skiing tickets with competitor; 4 mountains had put out joint ticket to ski at any 4 mountains, and aspen over time started dialing down and eventually cut out aspen highlands entirely and started its own 3 mountain ticket, going so far as to refusing to allow aspen to purchase lift tickets at retail so they couldn't recreate that ticket 3 mountain ticket rather than 2 market ticket - court said sudden change in pattern of conduct that only makes sense because of its tendency to harm rival is viewed as unlawful exclusionary conduct under section 2, so aspen's refusal to deal was exactly that (interstate circuit; sudden change in conduct and conduct that makes economic sense because of it tendency to harm the rival, so those circumstances make it okay to say it is exclusionary conduct) it doesn't make economic unilateral sense ; court said exclusionary conduct of section 2 for refusal to deal outcome: A business's refusal to cooperate with competitors may constitute monopolization under § 2 of the Sherman Act if the refusal does not serve a legitimate business purpose.
Kodak v Image Tech services
refusal to sell Kodak parts to independent providers; In the 1980s, independent service organizations (ISOs) began selling parts for Kodak equipment and offering repair and maintenance services at much lower prices than Kodak. In response, Kodak began refusing to sell replacement parts to buyers who used ISOs for servicing Kodak equipment and also made it more difficult to obtain used Kodak equipment. Kodak also reached agreements with OEMs that prohibited the sale of equipment parts to anyone other than Kodak. As a result, many ISOs went out of business or lost significant revenue outcome: A company's lack of monopoly power in a primary market does not preclude a finding that the company possesses sufficient market power in a subsidiary market to violate antitrust law. scalia dissent: focus on interbrand competition not intrabrand restraint, not something we should care about
Continental TV v GTE Sylvania
sale of bikes; rule of reason used after this ; Vertical restraints challenged as antitrust violations should be assessed under the rule-of-reason analysis.In this case, Sylvania's practice of restricting resale locations for its television sets clearly falls within the language of Schwinn and would constitute a per se antitrust violation under that standard. outcome: Vertical restraints challenged as antitrust violations should be assessed under the rule-of-reason analysis.
Dr. Miles Medical Company v John d Park
secret medicine formulas; sets out general rule that vertical price fixing is per se unlawful Once a manufacturer sells his product to a wholesaler, they both agree on the price of resale, under dr miles that's per se unlawful
Verizon v Trinko
section 2 case where court is very active;under telecom act Verizon (ILEC) was being insufficiently vigorous in its assistance to SILECs as it was required to do under the act - Verizon was insufficiently vigorous in its assistance—violation of telecommunications act also amounted to unlawful refusal to deal under section 2 - court said telecommunications act doesn't change section 2 rulings ; Scalia: aspen skiing gives road map for when refusal to deal with competitor might violate section 2 Verizon was only dealing with competitor bc of compulsion (had to under statute); aspen was doing it voluntarily, not because of a statute, and over a number of years Here Verizons refusal dealing doesn't tell us anything about its competitive intent; court did not expand ruling of aspen skiing "being a monopolist is not unlawful"
US v Container corp
section 5 illegality; Container Corporation of America (Container Corp.) (defendant) is a manufacturer of shipping containers. Container Corp. and 17 other container manufacturers (defendants) maintained a practice of sharing pricing information with each other upon request. There was no formal agreement between the container manufacturers, but each of the competitors generally provided the price information with the understanding that a request for information would be reciprocated in the future. outcome: The exchange of specific price information between competitors is a violation of the Sherman Act if the exchange chills price competition.
SSNIP test
small but substantial non-transitory increase in price
US v Topco
small grocery chains fighting larger brands; Grocery purchasing coop; 25 grocery small regional grocery chains that formed private label purchasing coop which allowed them to compete more effectively with larger brands; exclusive territories without price fixing (this case specifically) court struck down the horizontal terr. Restriction as illegal per se (pro-business rationale) Dissent from Burger - didn't think per se rule wasn't appropriate bc no restriction on interbrand restriction but intrabrand competition so it didn't apply Topco put squarely that exclusive territories for selling topco product; court struck down territorial restraint as illegal per se; they repeated pr business rational for per se rule outcome:An agreement between competitors to divide up a market into exclusive territories is a per se violation of § 1 of the Sherman Act.
private plaintiffs
standing to sue under antitrust laws
US v Sealy
territorial restraints for mattresses; Sealy licensed brand to manufacturers and set price for mattress and territories in which it could be sold; court said key issue was whether the terr. Restraints were viewed as vertical or horizontal originating from member mattress companies; pi said Sealy was a big agreement among agreeing mattress companies and so it struck down price fixing as unlawful per se outcome: Court seemed to implicitly recognize some benefits of putting in territorial restrictions but said that the key issue here was whether the territorial restraints were viewed as vertical, originating from the manufacturer, or horizontal originating from member mattress companies; court said Sealy was a "creature of its licensees" - Sealy was a big agreement among competing mattress companies so it struck down market division and price fixing as unlawful per se
horizontal integration
the practice of two rival companies within the same sector colluding to gain a greater market share and squeeze out smaller competitors; will expose 2 or more companies to legal recourse
Herfindahl-Hirschman Test
tool used to measure market concentration; replaced forefront concentration ratio Take market share of each participant in the market, square the share and then add up squares to get the HHI Merger guidelines have certain presumptions that kick in at different levels of concentration/HHI less than 1,500 = competitive 1,500-2,500= moderately competitive 2,500+ = highly concentrated
US v Loews
tying of good movies with bad movies; First case that started to put parameters when something is per se unlawful Tying of good movies with bad movies; court said - the standard of illegality is that the seller must have "sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product" Sufficient economic power does not mean market or monopoly power - lower standard
International Salt Company v US
tying of salt tablets to machines to add salt to canned food; outcome:A firm creates an unlawful tying arrangement if it requires lessors of patented machinery to purchase the firm's unpatented products for use in the machinery.
tying/tied product difference
tying product is the one that you want to buy, the tied product is the one that you have to buy with the tying product
Siegel v Chicken Delight
use of chicken delight trademark, name, and methods of operation
Sherman Act section 2
use of monopolies, intended or unintended, either by an individual company or companies to restrain interstate commerce is illegal power to exclude competition control of pricing/competition attempted monopolization
Henry v AB Dick
videographer machine and ink; Tie between a patented videograph machine and paper and ink to be used in it; one product is always sold on the condition that the customer buy one product with combination of another (buy both or none) tie/tied product difference—allowed bc the patented product was not obliged to allow others to buy the product Dissent: no limiting factors; opening a can of worms to allow patent owner to expand reach of monopoly power over patented product Court allowed the tie, it decided that bc the product was patented the patent owner was under no obligation to license the product in the first place and therefore it was lawful for the patent owner to impose further restrictions on customers of its patented products outcome: allowed bc the patented product was not obliged to allow others to buy the product