CH47 - Antitrust Law

In a rule-of-reason analysis, the court considers:

1. The nature and purpose of the restraint on trade 2. The scope of the restraint 3. The effect of the restraint on business 4. The intent of the restraint

Market share

A firm's fractional share of the relevant market.

Product market

A market in which all products identical to or substitutes for the company's product are sold.

Horizontal merger

A merger between two or more companies producing the same or similar products

Bid-rigging

An agreement among firms to not bid against one another or to submit a certain level of bid.

Horizontal division of markets

An agreement between two or more competitors to divide markets among themselves by geography, customers, or products.

Rule-of-reason analysis

An inquiry into the competitive effects of a company's behavior to determine whether the benefits of the behavior outweigh the harm of the anticompetitive behavior.

Price discrimination

Occurs when a seller sells the *same* goods to competing buyers for different prices. may be used to bring about monopoly power.

"Quick-look" standard

Permits the defendant to offer justification for his per-se violation. If the defendant can do so, the court then engages in rule-of-reason analysis.

Predatory pricing

When a company prices one product below normal cost until competitors are eliminated and then sharply increases the price.

Vertical merger

When one company at one level of the manufacturing-distribution system acquires a company at another level of the system - E.g. when a manufacturer acquires a retailer.

Horizontal restraint of trade

When two competitors in the *same market* make an agreement to restrain trade. - E.g. price-fixing, bid-rigging, horizontal division of markets

Price fixing

When two or more competitors agree to set prices for a product or service.

Vertical restraint of trade

When two parties at *different levels* in the manufacturing and distribution process make an agreement that restrains trade. - E.g. territorial and customer restrictions

Congress passed the Sherman Act through its ability to __________ ________ ________.

regulate interstate commerce

Two types of mergers (as prohibited by the Clayton Act):

- Horizontal mergers - Vertical mergers

Courts' approaches to evaluating the reasonableness of a restraint on trade:

- Rule-of-reason analysis - Per-se violations - Quick-look standard

Section 1 of the Sherman Act. To violate the act, a business act or practice must have three characteristics:

1. A combination, contract or conspiracy 2. An unreasonable restraint on trade. 3. A restraint that affects interstate commerce --------------- Courts are responsible for identifying these behaviors

Section 2 of the Sherman Act: Protects against unfair use of monopoly power. To violate the act, a business act or practice must monopolize, or:

1. Possess market power 2. Unfairly achieved this market power or uses this power for abuse

*The Clayton Act* identifies four practices (that are not covered under the Sherman Act)

1. Price discrimination 2. Exclusionary practices 3. Mergers 4. Interlocking directories

Per-se violation

Certain business practices that will always hurt consumers. To establish a violation, a plaintiff would have to prove *simply that the prohibited conduct occurred*. The defendant can offer no justification for the behavior; he can argue only that the behavior did not occur.

What's the purpose of the Sherman act?

It attempts to stop trusts from unfairly restricting market competition.

Monopoly power (or market power)

The ability to control price and drive competitors out of the market.

Geographic market

The area in which the company competes with others in the relevant product market