Anti-Trust Law
What are the burdens of proof in a Section 7 merger case?
"Allocation of the burden of proof in actions arising under Section 7: 1. The government or private plaintiff satisfies its initial burden of proof by showing that the combined market shares of the merging companies and the increase in concentration resulting from the merger is so high as to likely produce anti-competitive effects . 2. The defendant can rebut this prima facie showing by introducing other evidence. 3. If the defendant rebuts the presumption of illegality, "the burden of producing additional evidence of anti-competitive effect shifts to the plaintiff."
What is the Supreme Court requirement for establishing injury?
"Arista Records P must show: 1. Anti-trust standing 2. Anti-trust injury 3. Efficient enforcer"
What is vertical merger? What is the antitrust concern in a forward integration case? What will the court look to in order to analyze a vertical merger?
"In a vertical merger a firm acquires an actual or potential customer or supplier. Forward vertical mergers may adversely affect the acquired company's competitors, who will be foreclosed from handling the acquirers products. Whether a particular vertical merger or acquisition is unlawful under Section 7 of the Clayton Act will depend on the probability of it substantially lessening competition or tending to create a monopoly in a relevant market. The Supreme Court has relied heavily on several economic factors : degree of market foreclosure significant level of, or trend toward industry concentration or integration high barriers to entry elimination of potential competition"
What is the test to determine pro or anti-competitive effects of restraint on trade?
"Rothery v Atlas 1. Whether the restraint increases efficiency. 2. The restraint must be ancillary."
"Proctor & Gamble the "potential competition" doctrine"
"The question to be answered is: what is the effect on the target market of the acquiring firm's pre-merger position at the fringe of that market ? a market extension merger may be found to be unlawful when the acquiring firm is a perceived potential entrant."
What is the benefit of potential competition? What is the concern in a product extension merger?
"The threat of entry into the market of a competitor standing at the threshold will likely exercise a restraining influence on pricing and other behavior of existing firms in the market, and that the removal of that threat may have a substantial effect on competition. The chief competitive evil of a product extension merger is that it involves almost by definition the acquisition of a potential entrant into the acquiring firm's market, giving rise to possible competitive concerns under the "potential competition" doctrine: the loss of the acquiring company as a probable potential entrant into the relevant market, either by internal expansion or by toehold acquisition ."
The court in Northern Pacific RR stated 2 characteristics of agreements worthy of per se analysis. What are those two things?
(1) pernicious effect on competition and (2) lack of any redeeming virtue
Blue Cross "supply substitutability"
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How do territorial restraints harm consumers?
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Why is Vons no longer good law?
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What are the elements of a section 1 violation?
1. A contract combination or conspiracy. 2. an unreasonable restraint of trade. 3. anti-competitive effect on interstate commerce
what are the antitrust concerns associated with trade associations?
1. Because trade associations typically place limitations on membership, issues arise as to whether the exclusion of an applicant or the expulsion of a member violates the Sherman Act, as a group boycott or in restraint of trade. 2. Anti-trust law addresses the extent to which a trade association may lawfully limit its membership and restrict its services to members.
How is market share calculated?
1. By units Calculate the number of units produced by all suppliers and the number produced by the defendant. The defendants number dived by the total is the defendants market share. See example below. 2. By sales Calculate the total sales in the market and the defendants total sales. The defendants sales divided by the total is the defendants market share. ex: If the total spent by consumers in your market ias $100,000 and defendants revenues were $10,000, then the market share would be $10,000 divided by $100,000 or 10% percent.
What are the three sections of the Clayton Act we covered and what does each one prohibit?
1. Clayton Act Sec. 3 along with the Robinson Patman Act prohibits price discrimination. 2. Clayton Act Sec. 3 prohibits tying arrangements, exclusive dealing agreements, and requirements contracts that may substantially lesson competition or tend to create monopoly in any line of commerce. 3. Clayton Act Sec. 7 prohibits mergers and acquisition where the effect may be substantially to lessen competition or to tend to create a monopoly in any line of commerce in any section of the country.
How should you employ the rule of reason in a refusal to deal monopolization case on the exam?
1. Define the violation: (1) creation or maintenance of monopoly (2) by anti-competitive means (exclusionary or predatory conduct) 2. FIRST do economic analysis of the market power 3. Point to pro and anti-competitive effects (entry barriers especially). 4. Point out that the conduct may be ordinary and competitive practice and that competition may exist despite the restraint. 5. Show Causal Link Between Alleged Acts and Monopoly Maintenance 6. Argue there could be a more competitive regime if the restraint were not in place. - Why is use of third parties an effective barrier? Would entry barriers in the market would have fallen otherwise?
When is an information exchange analyzed under the per se rule? When is it analyzed under the rule of reason?
1. If there is both an exchange of information on price and an agreement to adhere to prices based on the information exchanged, the practice is likely to be anti-competitive and held per se unlawful. 2. If there no agreement to adhere to prices based on the information exchanged, the per se rule does not apply.
What are the two elements of market definiiton?
1. Product market. 2. Geographic market.
How do courts address the defenses of reasonable price restraints and price restraints that are reasonably necessary?
1. Reasonableness is not a defense. FOGA, Trenton Potteries, Addyston. 2. A price restraint is reasonably necessary if the business would not exist but for the restraint or there is a valid efficiency justification. BMI, Atlas
What defenses would you put forth for Microsoft?
1. We have no market power: (a) there is competition or the imminent threat of competition from everything (down to the electric toaster) against Windows (b) no entry barriers and no efficient entrants 2. Valid business justification - we either did not know or did not care what Netscape was doing
General Atomic
A cartel set up by govt regulation. New provisions were added each time a member came up with a new way to cheap on the cartel. Difficulty of maintaining a cartel: Cartels are inherently unstable b/c (1) there are still producers outside the cartel who will undercut you (2) the higher you raise the price of membership, the greater to motive to cheat.
RPM can also facilitate mfg. exclusion. How would this work? There are 3 things you'll need to show in order to establish such a case. What are they?
A dominant mfg. might use RPM to guarantee large margins to retailers and thereby discourage them from carrying products of the a smaller mfg or new entrant. 1. Show that the mfg. has a dominant market position. 2. Show that the RPM agreement covers a substantial portion of distribution outlets. 3. Show how the RPM plausibly has a significant foreclosure effect that impacted an actual rival. (you must show the harm is not just theoretical) 4. Defendant can rebut by showing pro-competitive benefits. That RPM allows it to compete with rivals and that RPM is a reasonable method for doing so.
Define horizontal refusal to deal. What laws cover horizontal refusal to deal?
A horizontal refusal to deal is an agreement among competitors not to deal with a third party Horizontal refusals to deal may violate Sections 1 and 2 of the Sherman Act as well as Section 5 of the Federal Trade Commission Act.
Last, RPM can facilitate retailer collusion. How?
A retailer might force the mfg. to use RPM to implement and police a retailer cartel. 1. Show that RPM is used with respect to at least 50% of the sales in the market. 2. Show that RPM was implemented as a result of retailer coercion (not persuasion) 3. Explain that the retailer coercion could not be prevented by the mfg. (ex it could not have chosen forward integration or contracted with new retailers) 4. Defendant can rebut by showing pro-competitive benefits. That RPM allows it to compete with rivals and that RPM is a reasonable method for doing so.
How does Justice Hand distinguish a lawful monopoly from an unlawful monopoly.
ALCOA Hand decides only if the monopoly is "thrust upon you" as a result of competition can you assert a defense for having a monopoly. Once prices are set the monopoly is unlawful per se bc that fact that they have the power to set the price is the danger.
How is an ancillary restraint different from a naked restraint?
Addyston Pipe 1. Ancillarity requires a legitimate main purpose 2. In a naked restraint the sole object is to eliminate competition.
Price Fixing TRADE ASSOC. EXCHANGE OF INFORMATION
American Column An information exchange within a trade association is unreasonable if it is detrimental to competition.
What is resale price maintenance?
An agreement between a manufacturer and a retailer setting minimum or maximum prices.
TOPCO Per se rule for Territorial Restraint/Boycott
An agreement to limit/restrict output by dividing up the customers. RULE: Territorial restraints are per se violation of section 1 even where there is no anti-competitive result or price fixing. An agreement to fix territorial restrictions is per se illegal b/c it horizontally fixes prices (among competitors) by reducing output.
What are two ways a refusal to deal becomes unlalwful?
Aspen Skiing 1. Refusing to deal with a competitor without a valid business reason. 2. If rivals have a history of dealing & monopoly changes the character of the market by refusing to deal."
Socony Vacuum horizontal price fixing
CHANGED THE LAW: in order to prove conspiracy to raise prices, you no longer need an overt act RULE: if the purpose or intent of an agreement is to set, stabilize or depress prices then the conduct is per se illegal whether you actually carry it out or not
How do cases following the doctrine in Trans Missouri analyze restraints?
Certain restraints are unreasonable based simply upon the "nature and character" of the agreement. These should be per se illegal.
Price Fixing PRICE UNIFORMITY AND CONSCIOUS PARALLELISM
Conscious parallelism is not unlawful b/c it is unilateral conduct. (Twombly) Price uniformity is an unreasonable restraint if other factors show a conspiracy does in fact exist. (GYPSUM)
What are three factors for finding conscious parrallelism?
Container Corp 1. small number of producers 2. barriers to entry 3. most importantly: what effect did the shared information have on price levels
Price Fixing INFORMATION EXCHANGE
Container Corp. An information exchange with BOTH the purpose and effect of affecting prices is always an unreasonable restraint
How do cases following the doctrine in Standard Oil analyze restraints?
Courts can determine that certain restraints are unreasonable based simply upon the "nature and character" of the agreement. However, only combinations and contracts UNREASONABLY restraining trade are subject to actions under the anti-trust laws, possession of monopoly power is not inherently illegal.
Distinguish the way horizontal group boycotts are analyzed from the way vertical group boycotts are analyzed.
Courts may apply the per se rule or quick look RR to horizontal group boycott agreements. (Northwest Wholesalers) Exclusionary agreements between entities at different distribution levels will be considered vertical and will be judged under the rule of reason, at least where they do not involve an express agreement on price
How should you analyze a horizontal restraint on the exam?
Discuss the potential for per se liability but analyze under some version of the RR. 1. If the horizontal pricing agreement is a naked restraint will be condemned as per se illegal. 2. If the anti-competitive consequences of an agreement impacting price are not be readily apparent presume illegality and rebut the presumption. 3. If pro-competitive virtues, efficiencies, ancillarity is readily apparent presume the conduct is legal and rebut the presumption.
What is the current law regarding horizontal market divisions?
Divisions of markets by competitors have no purpose other than the elimination of competition; therefore they are illegal per se. (TOPCO, BRG) Ancillary restraints are not per se illegal b/c the restraint is not the object of the agreement. (Addyston Pipe, Atlas)
Container Corp information exchange/conspiracy
Douglas: in a concentrated market, where demand is inelastic and where competition is based solely on price, an information exchange is per se illegal without considering the defendants' purpose and without any detailed inquiry into the effect of the price exchanges on market prices Fortas: concurrence says can't infer an agreement on "tacit/conscious parallelism" b/c there may be a valid pro-competitive justification for the activity. Fortas method is now the rule. MUST HAVE AN AGREEMENT AND THE THREE FACTORS
Name 3 factors to consider on the exam if asked to assess the legality of membership restrictions.
Factors: 1. whether the collective action was intended to 2. accomplish a legitimate goal 3. whether the action is related to that goal the detriment caused to the excluded firm
Distinguish monopoly power and monopolization.
Grinnell Monopoly power may be "growth or development as a consequence of a superior product, business acumen, or historic accident ." Kodak, Aspen Skiing What Section 2 does proscribe is monopolization, that is, the possession of monopoly power coupled with an intent, evidenced through exclusionary acts, to exercise that power.
FOGA Group Boycotts
Group boycott of retailers who sell "copied" patterns. FOGA attempted reasonable price defense. 2 VIOLATIONS: 1."Unfair method of competition" tending to monopoly: Clay. Act Section 3 - it is unlawful to make a sale or contraction the condition the purchaser will not deal in the goods of a competitor where the effect the condition may be to substantially lessen competition. 2. Sherman Act Sec. 1: (a) narrows outlets to which manufacturers can sell (b) subjects mfg. to boycott or tend to create a monopoly in any line of commerce.
Remember: criminal liability has a mens rea requirement. What does this mean? How can criminal mens rea be established?
Gypsum Before anti-competitive conduct can result in criminal liability, the Government must prove, in addition to the other factors, that the activity was undertaken with criminal intent. look proof that defendants acted with knowledge that the proscribed anticompetitive effect would most likely follow from the challenged conduct.15
How is HHI calculated?
HHI represents the sum of the squares of the market share of individual competitors in the market. In a market with a single seller, the HHI is 10,000. Merger guidelines: 1. an HHI below 1,000 corresponds to an "unconcentrated" market; 2. an HHI between 1,000 and 1,800 corresponds with a "moderately concentrated" market; 2. an HHI above 1,800 corresponds to a "highly concentrated" market.
Trans Missouri Price Fixing
Holding: competition or gov't may set reasonable rates, not the individual competitors as a group. The right of a firm to charge reasonable rates does not include the right to enter into a combination with competitors to maintain reasonable rates.
Kodak refusal to deal as evidence of monopolization
Holding: the most obvious evidence that a company has the ability to control prices or exclude competition is evidence that it actually has done so. RULE: monopolization requires both intent and market foreclosure, but bad conduct can establish intent RULE: valid business reasons can rebut the intent finding
What are the two categories of restraints and how are they analyzed?
Horizontal = Per se illegal Vertical = Price restraints are per se illegal and non-price restraints are analyzed under the Rule of Reason
What is HORIZONTAL market allocation and which laws cover market allocation?
Horizontal market allocation arises when competitors agree to divide territories, customers, or product markets. Horizontal market divisions can be challenged under Sections 1 and Section 5 of the Federal Trade Commission Ac.
Retailers might use RPM to exclude competition. How?
If a retailer with market power (or a group together) coerces the mrg to implement PRM policies it can frustrate competition from discount retailers. 1. Show that the retailer (or group) has sufficient market power to coerce the mrgs. 2. Show that coercion resulted in RPM covering much of the market. 3. Show how the RPM plausibly has a significant exclusionary effect impacting an actual rival. 4. Defendant can rebut by showing pro-competitive benefits. That RPM allows it to compete with rivals and that RPM is a reasonable method for doing so.
What is the current law regarding horizontal boycotts?
In many instances, courts have held that horizontal group boycotts are per se illegal. In recent cases, the Supreme Court has limited application of the per se rule
Trenton Potteries
It does not matter whether the competitors fixing prices lack market power or have a small market share; or that the price is reasonable. The reasonable price that is fixed today may not be reasonable in the market of tomorrow, but the lack of competition may maintain that price.
What is the the purpose of the quick look? How does it work?
It is a presumption determining tool for horizontal restraints. If the conduct is be presumed lawful, the plaintiff retains the burden of persuasion. if the conduct is presumed unlawful, the burden shifts to the defendant to persuade otherwise.
We covered Sec. 5 of the FTCA. What does it prohibit?
It prohibits "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce."
What is the ultimate question in a non-price restraint on trade?
Itek What is the effect on the consumer? Although the laws are most concerned with interbrand competition, they are not limited to those types of restraints.
How should you analyze resale price maintenance in a mfg. collusion case?
Mfg. might use RPM to facilitate collusion by providing a means of policing adherence to the agreement. 1. Show that a majority of sales in the relevant market are covered by RPM. 2. Show what structural conditions in the market are conducive to price coordination. (concentration that helps firms anticipate pricing) 3. Show that RPM plausibly helps significantly by identifying the cheaters. 4. Defendant can rebut by showing pro-competitive benefits. That RPM allows it to compete with rivals and that RPM is a reasonable method for doing so.
Distinguish the attempt or conspiracy to monopolize from actual monopolization.
Microsoft In both cases, monopoly has not yet been achieved. The attempt to monopolize that Section 2 prohibits reaches the situation where there is a "dangerous probability" of monopoly coupled with a specific intent on the part of the prospective monopolist to fix or control prices or exclude competition.
Microsoft proving monopolization: intent and willful conduct
Monopolization is exclusionary conduct and intent by a monopolist. 1. Intent: our focus is upon the effect of that conduct, not the intent behind it. Even an illicit intent will not make lawful conduct unlawul. 2. Conduct: the monopolist's bad conduct must have an anti-competitive effect. But this can be rebutted with evidence of a pro-competitive justification. The plaintiff can then rebut this claim, or demonstrate that the anti-competitive harm outweighs the pro-competitive benefits. refusing to deal with customers who deal with the monopolist's competitors is "inherently anticompetitive." 3. Monopoly power RULE: market share alone is not evidence of monopoly power . You must consider structural impediments to either the acquisition or exercise of monopoly power. - a company possessing even a 100% market share cannot be found guilty of violating Section 2.
What is monopolization?
Monopolization is monopoly power coupled with exclusionary conduct.
Distinguish the Colgate Doctrine from Monsanto's implied agreement rule.
Monsanto Colgate: Unilateral Conduct Rule Mfg can "suggest" resale prices and then can unilaterally refuse to deal with any dealer that doesn't abide by them. Monsanto:Implied Agreement Rule An agreement can be inferred and the protection of the Colgate rule removed. When the executives try to "cajole" mfg into the price restraint then it is illegal
Philadelphia natl. Bank the "undue concentration" or "quantitative substantiality" standard
No longer good law. Court ruled that a 30 percent market share was "undue" and that an increase in concentration of the top two firms from 44 percent to 59 percent was "significant. " A merger that produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market is so inherently likely to lessen competition - substantially - that it must be enjoined in the absence of evidence clearly showing that the merger is not likely to have such anti-competitive effect."
Although indirect price fixing is per se illegal, the court has made some exceptions. Distinguish Socony's broad prohibition from BMI and Chicago.
Not every arrangement that affects price competition has been held to be illegal per se 1. BMI: the licenses indirectly fix prices but had pro-competitive virtues. 2. Chicago: involved a novel an industry, was pro-competitive.
How might the case of State Oil v Khan effect the treatment of vertical group boycotts?
Now that vertical agreements on price are no longer considered per se illegal, it now appears that all vertical group boycott agreements, including those with specific resale pricing provisions, will be examined using the rule of reason.
Leegin minimum retail price maintenance
Overturned the per se restriction on minimum retail price maintenance agreements
Polygram quick look: market power/ agreement on price
PRESERVING THE PER SE RULE If a "quick-look" leads to the conclusion that the defendants have market power, then do not proceed to the full RR, the conduct is still per se unlawful. - not enough to just claim a justification
Polk Brothers quick look: ancillarity/market division
PRESERVING THE PER SE RULE RULE: only when the "quick look" reveals the restraint is one that would always or almost always tend to restrict competition should a court cut off further inquiry. RULE: ancillary restraints are analyzed under the RR, naked restraints are per se illegal
California Dental Association quick look: inherently suspect based on evidence standard
PRESERVING THE RR A full-blown rule of reason analysis of a horizontal price fixing arrangement is not needed if anti-competitive effects are inherently obvious to any observer. RULE: If under a quick look the anti-competitive effect is NOT obvious, proceed to the full RR
What are the two things you will need to show in order to establish an illegal price fixing claim.
Palmer v. BRG 1. the agreement was formed for the purpose of fixing prices 2. the effect has the effect of raising the price of the product
Chicago Board of Trade indirect price fixing: "unreasonable" restraints of trade
Price fixing by a professional organization RULE: to establish that a price restraint is not unreasonable, the defendant must provide a rationale that makes competition work better on the pro-competitive side The court will consider 1. facts specific to the business to which the restraint is applied 2. the nature of the restraint and its effect 3. the businesses condition before and after the restraint was imposed
California Dental Association quick-look analysis
RULE: If the experience of the market has been clearly shows a restraint is likely, a quick look is appropriate. otherwise... to determine whether a restraint is anti-competive, look to the circumstances, details, and logic of a restraint. The 9th Circuit erred in deciding that a "quick look" by the FTC was sufficient for finding that the restrictions were anti-competitive, as any anti-competitive effects of the restraints were far from intuitively obvious.
American Column information exchange
RULE: An agreement to exchange price information AND to adhere to the price information exchanged is illegal per se without regard to its purpose or proof of anticompetitive effect.
Khan
RULE: Analyze maximum price maintenance under the RR Overruled Albrecht MINIMUM PRICE MAINTENANCE IS STILL PER SE ILLEGAL
Maricopa County price fixing
RULE: Horizontal price fixing arrangements that establish maximum prices are also illegal per se
Monsanto
RULE: Non price restrictions are judged by RR, whereas vertical agreements to set prices are per se illegal. The agreement must tend to exclude the possibility of unilateral action. Colgate Doctrine: "Unilateral behavior" can't be condemned.
Grinnell "demand substitutability"
RULE: The relevant market includes products a customer would turn to if there is a slight increase in the price of the main product. RULE: the tests for product and geographic market in a Clayton Sec. 7 case are the same as in a Sherman Act Sec. 2 case
ALCOA intent to monopolize
RULE: a monopolist who deliberately limits competition or enhances its market position by "honestly industrial" acts is guilty of monopolization, unless it affirmatively demonstrates that its monopoly position has been "thrust upon it." a monopolist violates section 2 when it breaths: it is enough to establish bad conduct by showing that a firm with monopoly power purposefully and intentionally acquired, maintained, or exercised that power.
National Society of Professional Engineers
RULE: agreements to refrain from bidding competitively or against one another are per se illegal. RULE: the Rule of Reason should focus on the economic, and not social, consequences of a restraint
Superior Court Trial Lawyers Association per se rule for horizontal group boycotts intending to fix prices
RULE: an otherwise protected boycott will be subject to the antitrust laws when those who refuse to deal have an economic interest in the boycott and will financially benefit from a lessening of competition .
"Sylvania
RULE: analyze non-price vertical restraints under the Rule of Reason. When anti-competitive effects are shown to result from ther vertical restrictions, apply the RR balancing.
Maple Flooring Trade associations often set quality standards
RULE: courts should generally assess standard-setting processes under the rule of reason RULE: The decision whether to certify a product is generally valid if based on reasonable, objective standards and if not influenced by people having an economic interest in the certification of the product.
Five Smiths information exchange/RR
RULE: elements of price fixing 1. information exchange 2. amongst competitors 3. anti-competitive effect
United Shoe intent to monopolize
RULE: if the plaintiff proves the relevant market and that the defendant has a predominant share of that market, the defendant has the burden of proving that its dominant share of the market was "thrust upon" it.
Toys R US
RULE: it is a per se violation when a firm with market power coerces its suppliers to cut off sales to competitors without increasing efficiency
Northwest Wholesale Stationers quick look analysis
RULE: not all horizontal group boycotts should be classified as per se violations of Section 1 RULE: the issue of procedural due process is relevant to antitrust scrutiny only when Congress has given a cooperative a mandate for self-regulation. Expulsion of a member may be per se illegal if the plaintiff shows the cooperative possesses market power or exclusive access to an element essential to effective competition wholesale purchasing cooperatives were designed to increase economic efficiency and, thus, were not themselves illegal per se
NCAA RR for horizontal restraints/ancillarity
RULE: not all restraints of trade were unreasonable, and only an unreasonable restraint is prohibited by the Sherman Antitrust Act. Holding: Courts should not apply per se rules to agreements that are ancillary to pro-competitive activity, create efficiencies, or have other pro-competitive effects. if the conduct evidences a restraint of trade on its face, the defendant must establish an affirmative defense justifying the restraint - pro-competitive efficiencies - evidence the restraint accomplishes those efficiencies
Grinnell willful acquisition or maintenance of monopoly power
RULE: possession of monopoly power by itself does not violate Section 2 RULE: the "deliberateness" element of the Is satisfied if the monopolist had a general intent to achieve or maintain its monopoly, that is, if monopoly was the probable result of what was done
Associated Press legality of trade association membership restrictions
RULE: the legality of membership restriction s assessed under the RR. although not facially anti-competitive, and the cooperative exclusive access to an element essential to effective competition
Colgate refusal to deal
RULE: unilateral refusal to deal w/o a predatory intent is not sufficient to prove monopolization or a restraint of trade.
Rothery v Atlas ancillary restraint
RULE: when an agreement offers some pro-competitive effects, take a closer look and judge the reasonableness of the boycott and its competitive effects.
Maple Flooring information exchange
RULE: whether the exchange is illegal turns on the purpose and effect of the agreement to exchange information. RULE: Without an agreement to fix prices, gathering or disseminating information is not illegal, even if the effort stabilized prices or limited production through a better understanding of the economic laws.
Blue Cross conjunctive test for monopoly power
RULE: you have to prove BOTH the power to control prices and to exclude competition
Explain the relation between anti-competitive effect and market power.
Rothery "It is impossible to believe that an agreement to eliminate competition within a group [without market power] can provide any of the evils of monopoly." Under the rules of reason, if the defendant does not have market power (after the relevant market has been identified and properly defined) the restraint imposed should not result in a finding of an unreasonable restraint of trade.
Verizon refusal to share essential facilities as evidence of monopolization
Rule: possession of monopoly power, and the concomitant charging of monopoly prices not unlawful the amount of access guaranteed under the law was sufficient, so the court declined to force Verizon to provide addiitonal access
Price Fixing INDIRECT PRICE FIXING
SOCONY If an agreement has the purpose or the effect of fixing prices then it is considered price fixing
What are the two sections of the Sherman Act and what does each prohibit.
Sec. 1 prohibits concerted action in restraint of trade. Sec. 2 prohibits monopolizing trade.
What are the antitrust five violations that can be per se illegal?
Socony - Vacuum 1. horizontal pric e fixing; 2. horizontal market divisions; 3. tying; 4. reciprocal dealing; and 5. group boycotts.
What types of arrangements might fall under price fixing?
Socony Vacuum/Polygram An agreement need not literally fix prices to be condemned as illegal horizontal price fixing. Container Corp. Agreements between competitors that tamper with the price of goods or services that are bought or sold in interstate or foreign commerce constitute horizontal price fixing.
General Dynamics
Statistics may be sufficient to prove a finding of "undue concentration " however: factors affecting the industry and the business of the merging parties may mandate a conclusion that no substantial lessening of competition occurred or was threatened by the acquisition.
How has the treatment of territorial restraints changed between TOPCO and Atlas?
TOPCO: Pro-competitive justification is not a defense. Atlas: Pro-competitive justification is a defense. The test is whether the restraint increases efficiency, the restraint must be necessary and ancillary"
What is the theory of anti-competitive effects in a monopolization case?
That the defendant has increased its market power by engaging in exclusionary act. That is, the defendant can foreclose competition or increases prices b/c of its use of exclusionary conduct.
Why has the Supreme Court abandoned the ALCOA formulation for monopolization offenses?
The ALCOA case is ambiguous, the "thrust upon" distinction is not clear. ALCOA makes efficient conduct illegal.
Palmer v. BRG of Georgia per se rule in horizontal market allocation
The Court reiterated that market allocation agreements are "anti-competitive regardless of whether the parties split a market within which they both do business or whether they merely reserve one market for one and another for the other."
What is the Herfindahl-Hirschman Index (HHI)
The HHI is used after finding the relevant market as a screening tool to assess whether a proposed merger is likely to have anti-competitive consequences.
What is the antitrust objective in merger cases? How does market concentration relate to these concerns?
The anti-trust objective in a merger case is to arrest restraints of trade in their incipiency, before the firm violates the Sherman Act. High market concentration implies greater restraint on competition and tendency towards monopoly power or easier collusion.
There is an exception under the rule of reason that eliminates the need for market analysis. What is the exception and what cases addressed it?
The exception: When the restraint is not one of the traditional types thought to be w/o redeeming virtue, take a QUICK LOOK: if on a closer look it there are DEMONSTRABLE anti-competitive effects and the pro-competitive virtues are not genuine, there is no need to perform a market analysis. Indiana Federation of Dentists: professional assoc. NCAA: National sports organization Brown: Education
Addyston Pipe Ancillarity standard
The first case to apply RR to horizontal market allocation. RULE: a restraint falls outside of section 1 if it is ancillary to a legitimate purpose. - although joint purchasing agreements are in effect agreements among buyers fixing the price at which each will purchase a product, they are not per se illegal b/c these types of arrangements lower prices for the ultimate consumer. RULE: bidders agreeing to fix their bids so that one of them will receive the bid at a non-competitive price is per se illegal.
Summarize the legality of information exchange.
The more detailed the information shared the more likely it is to be machinery for catching chiselers (Amer. Column) Talking about past transactions is okay, but when you start discussing current or future transactions information exchange is not permitted (Male Flooring) For trade associations,
By what two tests do courts determine whether a restraint is unreasonable under section 1? What offenses fall under each?
The per se rule and the rule of reason 1. The per se rule applies to horizontal price fixing and market divisions; in the case of tying arrangements, reciprocal dealing, and group boycotts, courts will apply the per se rule, but only if certain elements are shown. 2. The rule of reason applies to vertical price fixing, nonprice vertical restraints, and exclusive dealing/requirements contracts.
Aspen Skiing (unilateral refusal to deal) intent to monopolize, relefant markets
There are limitations to right to refuse to deal. RULE: monopoly power can be inferred from market share RULE: intent is required but if the firm has monopoly power and engages in bad conduct intent can be inferred. RULE: It is enough that taken together the allegations are sufficient to prove a monopolization claim - especially where the conduct would be economically irrational but for its anti-competitive effect.
When can a firm facing ruinous competition engage in price fixing?
Trans Missouri Never. Competition fosters reasonable prices and its better for consumers to say what that is than the court."
Is parallel conduct proof of an anticompetitive agreement?
Twombly Parallel conduct is circumstantial evidence of an agreement Parallel conduct is not by itself sufficient to conclusively establish an agreement or constitute a Sherman §1 offense.
"Bell Atlantic v. Twombly Parallel Conduct/Standing
Twombly Plus factors Plaintiff must be able to show more than mere parallel conduct to state an antitrust claim b/c parallel conduct often has a valid pro-competitive rationale.
Jefferson Parish
Tying is still per se illegal BUT the threshold for proving a economic power is higher.
What is the anti-trust concern in a tying case?
Undue concentration leading to foreclosure. Concentration plays 2 roles in tying analysis: 1. W/o monopoly or oligopoly concentration in the TIED product market, foreclosure will not have anti-competitive effects. 2. a buyers desire to purchase the TYING product cannot result in coercion to purchase the TIED product unless the seller has monopoly power in the TYING product.
Gypsum controlling circumstance
Upheld under the Fortas concurrence from Container Corp RULE: An agreement to exchange price information which is masked so as to not identify any specific producers or customers, or which is historical and not indicative of current or future prices generally is not by itself illegal re the "controlling circumstance" - where the law requires price verification, the price exchange is not illegal. BUT here the compliance justification was not genuine.
GPD v Itek
Vertical non-price restriction on competition: non-price restrictions are analyzed under the Rule of Reason What effect does the restraint have on consumers? Does the defendant have any pro-competitive justification for the restraint? Are the restriction "reasonably necessary" to obtain a legitimate end? When looking at intrabrand harm, the court noted that "[a] seller with considerable market power in the interbrand market . . . will necessarily have power over price. In that situation, intrabrand competition will be a significant source of consumer welfare because it alone can exert downward pressure on the retail.
In 5 sentences, describe the broad state of the law regarding horizontal boycotts.
When the purpose of a concerted refusal to deal is to deprive a company of business or achieve an end that is itself per se illegal, rather than to obtain legitimate economic goals, Courts routinely apply the per se rule. When the motive is benign, courts often apply the rule of reason in order to weigh any pro-competitive and anti-competitive effects. If the EFFECT of the restraint is purely anti-competitive, a laudable motive will not preclude per se analysis. It is more likely that a boycott will be judged under the per se rule when the participants in the boycott have market power.
Business Electronics per se rule for horizontal market allocation definition of horizontal market allocation
Whether a restraint is horizontal does not turn on whether its EFFECTS may be horizontal Whether a restraint is characterized as horizontal depends on whether it is the PRODUCT of a horizontal arrangement. EXAMPLE: A manufacturer divides its dealers into territories to protect dealers from selling into each others territories. The manufacturer imposed the restraint not because it felt it was necessary but because it was coerced into doing such by its dealers acting in concert that vertical restraint . - it was a product of a horizontal agreement between the dealers to divide territories so the result will be considered a horizontal market allocation. Contrast to Itek: With respect to dual distribution systems—the mfg. employed independent distributors but also acts as a distributor itself.
What issue does FOGA address and how is it analyzed?
Whether boycotts would be analyzed under the RR or continue to be per se illegal. AGREEMENT vs "FOLLOW-THE-LEADER": The agreement is the problem. Ask: Would each member have done this independently, w/o the agreement? 1. If yes = follow-the-leader. Okay b/c competitor's don't have to wear blinders. 2. If no = PER SE ILLEGAL"
How can quality standards benefit consumer?
by providing guidance improving product quality, and increasing safety.
How did the decision in Container Corp stray from the decision in Socony Vacuum?
the Container decision rests on inference rather than proof of anticompetitive effects . Container Corp eliminated of the requirement of examining intent to determine whether an agreement to exchange price information was in fact an agreement to fix prices and thus unlawful under the per se rule established by Socony-Vacuum.
Why is Dr. Miles overruled?
the Court finds it difficult to maintain that vertically imposed maximum prices could harm consumers or competition to the extent necessary to justify per se invalidation
Indiana Federation of Dentists quick look analysis for horizontal group
the Supreme Court affirmed that not all group boycotts should be judged under the per se rule RULE: the per se rule should be limited to refusals to deal in which firms with market power boycott suppliers or customers to discourage competition