Ch 19: Antitrust Law and Promoting Competition

Jurisdictional Requirements of Sherman Act

1. Applies only to restraints that have a substantial impact on interstate commerce 2. Also extends to US nationals in other countries engaged in activities that have an affect on US foreign commerce

3 Antitrust Statutes

1. Criminal: Sherman Antitrust Act 2. Civil: Clayton Act 3. Civil: Federal Trade Commission Act

Problems with the Sherman Act

1. Language used is too general 2. Lackluster enforcement between 1920s and 1990s and then between 2000 and today

Clayton Act

Act that minimally restricted the use of injunctions against labor and legalized peaceful strikes, picketing, and boycotts -civil statute

Clayton Act, Sec 7: Mergers

Person or business entity can't hold stock and/or assets in another business entity where "effect may be to substantially lessen competition"

Clayton Act, Sec 2

Price Discrimination

who enforces anti-trust laws?

The DOJ, FTC, and U.S. Companies

monopoly power

a monopoly's ability to dictate what takes place in a market

Per Se Violations

blatant, unreasonable violations that are anticompetitive -ex: agreements by equal competitors to collusively fix prices or output

Clayton Act, Sec 8: Interlocking Directorates

can't have individuals serve as directors on boards of 2+ competing companies simultaneously

Sherman Act, Sec 1

concerned with finding agreements/contracts that: 1. restrain competition unreasonably 2. affect interstate commerce

horizontal restraints

contracts restraining competition between firms in same market and at same level of manufacturing and/or distribution process, ie: market rivals 1. Horizontal price-fixing contracts are per se violations 2. Horizontal big-rigging agreements are per se violations 3. Horizontal group boycott 4. Horizontal Market Division/Allocation 5. Horizontal Trade Association

Vertical Restraints

contracts restraining trade between firms in same market BUT at different levels in supply chain of manufacturing and distribution process

Violations Analyzed Under Rule of Reason

court reviews facts and considers these factors: 1. facts peculiar to this field of business 2. actual and probable effects of restraint 3. history of restraint 4. purposes of restraint 5. scope of restraint 6. convenience of consumers and suppliers 7. creation of new products

U.S. Department of Justice (DOJ)

enforces by civil AND criminal proceedings -both Sherman Act and Clayton Act

Federal Trade Commission (FTC)

enforces by only civil proceedings -only Clayton Act

Monopoly

generally used to describe a market in which there is a single seller OR very limited number of sellers, which gives it/them the greatest degree of market power

market power

power to control market price of its product

Section 1 prohibits:

prohibits contracts either horizontal or vertical restraints

Clayton Act, Sec 3: Exclusionary Practices

sellers can't condition sale or lease of goods on buyer's promise not to use or deal in goods of seller's competitor

1. Sherman Antitrust Act

this a criminal statute -has 38 sections, but major provisions are found in sections 1 and 2 -violators, if convicted, are guilty of a felony