Chapter 38: Antitrust Laws

Joint Ventures

A commercial enterprise undertaken by two or more parties that otherwise maintain their distinct identities. Typically a partnership for a limited purpose, will not be combined permanently, but only to work on a specific project.

Exclusive Dealing Contract

A contract in which a distributor or a retailer agrees with a supplier not to carry the products of any other supplier. Subject to a rule of reasoning violation and are only illegal if they have an anticompetitive effect.

Bid Rigging

A per se violation; where competitors eliminate price competition by agreeing on who will submit the lowest bid.

Antitrust Laws

Also known as competition laws, made by the U.S. Government to protect consumers predatory business practices by ensuring that fair competition exists in an open-market economy. 4 provisions against agreements in restraint of trade, monopolization, anticompetitive mergers, and the around in Patman Act bans price discrimination.

Rule of Reason Violation

An action that breaches antitrust laws only if it has an anticompetitive impact.

Product Market

Consists of other items that a purchaser could buy.

Clayton Act

Prohibits mergers that's are anticompetitive.

Predatory Pricing

When a company lowers its prices below cost to drive competitors out of business.

Sherman Laws

federal law passed in 1890 that committed the American government to opposing monopolies. The law prohibits contracts, combinations, or conspiracies in the restraint of trade or commerce.

Reciprocal Dealing Agreements

A buyer refuses to purchase goods from the supplier unless the supplier also purchased items from the buyer.

Merger

A combination of two things, especially companies into one.

Horizontal Agreement

An agreement among competitors.

Vertical Agreements

An agreement among participants operating at different stages of the production process.

Tying Arrangement

An agreement to sell a product on a condition that a buyer also purchases another, usually a less desirable, product. Illegal if the two products are clearly separate, the seller requires the buyer to purchase the two products together, the seller has significant power in the market for the tying product, and the seller is shutting out a significant part of the market for the tied product.

Per Se Violation

An automatic breach of antitrust laws.

Market Division

Any effort by a group of competitors to divide its market is a per se violation.

Vertical Allocation

Is illegal only if it adversely affects the competition in the market as a whole. A rule of reason violation. Reduces intrabrand competition (among dealers) and increases interbrand competition (between brands).

Robinson-Patman Act

It's illegal to charge different prices to different purchases if the items or the same or if the price discrimination lessens competition. But it is legal to lower the price for the buyer if the cost of serving this buyer is lower or the seller is simply meeting competition .

Geographic Market

Other areas where a purchase could be made.

Post Chicago School

Realized that Competition is not enough to protect consumers from big businesses. Even if product may seem consumer-friendly, in the long-run it can harm them. For example, it can drive other competing businesses out of the market, causing a monopoly.

Refusal to Deal

Rule of reason violation and illegal if it harms competition. Group of competitors boycotts a buyer, supplier, or another competitor.

Resale Price Maintenance (RPM)

So called vertical price fixing, when the manufacturer sets minimum prices that retailers may charge; sets retailers from discounting. Rule of reason violation.

Cross-Elasticity of Demand

The height that a company's price can rise before your buyers will switch to another product.

Chicago School

The main tenets are that free markets best allocate resources in an economy, and that minimal government intervention is best.

Monopilization

When a company develops enough power to control a market. Its illegal to monopolize a market, which means to acquire a monopoly illegally. Monopolies are legal unless gained in the wrong way. When company excludes competition and controls prices.

Vertical Maximum Price Fixing

When a manufacturer sets maximum prices; rule of reason violation.

Market

When buyers view two products as close substitutes.

Price Fixing

When competitors agree on the prices at which they will buy or sell products or services, it's a per se violation.

Conscious Parallelism

When competitors who do not have an explicit agreement nonetheless all make the same competitive decisions. Only illegal if there is a motive to conspire or a high level of communication among firms.