Antitrust Final

(1984) Jefferson Parish Hospital v Hyde

- Hyde is an anesthesiologist but wasn't apart of the Jefferson hospital contractors for anesthesiologists. Illegal tie in: surgery and anes. are one market In order to prove: 1) market power in tying product (YES the case has it) 2) reasonable possibility of expanding market power & tie in product (YES) 3) economical coherent version to treat products as separates (NOT separate markets: surgery and anes. are apart of the same market/product

(1965) Consolidated Foods

- a conglomerate merger FTC says illegal merger because used threat and lure of reciprocity to foreclose others Respondent, a large, diversified company, which owns food processing plants and a network of wholesale and retail food stores, in 1951 acquired Gentry, Inc., a manufacturer of dehydrated onion and garlic. Gentry, before the merger, had about 32% of the sales of those products, and, with its chief competitor, accounted for about 90% of the total industry sales. By 1958, in an expanding market, Gentry had 35% of the sales, and the combined share with its principal competitor remained about 90%. After the merger, respondent attempted to induce reciprocal buying of Gentry's products by respondent's suppliers. The Federal Trade Commission held that the acquisition violated § 7 of the Clayton Act, as the opportunity for reciprocal buying in this oligopolistic industry created a probability of a substantial lessening of competition and ordered divestiture. The Court of Appeals reversed, finding no substantial impact on the market in the light of ten years of post-acquisition experience. Held: 1. Post-acquisition evidence of the effect of the merger upon competition is entitled to consideration in determining whether a merger violates § 7, but it must not be given conclusive weight or allowed to override all probabilities. P. 380 U. S. 598. 2. The finding by the Commission of the probability of reciprocal buying's leading to a lessening of competition in the instant case was supported by substantial evidence. P. 380 U. S. 600. 3. Reciprocal buying is an anticompetitive device condemned by § 7 of the Clayton Act.

Loew's Case

- block booking: must take good movies with the bad Court: "there is hardly any purpose of tying sales other than to suppress competition,". Defense: these movies are a small part of tv programming Court: movies are copyrighted, own little monopoly and enough power to get TV stations to do something they don't like

(1971) Siegel v Chicken Delight

- franchisees sue franchisor C.D. doesn't charge fees or royalties. Made their money by requiring franchises to buy all supplies from C.D. Defense: Not 2 separate mandates Franchises & products = 1 thing 2) reasonable way to make money because we can set the standards if we provide the supplies Court: No, it's unreasonable to set standard and let them buy on the free market other defense: no market power because only a small part of fast foods Court: patent, copyright, trademark, and then some economic powers and enough power to get firms to do something they don't like

Secondary Line Case: (1948) Morton Salt Case

- offered huge quantity discounts Morton: Anybody can get the discount, but functionally it wasn't true - purpose of Robinson-Pitman act was to protect small buyers from being at a disadvantage to large buyers

(1967) Utah Pie Case

- primary line case in SLC, Utah Utah pie has 66% of market - National competitors decrease their prices in SLC, Utah (priced below CA price which is where National competitors were based) Utah Pies sue - illegal price discrimination bc Utah pie market share fell to 45% and profits fell Court: illegal price discrimination Dissent: Utah pie is still a quasimonopoly and still profitable - the purpose of the law is NOT to protect individual firms but the competitive process - low prices are good for consumers.

Price discrimination Case: (1993) Brook Group v Brown & Williamson

- primary line discriminating cases become predatory pricing cases Brooke - sold branded cigarettes but switched to generic cigarettes and their Market Share went up Brown & Williamson - enters generic cigarette market and cut the price & offered quantity discounts District Court: jury finds BW guilty and judge throws out the verdict of triple damages Appeals Court: agrees with judge SC - need to revisit Utah Pie case because need the price to be less than cost and reasonably expectation of recouping losses - extends to others in this case. It found a lack of injury to competition because there had been no slowing of the generics' growth rate and no tacit coordination of prices in the economy segment by the various manufacturers. In affirming, the Court of Appeals held that the dynamic of conscious parallelism among oligopolists could not produce competitive injury in a predatory pricing setting.

(1967) Proctor & Gamble

- product extension merger (conglomerate) P&G acquired Clorox Bleach The FTC challenged the acquisition, and, after hearings, found that the substitution of Procter for Clorox would dissuade new entrants in the liquid bleach field, discourage active competition from firms already in the industry due to fear of retaliation from Procter, and diminish potential competition by eliminating Procter, the most likely prospect, as a potential entrant. If P&G wants to enter: 1) enter denovo (make their own bleach) 2) merge with smaller company

Types of Mergers

1) Horizontal - between firms that sell the same product to same group of customers 2) Vertical - between firms in buying-selling relationships 3) Conglomerate - all else a) product extension merger - firms that sell complimentary products ex. tractor co. & plow co. or detergent and bleach b) market extension merger (if it's not horizontal or vertical its MEM) - firms that sell same products to customers (usually geographic) ex. Spokane Bond Co. & NYC Bond Co.

Potential Harms from Mergers

1) Horizontal mergers - increase in concentration which equals greater ability to raise price above cost 2)Vertical mergers - Market foreclosure or vertical foreclosure, is the production limitation put on a producing organization if either it is denied access to a supplier (upstream foreclosure), or it is denied access to a downstream buyer (downstream foreclosure). A supplier or intermediary in a supply chain could acquire this form of market power against competitors through means of mergers and acquisitions. This amalgamation of suppliers and customers demonstrates vertical integration along a value chain with various strategic and efficiency benefits including elimination of successive monopoly markups and lowering transaction costs. Conglomerate mergers - a) potential for cross subsidization = finance predatory campaign with profits from another area of business b) unintentional cross subsidization = allocation of overhead c) intimidation by giants = smaller firms less likely to compete very hard d) reciprocal buying - you buy from me i buy from you

(1962) Brown Shoe Case

Between Kinney Shoes( #1 shoe store) and Brown Shoes(#4 manufacturer): after merger became #3 manufacturer. Vertical Elements: Trend at the time involved fewer and fewer US manufacturers. Before the merger: Brown sold Kinney 0 shoes After Merger: #1 outside seller to Kinney Horizontal Elements: Product market - mens, women's, children's shoes At retail level - Geographic markets: about 30 cities where combined firm has 20% of women's and children's shoe market Court ruling: Merger can't go through because of anticompetitiveness

(1992) Eastman Kodak v Image Tech Service

E.K.- makes copy machines, but also services copy machines and provides parts and services - they refused to provide parts to independents Illegal tie in: parts and service Defense: service and parts are the same market Court argued: they're plainly separate Kodak says they have no market power ub copy machines Court's question: Can lack of power at equipment level preclude power at derivative level? Courts answer: copy machines are a long lived asset, SO ENOUGH MARKET POWER

(1947) International Salt Case

CLAYTON ACT SEC. 3 "tying contracts that may substantially lessen competition or tend to create illegal monopoly" It is violative per se of § 1 of the Sherman Act and § 3 of the Clayton Act for a corporation engaged in interstate commerce in salt, of which it is the country's largest producer for industrial uses, and which also owns patents on machines for utilization of salt products, to require lessees of such machines to use only the corporation's unpatented products in them. Defense: 1) meet any competitors low price 2) must use high quality salt to maintain machine Court: unreasonable standard - illegal

Vertical Market division Case: Continental TV v GTE Sylvania

CT - sells tv retail in San Fransisco, and expanded to Sacramento Sylvania - TV manufacturer Court: How to decide? 1) can lower intraband competition & lead to increase interband competition (where antitrust is focused) By restricting intrabrand we get motivated, aggressive retailers that provide service & really remote product Court said is was okay

Vertical Price fixing: (1911) Dr. Miles v John D Park

Dr. Miles wrote a contract stating no one can sell his product for less than their own price RIGHT OF ALIENATION: Once buyer buys product at a satisfactory price to seller that buyer can do whatever they want Court: vertical price fixing which is illegal per se.

(2007) Leegin Leather v PSKS (retailer)

Leegin - shoe producer; suggested retail prices and enforced it or cut off sales to price District court: vertical price fixing - illegal per se Appeal court: affirms Supreme Court: possible for decrease in intraband competition & increase interband competition (continental case) 2007 - vertical price fixing use rule of reason for per se and should only be used when activity is virtually always anticompetitive

Primary Line

Primary line - a company charges higher price everywhere else but where they compete at.

(1966) Von's Grocery

Shopping bag food company tried to acquire Von's Horizontal Merger: had 7.5% of sales after merger; but court looks at trends and corner grocers were drying off and there was a rise in chain stores The United States charged that the acquisition in 1960 by Von's Grocery Company of Shopping Bag Food Stores, a competitor in the retail grocery market in the Los Angeles area, violated § 7 of the Clayton Act. After a hearing, the District Court concluded that there was "not a reasonable probability" that the merger would tend "substantially to lessen competition" or "create a monopoly" in violation of § 7, and entered judgment for the appellees. Held. 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. Must protect the competitive process instead of individual competition

(1912) Henry v. AB Dick

SEC. 1 SHERMAN ACT "in restraint of trade" Complainant sold his patented machine embodying the invention claimed and described in the patent, and attached to the machine a license restriction that it only be used in connection with certain unpatented articles made by the vendor of the machine; with the knowledge of such license agreement and with the expectation that it would be used in connection with the said machine, defendant sold to the vendee of the machine an unpatented article of the class AB Dick required if you bought the machine to use their paper, ink, stencils (to ensure quality) Henry sues: if you buy A you must buy B, trying to extend market power from one area to another Court ruling: legal monopoly on machine and trying to extend power into other markets Contract is clear = if you don't like the terms don't sign it

Clayton Act Section 7

Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect "may be substantially to lessen competition, or to tend to create a monopoly." As amended by the Robinson-Patman Act of 1936, the Clayton Act also bans certain discriminatory prices, services, and allowances in dealings between merchants No person engaged in commerce may acquire the whole or any part of any other person (firm) engaged in commerce if in any section of the country, in any product the effect if acquisition may be to substantially lessen competition or tend to create monopoly. 1) may lessen competition - need probability not certainty 2) substantially lessen competition - has to be enough market share 3) product market - any line of commerce - need proper market definition ex. cane sugar in cans v. beet sugar in bottles 4) Any section of country that overlaps must be divested (old way of thinking) 5) Lessen competition - a) failing company doctrine (if no one else wants a dead company - merger is okay) b) law was passed to protect competitive process NOT individual competitors ORIGINALLY - law had no teeth - because had to be a stock sale , so just buy assets

United States v Deutsche telekom AG

Sprint would be absorbed into T mobile plaintiffs: states Section 7 of the clayton act - which prohibits mergers and acquisitions that would lessen competition or create a monopoly How competition would be affected: increase prices and reduce innovation, higher chance of collusion Decision: DOJ placed restrictions on new T Mobile by moving assets to Dish, Dish will need to be an effective competitor over the next 3-5 years to meet expectations

Illegal price discrimination (1990) Texaco v Rick's Texaco

Texaco - has franchises that provide gas to stations which is wholesales - 1) Dompier (branded Texaco) 2) Gull Large functional discount - Rick's says let us do what Dompier & Gull do Court: if some customers pay substantially more than other customers then injury to competition can be inferred Horizontal price fixing - illegal per se Horizontal market division - illegal per se

Celler-Kefauver Act

The Celler-Kefauver Act was a law passed by the U.S. Congress in 1950 to prevent anti-competitive mergers and acquisitions. Introduced in 1950, it sought to strengthen existing antitrust provisions, which back then only applied to buying outstanding equity. The Act added regulatory and enforcement language to the Sherman and Clayton Antitrust Acts. It remains one of American's strongest antitrust laws, arming the government with potent legal sway to prevent M&A that creates monopolies or otherwise significantly reduces competition. Applies to section 7 (Clayton Act) no matter how merger occurs

price discrimination

clayton act sec. 2 price discrimination that may substantially lessen competition or trend to a monopoly is illegal Defense: 1) price differences are based on cast differences - not price discrimination 2) wont lower competition substantially