Chapter 46

Section 1 of the Sherman Act

- prohibits contracts, combinations, and conspiracies in restraint of trade - applies to unlawful conduct by two or more parties

Section 4 of the Clayton Act

anyone injured in his/her business or property by the defendant's violation of any federal antitrust law may bring a private civil action - successful plaintiffs can recover from the defendant treble damages, reasonable costs, and attorney's fees

Per Se Rule

applicable to restraints of trade considered inherently anticompetitive - once determination is made about a restraint of trade, the court will not permit any defenses or justifications to save it

Relevant Geographical Market:

area in which the defendant and its competitors sell the product or service

Treble Damages

awarded in a successful civil antitrust lawsuit, in an amount that is triple the amount of actual damages

Conglomerate Merger

between firms in totally unrelated businesses

State Action Exemptions (from antitrust laws)

business activities that are mandated by state law are exempt from federal antitrust laws

Changing Conditions Defense (to Price Discrimination)

claims prices were lowered in response to changing conditions in the market for or the marketability of the goods

Failing Company Doctrine

competitor may merge with a failing company if: - there is no other reasonable alternative - no other purchaser is available - assets of the failing company would disappear from the market

Division of Markets (market sharing)

competitors agree that each will serve only a designated portion of the market

Price Fixing

competitors in the same line of business agree to set the price of the goods or services they sell, raising, depressing, fixing, pegging, or stabilizing the price of a commodity or service

Federal Antitrust Law

comprises statutes that prohibit certain anticompetitive and monopolistic practices - government enforcement of federal antitrust laws is divided between the Antitrust Division of the Department of Justice and the Bureau of Competition of the FTC - government has the power to seek civil damages for violations of antitrust laws

Unfair Advantage Theory

conglomerate merger may not give the acquiring firm an unfair advantage over its competitors

Backward Vertical Merger

customer acquires a supplier

Direct Price Discrimination

defendant sold commodities of like grade and quality to two or more purchasers at different prices at the same time - plaintiff suffered injury because of the price discrimination

Section of the Country (proving violation)

division of the country that is based on the relevant geographical market - area that will feel the direct and immediate effects of a merger

Conscious Parallelism

doctrine that states if two or more firms act the same but no concerted action is shown, there is no violation of Section 1 of the Sherman Act

Federal Antitrust Statutes

drafted to reflect the government's enforcement policy and to allow it to respond to economic, business, and technological changes

Statutory Exemptions (from antitrust laws)

expressly provided in statutes enacted by Congress

Federal Trade Commission (FTC)

federal government administrative agency that is empowered to enforce the Federal Trade Commission Act (FTC Act)

Attempt or Conspire to Monopolize

firms that do so to a relevant market may be found liable under Section 2 of the Sherman Act defenses: - innocent acquisition of a monopoly - natural monopoly

Group Boycott by Buyers

group of purchasers agrees not to purchase a product from a certain seller

Group Boycott by Sellers

group of sellers agrees not to sell their products to a certain buyer - reasonable restraints are lawful - unreasonable restraints violate Section 1 of the Sherman Act

Implied Exemptions (from antitrust laws)

implied by the federal courts

Relevant Product or Service Market:

includes substitute products or services that are reasonably interchangeable with the defendant's products or services

Vertical Merger

integrates the operations of a supplier and a customer

Section 7 of the Clayton Act (merger)

it is unlawful for a person or business to acquire the stock or assets of another where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly probability of a substantial lessening of competition or likelihood of creating a monopoly - court can prevent the merger

Sherman Antitrust Act

makes certain restraints of trade and monopolistic acts illegal - only antitrust act that includes criminal sanctions

Market Extension Merger

merger between two companies in similar fields whose sales do not overlap - geographical market extension merger - product market extension merger

Horizontal Merger

merger between two or more companies that compete in the same business and geographical market

State Antitrust Laws

most states have enacted antitrust statutes - patterned after federal antitrust statutes - used to attack anticompetitive activity that occurs in intrastate commerce

Government Judgment

obtained by the government against a defendant for an antitrust violation that may be used as prima facie evidence of liability in a private civil treble-damages action antitrust defendants opt to settle government-brought antitrust actions by entering a plea of: - nolo contendere in a criminal action - consent decree in a government civil action

Horizontal Restraints of Trade

occurs when two or more competitors at the same level of distribution enter into a contract, combination, or conspiracy to restrain trade

Vertical Restraints of Trade

occurs when two or more parties on different levels of distribution enter into a contract, combination, or conspiracy to restrain trade

Rule of Reason

only unreasonable restraints of trade violate Section 1 of the Sherman Act - court is required to examine the pro- and anticompetitive effects of a challenged restraint

Resale Price Maintenance (vertical price-fixing)

per se violation - party at one level of distribution enters into an agreement with a party at another level to adhere to a price schedule that either sets or stabilizes prices - minimum resale prices - maximum resale prices

Section 16 of the Clayton Act

permits the government or a private plaintiff to obtain an injunction against anticompetitive behavior that violates antitrust laws - only the FTC has the ability to obtain an injunction under the FTC Act

Small Company Doctrine

permitted if the merger allows two or more small companies to compete more effectively with a large company

Monopoly Power

power to control prices or exclude competition - measured by the market share possessed by the defendant in the relevant market

Indirect Price Discrimination

price discrimination less readily apparent than direct forms

Predatory Pricing

pricing below average or marginal cost

Line of Commerce (proving violation)

products or services that will be affected by a merger, including those that consumers use as substitutes - if an increase in price of one product/service leads consumers to purchase another product/service, the two products are substitutes for each other

Section 2 of the Sherman Act

prohibits act of monopolization and attempts or conspiracies to monopolize trade

Section 2 (a) of the Robinson-Patman Act

prohibits direct and indirect price discrimination by sellers of a commodity of a like grade and quality, where effect of such discrimination: - may be to substantially lessen competition - tend to create a monopoly in any line of commerce

Robinson-Patman Act

prohibits price discrimination

Price Discrimination (section 2 of clayton act "robinson-patman act")

prohibits price discrimination in the sale of goods if certain requirements are met

Section 3 of the Clayton Act

prohibits tying arrangements that involve sales and leases of goods

Federal Trade Commission Act (FTC Act)

prohibits unfair methods of competition

Section 5 of the FTC Act

prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce

Clayton Antitrust Act

regulates mergers and prohibits certain exclusive dealing arrangements

Willful Act of Monopolizing

required to find a violation of Section 2 of the Sherman Act - possession of monopoly power without such act does not violate Section 2

Hart-Scott-Rodino Antitrust Improvement Act (HSR Act)

requires certain firms to notify the Federal Trade Commission and the Justice Department in advance of a proposed merger Merger proceeds if the government does not challenge a proposed merger within 30 days

Tying Arrangement

restraint of trade in which a seller refuses to sell one product to a customer unless the customer agrees to purchase a second product from the seller

Meeting the Competition Defense (to Price Discrimination)

seller may lawfully engage in price discrimination to meet a competitor's price

Cost Justification Defense (to Price Discrimination)

seller's price discrimination is not unlawful if the price differential is due to differences in the cost of manufacture, sale, or delivery of the product

Antitrust Laws

series of laws enacted to limit anticompetitive behavior in all industries, businesses, and professions operating in the United States

Forward Vertical Merger

supplier acquires a customer

Group Boycott (refusal to deal)

two or more competitors at one level of distribution agree not to deal with others at another level of distribution

Noerr Doctrine

two or more persons can petition the executive, legislative, or judicial branch of the government or administrative agencies to enact laws or take other action without violating antitrust laws

Unilateral Refusal to Deal

unilateral choice by one party not to deal with another party - not a violation of Section 1 of the Sherman Act because there is no concerted action

Nonprice Vertical Restraints

unlawful when anticompetitive effects outweigh their procompetitive effects