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16 Cards in this Set
- Front
- Back
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The Sherman Antitrust Act- 1890, overall general characteristics
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• Several statues, but not a comprehensive scheme
• Have reduced importance of common law business torts of unfair competition (e.g. predatory pricing) • Certain action are illegal that can have nothing to do with whether you are a monopoly or not. Examples: conspiracies, tying arrangements • Certain mergers prohibited (ex. Whole Foods and Wild Oats) • OK to be a monopoly but cannot misuse monopoly power • Fed statutes apply to interstate/foreign commerce |
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Sherman Act. Sec. 1
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prohibits contracts, combinations, and conspiracies in restraint of trade
• Violation only if an agreement, 2 parties acting • Certain agreements prohibited • Per se violation • Rule of reason violation |
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Sherman Act. Sec. 1, Per Se Violation
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o wrong no matter what
o some types of arguments are always illegal o Speeding is a per se violation |
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Sherman Act. Sec. 1, Rule of reason violation
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o we’ll look at the terms, circumstances, etc.
o maybe ok, maybe not applied when an anticompetitive agreement may be justified by legitimate benefits. Under the rule of reason, the lawfulness of a trade restraint will be determined by the purpose and effects of the restraint |
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Sherman Act Sec. 1 Horizontal Restraints
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• Among competitors
o Per Se Violations • Price Fixing • Group boycott only relevant to business behavior refuse to buy from or sell to somebody consumers and individuals are free to boycott • Division of markets: geographical: you take east side, I take west side product line: you stay in road bike business, I do mountain bikes • * in every circumstances must prove agreement o Trade Associations: okay unless anticompetitive • Real estate agents set commission rates • Trade Association cannot mandate a minimum commission rate because that is anti-competitive |
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Sherman Act Sec. 1 Vertical Restraints (3 forms)
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o Resale price maintenance (vertical price fixing), must be 2 entities
o Floors: Rule of reason since 2007 • retailer agrees to not resell jeans below a certain price o Ceiling: Rule of reason since 1997 • retailer cannot sell above a certain price o Fixed Price • Both a floor and ceiling o *previously were per se violations but now rule of reason • A price ceiling can help consumers, long term could be less competition. It could be okay. |
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Sherman Act: Section 2 Monopolization
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• Unilateral action can be a violation
• Monopoly power ok, but cannot abuse it • Monopoly power + intent to monopolize= violation • Predatory pricing |
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Sherman Act: Section 2 Monopolization, OK if
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o 1. Obtained through superior business acumen (combo of product, marketing, etc.)
o 2. A natural monopoly |
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Sherman Act: Section 2 Monopolization, what is crucial? what do you have to prove?
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o Relevant market crucial
• Product or service • geographical o direct proof: of controlling prices or restricting output (often not available) o indirect: dominant share, barriers to entry |
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The Clayton Act- Section 2 Price Discrimination
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• Usually OK at retail level, not ok above
• Seller must offer the same price to all buyers unless |
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The Clayton Act- Section 2 Price Discrimination, when is it okay?
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o 1. Cost justification (not mere volume)
• actually cheaper for Sony to sell to Walmart versus Boulder Appliance o 2. meeting the competition’s price • Selling TV for 500. Walmart goes to Sony and says, we are getting an identical TV from Toshiba at 450. Match it o 3. Changing market conditions |
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Clayton Act Sec. 3 Tying Arrangements (okay if... critical question?
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• Must buy one product to get another
• OK if a business reason o Franchises • Often OK at the consumer level o Usually structured as “buy this, get that free” • Critical: are the products separate? |
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Mergers: Clayton Act Section 7
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• Merger not allowed if “substantially lessens competition”
• Market? Judge more or less decides based on a and b o a) Line of Commerce o b) Section of Country |
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Vertical Mergers: Clayton Act Section 7
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o “Foreclosure” concept-
o Now, many factors used o Supplier merges with retailer o Retailer’s competitor cannot buy from that supplier |
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Horizontal Mergers: Clayton Act Section 7
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o Firms in the same market, unlawful if the entity created has a substantial share of the market
• Herfindahl-Hirschman Index (HHI) o Considers current market concentration and increase caused by proposed merger |
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Section 5 FTC Act (statute): a violation if... who enforces?
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• very broad, catch-all
• a violation if o violate other antitrust act o violate spirit of those acts (general theme is preventing anticompetitive) o fills in gaps of those acts o violates public policy • enforcement: DOJ, FTC, or private party o government can come after you both civil and criminally |
