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140 Cards in this Set
- Front
- Back
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Origins of Antitrust
the laws to promote competition and inhibit monopolies and restraints of trade |
Antitrust Definition
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Origins of Antitrust
Capitalism, Central Planning, Socialism, Communism, Fascism, Tribalism, Feudalism |
Different Economic Systems
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Origins of Antitrust
· Price fixing · limits supply |
What does a monopoly do
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Origins of Antitrust
· Section 1: K, combination or conspiracy in restraint of trade . . . . · are all agreements to restraint of trade · Section 2: monopolization (the process of wrongfully cornering a mkt) · some monopolies are OK (i.e. USPS) |
Sherman Act (1870)
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Origins of Antitrust
· Section 2: price discrimination (Robinson Patman Act) · Section 3: tying arrangements · Section 7: mergers |
Clayton Act
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Origins of Antitrust
Independent Reg. Agency · Section 5: unfair methods of competition |
FTC Act (1914)
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Goals of Antitrust
· Economic efficiency/consumer welfare · controlling mkt structure – more competitors --> collusion among competitors · dispersion of economic and political power · advance fairness/justice |
Schools of Antitrust Thought
Harvard/Structuralist School |
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Goals of Antitrust
AT only to be used to achieve economic efficiency |
Schools of Antitrust Thought
Chicago/Neo Classical |
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AT Economics
many sellers of good or service. undifferentiated product. sellers called “price takers”. perfect knowledge of marketplace. innovation. Example: grain mkt. Benefits of PC market. low prices. high output. no barriers to entry |
Market Structure
Perfect Competition |
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At economics
One seller. differentiated product. price maker (can chose price to sell). barriers to entry. Ex: software industry, OPEC (cartel – redux output, increase price. Effects of monopoly. Lowers/restricts output. raises prices. no innovation (no incentive).barriers to entry |
Market Structure
Monopoly |
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AT economics
· few sellers · some product differentiation, but no dominant edge product · Price sharers: work together to influence price · Effects · Price may go up if collusion · output may go down |
Market Structure
Oligopoly |
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AT Economics
· enough sellers · some differentiation · inability to collude to restrict output & raise prices |
Market Structure
workable - competition/monopolistic competition (real world goal) |
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Price Fixing
One of the per se illegal categories |
price fixing
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price fixing
: “every K, combination, or conspiracy in restraint of trade . . . unlawful” |
Sherman Act Section 1
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Price Fixing
(1) agreement and (2) restraint of trade |
2 elements for Sherman Act Section 1
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Price Fixing
:“group of competitors to limit or eliminate competition”] |
Restraint of Trade
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Price Fixing
does act promote or restrain trade on balance? ( you may weigh pro and con anticompetitive effects) |
rule of reason balancing test
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price fixing
“only unreasonable restraints are unlawful.” · Look at conditions of mktplace, nature of restraint and it effects, history of restraint, reason for adopting it, etc. · DFN: argue that actions actually promoted competition |
rule of reason balancing test:
rule from chicago board of trade |
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price fixing:
facially, it suppresses competition · Rule: agreement that raises, depresses, pegging or stabilizing (influence) price among competitors unlawful per se (Socony-Vacuum) · P must no longer produce evidence |
Per se rule (shortcut to Rule of reason)
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price fixing
(that price level you picked is fair and reasonable) (Trenton Potteries) because: · reasonable hard to define · institutional competence · changeability of circumstances · competition of freedom |
reasonable price definnition not allowed
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Price Fixing:
· (1) Conspiracy; agreement sufficient (2 or more legally distinct actors) · no need to for C/L or traditional conspiracy elements · (2) No need to have “power or means” to affect price in order to be guilty · policy: potential threat to central nervous system economy--> price is a signal to competitors to make/charge more/less or to enter/leave mkt. PRICE IS THE CENTRAL NERVOUS SYSTEM OF THE ECONOMY |
What P must prove as RoT (Restraint of Trade) in Price Fixing
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Price Fixing:
· illegal per se; that action are so anti-competitive · R/Reason; analyzing the particular facts · dfn: argue that RoT actually promoted competition |
2 ays to prove Price fixing in NSPE
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Price Fixing:
(sub-category of Sherman Act Section 1 Rule of Reason; if actions does not fall within bottom 5, then use RoR)(practices are presumed to be unreasonable w/o elaborate analysis of industry from judicial experience)!! |
Per Se Rule
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Price Fixing
· Horizontal PF (PF among competitors) · Horizontal Market Division · Group Boycotts · Vertical PF · Tying (mft tells wholesaler that they must buy computer and monitor) |
It is only after considerable experience with certain business relatinoship that cours classify them as per se violations of the Sherman Act.
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Characterizing Price Fixing exception to per se rule:
“Agreements to Facilitate a Market that are Necessary to Make a Product Exist are legal” |
rule for characterizing price fixing: exceptions to per se rule
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characterizing price fixing (exceptions to per se rule):
a) (BMI v. CBS – where there was no market for music licenses, ASCAP's blanket licenses created the market and did not violate the per se rule) b) (NCAA v. Univ. of Oklahoma – where NCAA restricted broadcasting of games, did not violate per se rule b/c NCAA created the sports league and governs play; however court held that actions restricted output, increased price w/o pro-competitive reason) |
Characterizing price fixing (exceptions to per se rule):
case law |
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Characterizing price fixing (exceptions to per se rule):
court can determine whether actions are of kind that restrict competition or creates of market · Elements/Common Themes of Cases; Quick Look Must Show ·(1) joint venture ·(2) creation of market |
Characterizatino Analysis/Quick look Analysis
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Price fixing:
i. Criminal intent required in criminal AT cases (Gypsum) a) rationale: S/L would chill competition |
Criminal antitrust and intent issue in RoT case (cause of action).
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Price Fixing:
a) An agreement b) restraint of trade – Intent element--> · Civil Case · any agreement that has purpose OR effect of restraining trade · Criminal Case · purpose to restrain trade OR · Effect of restraint and knowledge of probable consequences (Gypsum |
Proving Violation of Sherman Act Section 1 Price Fixing
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Market Division Among Competitors:
2nd of the per se illegal categories |
market division among competitors
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Market Division
“competitors have divided up marketplace, allocating to each member a component and agree not to sell to each other's component” |
market division among competitors definition
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market division
a) must be HORIZONTAL |
market division among competitors
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market division
a) Geographic division b) Product Type (you only sell X car, I sell Y car only) c) Customer Allocation (only sell to your own customer) |
market division
how do they divide it up/issue spotting |
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market division
iii. Are “Naked Restraints of Trade” with no purpose except stifling competition |
market division among competitors
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market division
“an agreement among competitors is unlawful per se” (Justice Marshall in Topco) · restraint of trade was NOT necessary to their agreement (distinguished from BMI) |
pre se rule and possible characterization
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Market Division
“competitors have divided up marketplace, allocating to each member a component and agree not to sell to each other's component” |
market division among competitors definition
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market division
a) must be HORIZONTAL |
market division among competitors
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market division
a) Geographic division b) Product Type (you only sell X car, I sell Y car only) c) Customer Allocation (only sell to your own customer) |
market division
how do they divide it up/issue spotting |
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market division
iii. Are “Naked Restraints of Trade” with no purpose except stifling competition |
market division among competitors
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market division
“an agreement among competitors is unlawful per se” (Justice Marshall in Topco) · restraint of trade was NOT necessary to their agreement (distinguished from BMI) |
pre se rule and possible characterization
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Group Boycotts:
“an agreement by horizontal competitors and/or others to exclude or coerce a competitor in the marketplace; usually exclusion deprives competitor of something they need to compete.” |
group boycotts definition
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group boycotts
3rd per se illegal category |
group boycotts
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group boycotts:
· “those horizontal agreements whose intrinsic nature is exclusionary and anti-competitive are per se illegal” (ex: Klors, FOGA, NYNEX, GM) |
explicit boycott
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group boycotts:
· Is a “naked restraint of trade” b/c there was no pro-competitive rational; strictly to exclude the competition |
explicit boycotts
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group boycotts:
· “if a group boycott is explicit, then is per se illegal” · (Klor undercut Broadway on prices, Broadway & suppliers colluded cut off Klor to exclude them – KLORS) · Where attorneys got together boycotted to protest pay received,held to be explicitly illegal (Super. Ct. TLA) · Moreover, you don't need proof of monopoly or market power to prove illegal boycott |
explicit boycotts
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group boycotts:
· “those agreements whose intrinsic nature is legitimate (i.e. Pro-competitive) w/ ancillary restraining effect are governed by the RoR” |
non explicity boycotts
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group boycotts:
· agreements to improve market efficiency OK (Reality Multilist) · agreements to create industry standards OK (Radiant Burner) · Where R made a more efficient burner than those in the AGA and was denied AGA seal, court held that this is group boycott b/c of subjectivity and bias to which standards which was applied (AGA) · Joint buyer ventures are pro-competitive (NW Wholesale) · Trade associations/Professional Associations (Indiana Dentists) · P need not prove market power to prove per se boycott case (Dentists) · Expulsion f/ joint buying venture with mkt power may be anti-competitive |
non explicity boycotts:
analysis: no balance, did action promote or stifle compeitition |
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group boycotts:
· Issue: what do you do if you have facility/component that is unique w/o no access to competitors and is necessary or beneficial to compete? |
essential facilities doctrine
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group boycotts:
· Rule: must share facility with competitors · D had only RR facility in city; court held that they must open up to competitors (US v. Terminal RR Assn.) · Held, access to facility to conferred significant econ advantage must be shared among competitors (AP vs. US); Court rejects “indispensability” test |
essential facilities doctrine
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group boycotts:
i. Vertical Boycotts (single buyer and single seller) are not per se illegal (Where D went to competitor b/c of kickbacks; held not to be per se illegal - NYNEX) a) To be per se illegal, must be horizontal agreement |
nynex and new learning
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Trade Associations:
· industry advertising (i.e. Milk campaign) · creation of standards · Lobbying efforts (Noerr-Pennington Doctrine) · Mft and R&D joint efforts · Educate members · trade information |
pro competitive acts of trade associations
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trade associations:
ii. Rule Used: RULE OF REASON |
trade associations
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trade asssociations:
a) must be reasonable and non-discriminatory , reasonably enforced, especially if restrict/control access to essential facility (see Multilisting, where TA required arbitrary $, regular office hours; held to be facially unreasonable as to these 3 rules) (See also Radiant Burner) |
membership
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trade associations:
· Actual identifiers/invoices (date, seller, buyer, amts) · future predictions (seen as invitation to collude) · very current info (i.e. Past 30, 60, 90 days) · TA information exchange used to police members who cheated restricted trade b/c violation of agreement would get them kick out (American Column Lumber) |
price and statistical (information) exchange: info you can't exchange
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trade associations:
· no current price info exchange · no identifiers, compilation/averages · reason: show that we aren't looking for cheater · Historical data (6 months more) · No exchange of invoices |
price and statistical (information) exchange: info you can exchange
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trade associations:
· Knowing this info can help create a competitive pricing structure, competitive supply, etc |
price and statistical (information) exchange: how can info exchange to pro competitive
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trade associations:
a) “...every contract, combination, conspiracy....”; Larry Sullivan says = agreement |
conspiracy element in sherman act section 1
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trade associations:
b) YOU NEED AN AGREEMENT FOR A SHERMAN ACT SECTION 1; IT CANNOT BE VIOLATED BY 1 FIRM; THERE MUST BE 2 MORE MORE LEGALLY DISTINCT |
conspiracy element in sherman act section 1
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trade associations:
Wholly owned sub and parent corporation cannot conspire (Copperweld) held by US Supreme Court |
intra corporate conspiracy
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trade associations:
· Direct · written agreement · conduct of parties (witnesses) · fruits of search warrant · Circumstantial |
proving conspiracy, Generally:
Evidence that you can use |
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Trade Associations:
· Burden on D to prove that they did not collude; an inference of II conduct – difficult (Interstate) · Legitimate Explanations for II conduct but not collusion (Some argue not fair to shift burden on D b/c of legitimate explanations) · cost of supplies/production went up · change in demand · predictions about market conditions · by chance · I(Paramount) |
Implied Conspiracy and Conscious Parallelism:
Parallel Business Conduct |
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Trade Associations:
· You can use II behavior as block to prove agreement, but not sufficient by itself; if only have evidence of II behavior, burden not shifted to D · Factors to Show Evidence of Possible Collusion · evidence of communication, discussions · opportunity to collude · behavior irrational absent collusion · behavior against economic interest · Motivation |
implied conspiracy and Conscious Parallelism:
Today: Conscious parallelism Plus Doctrine |
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monopolizatoin:
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire w/ any other person or persons, to monopolize any part of trade or commerce among several states ....” |
intro to sherman act section 2
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monopolization:
Person” = single firm b) “Any part of trade or commerce” = market/structure |
key features of monopolization
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monopolization:
· Behavior: Bad behavior “wrongful or exclusionary conduct” (monopolization or attempt) (1st Prong) AND · Structural: Definition of Market/Market share/Market Power/Dominant · by geographic and product |
key features of monopolizatoin:
2 compenents of proving monopoly |
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monopolization:
d) But does not ban monopolies themselves, b/c some monopolies are good · we oppose a firms that attempt or monopolies thru bad behavior |
monopolization key features
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monopolization:
a) How do you regulate mkt power from abuse vs. encouraging competitive behavior? |
monopolization: controversies and issues
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monopolization:
a) They Raise prices b) They restricting output · leads to “dead weight welfare loss”: amount of goods and services not manufactured/lost value to society from monopoly behavior (pg 170) |
objections to monopoly
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monopolizatoin:
· Strict liability laws · dispersion of economic power · dispersion of political power · Support for small businesses |
non economic objectives (monopoly)
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monopolizatoin:
a) Did the firm have monopoly power in a relevant market and b) The willful acquisition or maintenance (usually by unlawful or exclusionary means) of monopoly power (power to control prices or exclude competition, Papageorge - as the power to raise prices or exclude competitors over the long run successfully) |
single firm monopolization: Rule Grinnel Test: must prove 2 parts
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monopolization:
substitutability (aka interchability of use measured by cross elasticity of demand) of product (Cellophane) |
Defining Relevant marketplace:
product market test |
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monopolization:
substitutability of product: raise price of one and see if people switch readily |
defining relevant marketplace:
product market test |
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monopolization:
(two products in the same product market and how much demand will change for particular product depending on small/large changes in price). Cable is an elastic product, because you can switch from cable to satellite tv and price would be enough to make a change. If they are readily substitubale then they are in the same market. If they won’t the market is being narrowly defined thus the defendant will be more liable to section 2 liability. |
defining relevant marketplace: product market:
cross/elasticity of demand |
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monopolization:
where do the customers shop for this product or service? |
defining relevant marketplace:
Geographical - commercial reality test |
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monopolization:
· The structure of the customer/supplier relationship. · Example: A small geographic market is a market because you won’t drive far for it, it is more about convenience. Large Geographic market are diamonds for industrial purposes. You go all over the world because you are spending 5 mill for 2 pounds of product. |
defining relevant marketplace:
Geographical |
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Monopolization:
a) “The power to control prices or exclude competition over time and getting away with it” · being a price maker |
defining monopoly power
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monopolization:
a) define relevant market · product market, and · geographical market b) Did the firm have monopoly power in a relevant market c) Was there a willful acquisition or maintenance of monopoly power. |
analysis for exame for section 2 monopolization case
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monopolization:
some industries are more efficient with only 1 provider (i.e. Utilities) b/c of physiological limits. |
natural monopoly and regulation:
PUblic Regulations |
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monopolization:
a) Bar/Regulate entry into this natural monopoly b) Regulate rates to protect consumers |
natural monopooly and regulation:
Pervasive Publice Regulation 2 things to do to regulate a rationale monopoly as a government |
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Monopolizatoin:
“under certain circumstances we will have a regulated model; but in order to protect the consumer, we will regulate entry and rates” |
natrual monopoly and regulations rule statement
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monopolization:
a) Refused to pass power thru system to enter into other markets (Otter Tail) |
natrual monopoly and regulations:
duties of monopolies to deal with others |
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monopolization:
b) Rule: no general duty to cooperate with your business rivals even if you are a monopolist; however, refusing to sell ticket to competition evidence of bad behavior (Aspen Skiing Company) · Rule: sliding scale: more market power, acts of exclusionary has evidentiary significant for monopoly determination (the bigger you get, the more careful you have to be with your actions against competitors.) |
duties of monopolies to deal with others: rule
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monopolization:
specific intent to monopolize: Over Exclusionary Act: Dangerous Probabilty of Successful |
Attempts to Monopolize 3 elements
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monopolize:
· most common: predatory pricing ( deep pocket co charges below cost for certain time b/c the only rational reason was to drive comp out of business) · problem: we want low prices , so why go after PP? Later, they will raise prices; there must be a balance · Proving PP (hard to prove) Federal AT Case · that D is charging below cost (SC doesn't tell you how to do this) · likelihood that D will be able to recoup loss later (hard) |
attempts to monopolize
overt exclusionary act |
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monopolization:
· enough market share and enough prospect that they might succeed |
attempts to monopolize 3 elements:
dangerous probability of succesful |
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Mergers
applies to effects of M&A that may be to lessen competition or to tend to create a monopoly |
Mergers - INtro to Clayton Act Section
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Mergers
- catches RoT or monopoly before it can be in effect |
mergers
Nipping it in the bud |
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mergers:
horizontal, vertical, conglomerate · horizontal: competitors, firm that acquires another firm that with which they are a direct competitor. · vertical: buying up the chain of distribution, a purchase or acquisition of a customer of a supplier or vice versa. · conglomerate: 2 firms not HZ or VT; diversifying products. |
3 types of mergers
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mergers:
a) plugs all section 7 loopholes: “no person”, “stock or assets”, “in or affecting interstate commerce” iv. Modern Interpretation: Brown Shoe: 5 Rules established a) market share is proxy for monopoly power (5% in Brown Shoe) b) Line of Commerce/Definition of Market · Sub-Markets: c) AT laws protect competition, not d) HZ merger liability: 5% market share, under Brown, is liability; realistically, can't win on small market share e) VT mergers liability · Foreclosure: no more access to once available markets due to VT mergers |
Celler Keyfauver
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Mergers:
“Rebuttal Presumption” if Meets 2 prong standard a) “(1) An undue %age share of relevant market, and results in significant increase in concentration of firms in that market must be enjoined (2) in absence of evidence clearly showing that merger not likely to have anticompetitive effect” pg 985 · did firms merge with undue market share? Part 1 · translation: Define market share and monopoly power? (product and geography) · significant increase in concentration? Part 2 · if not clearly anticompetitive effects, then not enjoined Part 3 b) What is Undue Market Concentration? Numbers only not enough · 30% & no showing of no anticompetitive effect = illegal under PNB · 7.5% & industry trend towards concentration = illegal under Vons · Dissent: must look beyond the #s, smaller shops were less efficient; can't use mom & pop protectionism |
Horizontal Mergers:
Legal STandard |
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Horizontal Mergers:
· where merger would not affect competition b/c of lack of coal reserves · Must look at competitive significant, nature of market, significant increase in concentration · Failing company defense: good business mergers with a failing company may be permitted |
other factors than mere % of present market share must be used under Generl Dynamics Rule
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Horizontal mergers:
· old law: post merger legal action; problem: hard to put back the omelette · current law: pre-merger notification (Hard-Scott-Rodino Act 1976) |
DOJ/FTC merger guidelines & administrative enforcement
Histor |
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Horizontal Mergers
· 95% of challenged mergers abandoned b/c they lose money · Violation of guidelines not illegal, but show likelihood of being challenged · Today: lobby FTC/DOJ to approve the merger · Fix-It-First System: settlement agreement to spin off companies/competitors in areas (product, geography) where competition would be lessened before merger decision |
DOJ/FTC Merger Guidelines & Administrative Enforcement
The merger system |
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horizontal mergers:
· the gist: are worried about too much market power that can be used to control price or reduce power and to exclude competitors |
DOJ/FTC Merger Guidelines & administrative enforcement:
how des the guidelines work |
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horizontal mergers:
· product (substitutability) · geography (customers/supplier market) · D wants broader definition |
DOJ/FTC merger guidelines:
define relevant market |
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horizontal mergers:
· Herfmandal Hirshman Index (HHI)-->easy way to determine increase in concentration market from merger · (sum of market share before merger)^2 minus (sum of market share after merger)^2 · Concentration of Ranges: (pg 1044): “In the evaluating HZM, the Agency will consider both post M concentration and the increase in concentration resulting from the merger” · Look to POST Merger HHI to determine concentration (UnConcentrate, highly , moderately) · <1000: unconcentrated; unlikely to challenge |
DOJ/FTC merger guidelines:
applying the guidelines: calculate undue/concentration element |
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horizontal mergers:
· 1000-1800: moderately concentrated · unlikely to be challenged if change is <100 · likely to be challenge if change >100 · >1800: highly concentrated · No challenge if change <50 · challenge if change >100 · 50-100 increase: look to other factors (pg 1045 para 1.52) · changing market conditions (See General Dynamics) · Product Homogeneity (possible collusion) · degree of diff of market, location ,and Substitutability · Entry: ease or difficulty (100% marketshare might not be monopoly if entry easy) · ease of collusion |
DOJ/FTC merger guidelines:
applying the guidelines: calcluate undue/concentration element |
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horizontal mergers:
“What is the status of the the proposed merger under the Clayton Act?” ; Analysis under Clayton Act (PNB Rule) |
exam approach for merger guidelines:
legal |
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horizontal mergers:
“Whether the proposed merger will likely be challenged under the FTC guidelines”; Analysis under Merger guidelines (HHI) |
exam approach for merger guidelines:
administrative |
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horizontal mergers:
Defense attorneys argue that the market defined by DOJ/FTC is too narrow; you want to argue that your market is broad so that you can get in more comp. |
horizontal merger tip
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horizontal mergers:
will sell some assets in hopes of preserving competition |
fix it first nature of merger law
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Vertical Mergers:
i. Foreclosure: ex: supplier cannot sell to mft b/c mft merged w/ supplier's customer; “Foreclosed from access to market” ii. Less likely to be challenged b/c presumed that vert mergers are for efficiency purposes a) counter: higher barrier to entry |
vertical mergers
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Conglomerate Mergers:
mergers of cos that do not have a direct trading relationship |
conglomerate mergers definition
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conglomerate mergers:
a) reciprocity theory (Consolidated Foods): there may be competitive harm when a large buyer uses its purchasing power and control as leverage to persuade its suppliers to make reciprocal purchases (produces foreclosure effect) · held; in concentrated industries, reciprocal buying can trigger a Section 7 liability b/c it may foreclose outsiders from being able to sell (CF) b) Entrenchment (P&G): “Giant Among Pygmies”; a large firm enters an a market buying the largest firm and using its power to discourage them from competing c) Potential Competition Theory (P&G): Big firm waiting into wings to enter may drive current firms to lower price, eliminating competition. Courts will not allow big firm to enter market that will disrupt competition |
theories under which conglomerate mergers can be challenged
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conglomerate mergers:
there may be competitive harm when a large buyer uses its purchasing power and control as leverage to persuade its suppliers to make reciprocal purchases (produces foreclosure effect) · held; in concentrated industries, reciprocal buying can trigger a Section 7 liability b/c it may foreclose outsiders from being able to sell (CF) |
theories under which CM can be challenged:
reciprocity theory |
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conglomerate mergers:
“Giant Among Pygmies”; a large firm enters an a market buying the largest firm and using its power to discourage them from competing |
theories under which CM can be challenged:
Entrenchment |
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conglomerate mergers:
Big firm waiting into wings to enter may drive current firms to lower price, eliminating competition. Courts will not allow big firm to enter market that will disrupt competition |
theories under which Cm can be challenged:
Potential Competition Theory |
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vertical restraint:
ii. Agreements between those in supply chain (i.e. Retailers and suppliers) |
vertical restraints
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vertical restraints:
iii. by their nature, VR tend to hurt competition less than HR b/c are less harmful to consumer welfare |
certical restraints
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vertical restraints:
“RPM is illegal Per Se” (Parke- Davis) a) it is unlawful for mft to require to adhere to MSRP (Dr Miles Medical) |
resale price maintenance/vertical price fixing
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vertical restraint:
Unilateral Refusals to Deal |
resale price maintenance/vertical price fixing:
exception |
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vertical restraint:
a) the Meanness Paradox b) Need an announced program to be able to maintain price with RTLR; make no demands or agreement with RTLR to maintain price |
maintenance/vertical price fixing:
exception |
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vertical restraints:
c) RULE: “a program of announcement of price preferences and simple refusals to deal with no form or coercion or pressure may be lawful under the Colgate unilateral refusal to deal” |
maintenance/vertical price fixing:
exception rule |
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vertical restraints:
Per Se Rule only applies to minimum price fixing” (Khan) |
maintenance/vertical price fixing:
maximum price fixing |
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vertical restraints:
iii. Definition: mft insists/agree that rtlr maintain certain price (MSRP) |
maintenance/vertical price fixing:
Resale Price Maintenance |
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vertical restraint:
i. Most Common: vertical territory and customer restraints a) ex: Can only sell in your state and you are only retailer · mft allows 1 retailer only in each state; can't sell outside of your state |
non-price vertical retraint
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vertical restraint:
“Non-Price Vertical Restraints are judged by the Rule of Reason ” (GTE Sylvania) KNOW THIS CASE a) “b/c they may in some cases strengthen overall competition, we judge all non-price restraints under the RoR” |
non price vertical restraint rule
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vertical restraint:
: Intra-Brand vs. Inter-Brand Competition a) Chicago School: Intra-brand elimination can strengthen inter-brand, which is more important; therefore, can't have a presumption of anti-competition |
non price vertical restraint development of rule
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tying arrangments:
can't sell on condition that buyer must also buy something else from you; “the bundled sale of of tied good and a tying is governed by both Clayton Act Sec. 3 (conditional sales) and Sherman Act Sec. 1. (restrains trades)” |
tying arrangments, basically
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tying arrangements:
a) Tying Product: Desired b) Tied Product: Bundled In (can get anywhere, cheaper) c) Foreclosed: competitor (M2) blocked out from selling tied product (usually the one who sues) |
definition
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tying arrangments:
a) coerced agreement sufficient for violation (M2 foreclosed out my M1 involuntarily) |
SA section 1 also applies: an (1) agreement that (2) restrains trade may be unlawful
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tying arrangments:
to head off tying arrangement before they become monopolies; it forces the customer to give up free choice in the market, which is anthetical in consumer welfare |
rationale for opposing tying arrangments
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tying arrangments:
a) (1) two distinct product or services · Test: consumer demand test: If “separate consumer demand” for each product, then a distinct product(Jefferson Hyde) b) (2) Sufficient Economic/Market Power · Must substantial market power measured by desirability or uniqueness of a product (not monopoly) · ex: patented or highly valued items · Kodak: K owned all repair products · May also be within 1 brand where there is huge sunk capital (Kodak) c) (3) “Not insubstantial” amount of tied commerce (must be a substantial impact to commerce) · Issue: is there a tied product foreclosure? Is the buyer foreclosed from buying in the tied product? |
per se rule: whether there is a tying arrangment
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tying arrangments:
a) For services and products only: Sherman Act requires all 3 elements b) For commodities only: Clayton Act requires only 2 of 3 elements (requires at least # 3 – not insubstantial amount tied to commerce) |
when and where to use the tying arrangment rules
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tying arrangments:
i. Sunk Cost Situations/Relevant market may be within 1 brand (market for Kodak services)(Kodak) |
contemporary interpretations
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tying arrangments:
in certain circumstances, tying may be permitted even though otherwise unlawful where it is essential to preserve the goodwill of a new product or technology (Jerrold Electronics, Dehydrated Products) a) “if there is an overriding pro-competitive reason for the tying, the courts will sometimes approve the act even though the elements of tying have been me if it is essential to preserve the goodwill of a new product or technology” (Jerrold, Carvel, Dehydrated Products) |
good will defense/new technology defense
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price discrimination:
i. “PD is the practice of selling the same good of like grade and quality to two competing buyers at different prices where the effect is to injure competition” ii. Where: big business is to be able to buy at a lower cost is able to drive smaller competitors out of business |
intro to Rob-Pat act
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price discrimination:
a) Interstate Commerce b) Discrimination: a difference in price c) Sale to 2 Different Purchasers d) Must be Commodities e) Must of “Like Grade and Quality” (i.e. The same product) f) Legal Std: where the effect is to · (1) substantial lessen of competition or · (2) tendency to create a monopoly or · (3) where the effect may be to injure, destroy, or to prevent competition with a particular competitor · an injury to a competitor (compare to protecting competition of other provisions; critics say this is protectionism) |
development of RPA: Elements
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price discrimination:
can charge less b/c it costs less to serve the customer at higher volume on actual cost differences; BOP on D must be based on actual accounting differences, not on a general perception(Morton Salt) · “to succeed on this defense, the D must prove actual accounting difference and can only pass on this actual difference” |
development of RPA Defenses
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price discrimination:
b) Meeting Competition Defense |
development of RPA defenses
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price discrimination:
i. “PLH is injury among or at the level at those offering the discriminatory (lower) price” (Utah Pie) |
primary line harm
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price discrimination:
hard to prove (Brown and Williamson) a) that D is charging below cost (SC doesn't tell you how to do this) b) likelihood that D will be able to recoup loss later (hard) |
primary line harm rule
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price discrimination:
iii. PLH case are rarely brought b/c of high standard |
primary line harm
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price discrimination:
i. Is more common than PLH ii. SLH occurs where a power buyer gets a deal that is different from the smaller buyers and smaller buyer can't take advantage of the deal (“functional availability”) a) Function Availability: Business can give discounts, but there must be a system where discount is functionally available to everyone (depends on facts) · “Unless the offeror of discount can defend with actual cost justification data, it must make such discounts functionally available to everyone” |
secondary line harm
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unfair competition
i. “FTC Act prohibits unfair methods of competition in interstate commerce” |
FTC ACT
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unfair competition:
i. Broadest of all FTC laws; goes beyond (subsumes) SA and Clayton Act; to compensate for that, Congress reduced the remedies (see below); FTC Act automatically violated when SA or Clayton Act violated a) Limited Remedies: Compare to SA and Clayton Act: no criminal sanctions, no private action/only FTC can bring actions, remedies are prospective (no treble damages, primary is C&D or injunction) |
development of FTCA section 5
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unfair competition:
i. Scope of FTC Act – beyond the SA and Clayton Act (pg 905) (S&H – stamp case): Cigarette Rule Factors to determine if violation of FTC Act a) Whether the practice is unlawful or offends public policy b) Whether the practice is immoral, unscrupulous or immoral c) whether it causes substantial injury to consumers |
contemporary standards
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state at laws:
i. 21 states enforced AT in 1890 before federal laws ii. Congress' purpose was to complement and supplement state AT laws |
history of state laws
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state at laws:
i. Federal law does not preempt state AT Laws (ARC) ii. Federal and state share Jx on AT actions iii. In practice, assume that both laws apply (State and Federal AT laws) |
federal state jurisdiction
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state at laws:
i. Cartwright Act ii. Unfair Practices Act iii. Unfair Competition Law |
CA at law
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