Elet5e ch19

ESSENTIALS OF THE LEGAL ENVIRONMENT TODAY, 5E

ROGER LEROY MILLER

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

CHAPTER 19

ANTITRUST LAW AND PROMOTING COMPETITION


LEARNING OBJECTIVES

1. What is a monopoly? What is market power? How do these concepts relate to each other?

2. What anticompetitive activities are prohibited by Section 1 of the Sherman Act?

3. What type of activity is prohibited by Section 2 of the Sherman Act?


LEARNING OBJECTIVES (CONT’D)

4. What are the four major provisions of the Clayton Act, and what types of activities do these provisions prohibit?

5. What agencies of the federal government enforce the federal antitrust laws?


INTRODUCTION

• Laws regulating economic competition in the United States• Embodied almost entirely in• Sherman Antitrust Act • Clayton Act• Federal Trade Commission Act


THE SHERMAN ANTITRUST ACT

•Major Provisions of the Sherman Act• Sections 1 and 2 contain the main

provisions•Differences between Section 1 and Section 2• Section 1 – concerned with finding an

agreement leading to restraint of trade• Section 2 – structure of a monopoly that

exists in the marketplace© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


• Monopoly – a market in which there is a single seller or a very limited number of sellers• Monopoly power – the ability of a

monopoly to dictate what takes place in a given market• Market power – the power of a firm to

control the market price of its product; monopoly has greatest degree of market power


LO-1

EXHIBIT 19.1



• Jurisdictional Requirements• Only applies to restraints that have a

substantial impact on interstate commerce.• Also extends to U.S. nationals abroad

engaged in activities that have an effect on U.S. foreign commerce.


SECTION 1 OF THE SHERMAN ACT

• Section 1 prohibits horizontal and vertical restraints.• Per Se Violations versus the Rule of Reason• Per se violations are blatant and

substantially anticompetitive.• Why the rule of reason was developed• Factors courts consider under the rule of

reason© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

LO-2


•Horizontal Restraints• Restrains competition between rival

firms competing in same market• Price fixing• Group boycotts• Horizontal market division• Trade associations



• Vertical Restraints• Restraint of trade created by agreement

between firms at different levels in manufacturing and distribution process• Territorial or customer restrictions• Resale price maintenance agreements



•Monopolization and attempts to monopolize•Monopolization• Monopoly power• Relevant market• Relevant product market• Relevant geographic market

• The intent requirement• Unilateral refusals to deal

LO-3© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


• Attempts to Monopolize• Proof of

1. Anticompetitive conduct2. Specific intent to exclude competitors and garner

monopoly power3. A “dangerous” probability of success in achieving

monopoly power


THE CLAYTON ACT

• 1914 Clayton Act passed: Sections 2, 3, 7, 8• Section 2—Price Discrimination• Requirements• Seller must be engaged in interstate commerce, goods

must be of like grade and quality, goods must have been sold to two or more purchasers

• Defenses• Several statutory defenses to liability for price

discriminationLO-4


THE CLAYTON ACT

• Section 3—Exclusionary Practices• Sellers or lessors cannot condition the

sale or lease of goods on the buyer’s or lessee’s promise not to use or deal in the goods of the seller’s competitor.• Exclusive-dealing contracts• Tying arrangements


THE CLAYTON ACT

• Section 7—Mergers• A person or business cannot hold stock

and/or assets in another entity “where the effect…may be to substantially lessen competition.”• Horizontal mergers• Vertical mergers


THE CLAYTON ACT

• Section 8—Interlocking Directorates• The practice of having individuals serve

as directors on the boards of 2+ competing companies simultaneously.


ENFORCEMENT AND EXEMPTIONS

•U.S. Department of Justice (DOJ)• Federal Trade Commission (FTC)• Enforcement by Federal Agencies• Only DOJ can prosecute Sherman Act

violations• Violations of Clayton Act are not crimes

but can be enforced by DOJ or FTC through civil proceedings

LO-5© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

ENFORCEMENT AND EXEMPTIONS

• Enforcement by Private Parties• Can sue for treble damages• Under Sherman Act must prove

1. The antitrust violation either caused or was a substantial factor in causing the injury that was suffered.

2. The unlawful actions of the accused party affected business activities of the plaintiff that were protected by the antitrust laws.

• Exemptions from Antitrust Laws© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

EXHIBIT 19.2


U.S. ANTITRUST LAWS IN THE GLOBAL CONTEXT

• The Extraterritorial Application of U.S. Antitrust Laws• Section 1 of Sherman Act• Violation may occur outside United

States• Foreign persons including governments

can be sued for violation of U.S. antitrust laws


U.S. ANTITRUST LAWS IN THE GLOBAL CONTEXT

• The Application of Foreign Antitrust Laws• EU has stepped up enforcement actions

against antitrust violators• Other nations have laws that promote

competition and prohibit trade restraints.


Business

Elet5e ch19