Antitrust Does Google have monopoly power? Microsoft? On what? Why? Why Not? Is that bad? Why? Can you name monopolies in other industries? Is Monopoly Power Necessarily Harmful to Society?

Why Do We Have Antitrust Laws? Standard Oil Trust Created the 7 Sisters (Made Rockefeller even richer)

Section 2 of the Sherman Act Section 2 condemns “every person who shall monopolize, or attempt to monopolize.” There are two distinct types of behavior that are subject to sanction under Section 2: Monopolization Attempts to Monopolize Section 2: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or person, to monopolize any part of trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”

Sherman Antitrust Act “Unreasonable Restraints.” U.S. Supreme Court added “unreasonable” – Restraint is greater than needed to protect legitimate business interest – Restraint poses an undue hardship on the promisor or likely injury to the general public Contracts in Restraint of Trade. Contract or combination in restraint of trade is illegal. Monopoly or Attempt to Monopolize. Monopolies or attempts to monopolize are illegal. Interstate Commerce. The Sherman Act applies only to activities that have a “significant” impact on interstate commerce. – Interstate Commerce (commerce clause). Section 1: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal…”

Current Antitrust Example: JACOBI INDUSTRIES PLEADS GUILTY TO BID RIGGING (July 2007) Bid Rigging. The president and owner of Jacobi Industries Inc., a Medford, N.Y. company, pleaded guilty to conspiring to rig bids on U.S. Department of Defense (DOD) contracts for military tiedown equipment and cargo securing systems. $20,000 Fine – 6 Months Prison. Jacobi has agreed to pay a criminal fine of $20,000, and to cooperate with the Department's ongoing investigation. Jacobi could also serve up to six months in prison. The terms of the plea agreement are subject to court approval. Maximum 10 years of prison and $1million fine (or twice the gain or twice the loss). Conspiracy. Jacobi participated in the bid-rigging conspiracy from November 2001 to January 2005, during which time he and co-conspirators discussed and agreed among themselves not to compete by agreeing not to submit prices or bids against each other on certain contracts. – Attending meetings and engaging in discussions regarding the sale of military tiedown equipment and cargo securing systems; – Agreeing during those meetings and discussions not to compete on certain contracts with the DOD by not submitting prices or bids on those contracts; – Submitting bids in accordance with the agreements reached; – Selling military tiedown equipment and cargo securing systems to the DOD under those agreements at collusive and non- competitive prices; and

Restraints of Trade – Overview Price Fixing – OPEC – School Milk Scam – NCAA Cap of assistant coach salaries – Any agreement among competitors to fix prices is a per se violation. Horizontal Market Division – Trade Associations Joint Ventures Resale Price Maintenance Agreements (rule of reason) Territorial Restrictions – Free Rider Problem Horizontal Vertical

Vertical versus Horizontal VerticalHorizontal