1. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 5 Government Regulation of Competition and Prices Twomey Jennings Anderson’s Business Law and the Legal Environment, Comprehensive 20e Anderson’s Business Law and the Legal Environment, Standard 20e Business Law: Principles for Today’s Commercial Environment 2e

2. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 2 Power to Regulate Business Regulation by government has occurred primarily to protect one group from the improper conduct of another group. Until the middle third of this century, regulation of business was primarily directed at protecting competitors from misconduct of other competitors.

3. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 3 Power to Regulate Business Beginning with the middle third of this century, regulation expanded in the interest of protecting consumers.

4. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 4 Power to Regulate Business The Sherman Antitrust Act prohibits conspiracies in restraint of trade and the monopolization of trade. The Clayton Act prohibits mergers or the acquisition of the assets of another corporation when this conduct would tend to lessen competition or give rise to a monopoly.

5. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 5 Regulation of Markets and Competition Regulation of Prices. –Prohibited Price Fixing (Section 1 of Sherman Act). –Prohibited Price Discrimination (Clayton Act & Robinson-Patman Act). –Permitted Price Discrimination.

6. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 6 Regulation of Markets and Competition Prevention of Monopolies and Combinations: –The Sherman Act. –Monopolization (Market Power). –Price-Fixing –Tying. –Business Combinations.

7. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 7 Power to Protect Business Some industries are exempt from the Sherman Act. To be illegal, restraint of interstate commerce must be unreasonable. Court applies the “rule of reason”.

8. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 8 Remedies for Anticompetitive Behavior Criminal Penalties. –Sherman Act provides for fine or imprisonment. –Up to $10 million for corporation. –Up to $350,000 and/or prison up to three years. Civil Penalties. –Individual treble damages. –Class Action suit.