1. Customized by Professor Ludlum December 1, 2016
Unit W
Customized by Professor Ludlum
December 1, 2016
Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

2. New Orleans, 2010

3. Introduction
Common law actions intended to limit restraints on trade and regulate economic competition.
Embodied almost entirely in:
The Sherman Antitrust Act of 1890.
The Clayton Act of 1914.

4. § 1: The Sherman Antitrust Act
Section 1 and 2 contain the main provisions of the Sherman Act.
Section 1:
Requires two or more persons, as a person cannot contract, combine, or conspire alone.
Concerned with finding an agreement.
Section 2:
Applies both to an individual person and to several people, because it refers to every person.
Deals with the structure of monopolies in the marketplace.

5. Sherman Act Per se violations vs. the Rule of Reason
Per se are blatant and substantially anticompetitive.
Rule of reason agreements do not unreasonably restrain trade.

6. Horizontal Restraints
Horizontal restraints are agreements among Sellers (or Buyers) that restrain competition between rival firms competing in the same market .
Seller
Buyer

7. Resale Price Maintenance Agreements
An agreements between a manufacturer and a distributor or retailer in which the manufacturer specifies the retail price at which retailers must sell products furnished by the manufacturer or distributor.
Minimum price = per se unlawful
Maximum price = rule of reason

8. Apple agreed to pay up to $400 million to avoid any lawsuits from ebook price fixing case(s)
Apple admitted they overcharged customers $280 million on ebook purchases….
Treble Damages…. Justified the settlement!
Wall Street Journal, July 16, 2014

9. Group Boycotts
Agreement between two or more sellers to refuse to deal with a particular person or firm. Group boycotts are per se violations of the Act.

10. Trade Associations
Trade Associations are industry specific organizations created to provide for the exchange of information, ….
Rule of reason is applied to determine if a violation of the Act has occurred.

11. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.“
Wealth of Nations, Smith (1776) Book I, Chapter 10, para 82

12. Joint Ventures
A joint venture is an undertaking by two or more individuals or firms for a specific purpose. The rule of reason is applied to analyze the agreement if the venture has first been found not to involve price fixing or market divisions.

13. Monopolization Predatory pricing.
Attempt by a firm to drive its competitor from the market by selling its product at prices substantially below the normal costs of production.

14. Monopoly Power
Exists when one firm has sufficient market power to control prices and exclude competition. Monopoly power is if a firm has 70% or more of a relevant market, it is regarded as having monopoly power.

15. May 2014 update Reynolds America & Lorillard trying to combine
No. 2 and No. 3 cigarette makers in US
Altria (Big MO) has 50% of the market.
Wall Street Journal, May 23, 2014

16. The Clayton Act The Clayton Act deals with: Price Discrimination.
Tying Agreements

17. Price Discrimination
Price discrimination is the charging of different prices to competing buyers for identical goods.

18. Price Discrimination Defenses: Cost justification.
Meeting the price of competition.
Changing market conditions.

19. _Tying_Arrangements.
The conditioning of the sale of a product on the buyer’s agreement to purchase another product produced or distributed by the same seller.
Examples:
Xerox paper
American Can Company

20. Private Actions
Private party injured under the Sherman or Clayton Act can:
Sue for damages and attorneys fees.
Plaintiff must prove:
Antitrust violation either caused or was a substantial factor in plaintiff’s injury, and the unlawful actions of Defendant affected Plaintiff’s business protected by antitrust laws.
Treble Damages.

21. § 6: Exemptions from Antitrust Law
Labor.
Agricultural associations and fisheries.
Insurance.
Foreign trade.
Professional baseball.
Cooperative research and production.
Joint efforts by businesspersons to obtain legislative or executive action.
And Others.