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THE RULES OF THE GAME: Intro to Antitrust Law Robbyn Wysocki
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2 What’s the game? Capitalism
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What are the rules? Play Fair.
3 What are the rules? Play Fair.
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Antitrust Laws Protect Competition
Consumers benefit from lower prices, higher quality When competitors agree to fix prices, rig bids or allocate customers or territories, consumers lose the benefits of competition. The result is higher prices.
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Agreements Monopolies Trade Associations
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AGREEMENTS Sherman Act Section 1
Every contract, combination, or conspiracy, in restraint of trade is illegal.
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AGREEMENTS Need not be in writing Can be implied MOST inferred from circumstantial evidence.
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MANUFACTURERS DISTRIBUTOR/WHOLESALERS RETAILERS CONSUMERS
Relationships matter MANUFACTURERS DISTRIBUTOR/WHOLESALERS RETAILERS CONSUMERS
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HORIZONTAL RESTRAINTS
Agreements among competitors most feared
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Agreements on Price Price Fixing Price discounts Hold on prices
Eliminate or reduce discounts Standard formula for computing prices Specific price differentials between 2 products Minimum fee or price schedule; Fix credit terms Not advertise price
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Customer or Territorial Allocations
An agreement in which competitors divide markets among themselves: Competitors agree to allocate customers among themselves; or Competitors agree to allocate sales territories or geographic markets
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12 Bid Rigging An agreement among competitors to conspire to raise prices when purchasers seek to acquire goods or services by soliciting competing bids.
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Bid Rigging Schemes Bid suppression Complementary bidding Bid rotation
13 Bid Rigging Schemes Bid suppression Complementary bidding Bid rotation Subcontracting
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Bid-rigging: Subcontractors
Agreements between GC and SC to work together to submit a bid is OK. Agreement between GC and GC on who gets to be SC
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15 Bid Rigging Red Flags Last minute changes to bid documents at time of submission Discussions with competitors immediately prior to submitting bids Statements that a contract “belongs” to a particular bidder
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VERTICAL RESTRAINTS Restrictive agreements made between firms at different levels of the production-distribution-supply chain. manufacturer/distributor Manufacturer/retailer
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Vertical Restraints Agreements to: Set minimum prices
Set maximum prices Suggest or promote resale prices Restrict or allocate sales territories
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Bad Vertical Agreements
Fixing specific or minimum resale prices. Cutting off a reseller that prices below a prescribed level. Cutting off a reseller at the request of a competing reseller. Unlawful tying agreements
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Acceptable Vertical Agreements
Exclusive territories for resellers Bundling or tying where company name has no market power or where the products are offered separately. Suggesting or promoting reseller-advertised resale prices
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What are the danger zones?
Review of Agreements What are the danger zones?
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MONOPILIZATION Sherman Act Section 2
The intentional acquisition or maintenance of the power to control prices or exclude competition. Requires: 1. Market Power 2. Abuse of monopoly position
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Combine or conspire with any other person or persons, to monopolize
It is illegal to: Monopolize, Attempt to monopolize, Combine or conspire with any other person or persons, to monopolize
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Unlawful Monopolization requires monopoly power and
the willful acquisition or maintenance of that power NOT from growth or development as a consequence of a superior product, business acumen, or historic accident.
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Abuse of Monopoly Position
The existence of monopoly power is not illegal - abuse of that power is. Abuse = predatory or exclusionary conduct.
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Predatory Conduct Lowering Prices Below Cost
Short term = less competitors Long term = higher prices
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Tying Agreements Can’t require the purchase of one product in order to purchase a second product where: Your company has market power (usually a very large market share and the ability to raise prices) in the first product. The products can be and are sold separately. There is no legitimate business justification for requiring that they be purchased together.
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Attempted Monopolization
anticompetitive conduct, a specific intent to monopolize, and a dangerous probability of achieving monopoly power.
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MONOPOLIZATION REVIEW
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SO WHAT CAN WE DO TOGETHER?
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COOPERATIVE ACTIVITY Trade associations: Benefits outweigh the risks of anticompetitive behavior
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QUALITY Cooperative Research betters the industry as a whole
Technical Committee AASHTO NCHRP UT Arlington
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EDUCATION ACPA educational programs Pipe Schools Webinars Calculation Tools Annual convention Press releases
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INDUSTRY PROMOTIONS Marketing Committee Fly-ins Lunch-n-learns “Got Milk?” White papers
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LOBBYING Anticompetitive but allowed under the First Amendment as free speech. “Noerr-Pennington Doctrine”
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Noerr-Pennington Doctrine
N-P renders the antitrust laws inapplicable to individual or group action intended to influence legislative, executive, administrative, or judicial decision-making. Lobbying efforts okay regardless of intent to limit economic competition.
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“Sham Exception” Must be in “good faith” Applies where petitioning is a mere sham to cover an attempt to interfere directly with business of competitor Abuse of the process
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Antitrust immunities are limited to specific behavior.
37 Antitrust Immunity Noerr-Pennington immunity Seeking government action – First Amendment basis State action and “implied” immunity Complying with government requirement Government officials performing non-commercial duties Antitrust immunities are limited to specific behavior.
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Trade Association Meetings
38 Trade Association Meetings Good meeting practices Agenda Transparency Minutes Civility Awareness of antitrust issues
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Penalties are Severe Companies fined hundreds of millions
39 Penalties are Severe Companies fined hundreds of millions Companies can lose its right to do business with state and federal agencies. Companies may lose its opportunity to bid for federal or state contracts. Individuals can receive prison sentences. Trade associations can be fined,and lose their charter.
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Antitrust Risk Management
40 Antitrust Risk Management Always comply with the law Avoid ambiguous contacts with competitors Understand your competitive position Use antitrust analysis in strategic planning When in doubt, contact your legal counsel
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INTRO TO ANTITRUST LAW Robbyn Wysocki Wysocki Legal Group 972-702-6061
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