1. Essentials of the legal environment today, 5e
ROGER LEROY MILLER
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2. Antitrust law and promoting competition
CHAPTER 19
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3. Learning Objectives
What is a monopoly? What is market power? How do these concepts relate to each other?
What anticompetitive activities are prohibited by Section 1 of the Sherman Act?
What type of activity is prohibited by Section 2 of the Sherman Act?
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4. LEARNING OBJECTIVES (CONT’D)
What are the four major provisions of the Clayton Act, and what types of activities do these provisions prohibit?
What agencies of the federal government enforce the federal antitrust laws?
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5. Introduction Laws regulating economic competition in the United States
Embodied almost entirely in
Sherman Antitrust Act
Clayton Act
Federal Trade Commission Act
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6. 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
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7. The Sherman Antitrust Act
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
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8. Exhibit 19.1
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9. The Sherman Antitrust Act
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.
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10. 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
LO-2
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11. Section 1 of the Sherman Act
Horizontal Restraints
Restrains competition between rival firms competing in same market
Price fixing
Group boycotts
Horizontal market division
Trade associations
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12. Section 1 of the sherman act
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
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13. Section 2 of the sherman act
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
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14. Section 2 of the sherman act
Attempts to Monopolize
Proof of
Anticompetitive conduct
Specific intent to exclude competitors and garner monopoly power
A “dangerous” probability of success in achieving monopoly power
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15. 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 discrimination
LO-4
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16. 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
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17. 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
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18. The clayton act Section 8—Interlocking Directorates
The practice of having individuals serve as directors on the boards of 2+ competing companies simultaneously.
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19. 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
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20. Enforcement and exemptions
Enforcement by Private Parties
Can sue for treble damages
Under Sherman Act must prove
The antitrust violation either caused or was a substantial factor in causing the injury that was suffered.
The unlawful actions of the accused party affected business activities of the plaintiff that were protected by the antitrust laws.
Exemptions from Antitrust Laws
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21. Exhibit 19.2
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22. 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
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23. 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.
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