1. U.S. Antitrust Policy: Cartels, Consumer Welfare and International Convergence University of La Rochelle 27 Janvier, 2006 John S. Martin Fulbright Visiting Lecturer University of Toulouse johnsmartin@mac.com

3. Purpose of U.S. Competition Law? Social/Political: [M]ost men are the servants of corporations.... By tyranny, as we now fight it, we mean control of the law, of legislation and adjudication, by... special bodies of capital and those who organize their use. (Woodrow Wilson (1914)) Small business: “ local control over industry and the protection of small business. ” Accept “ higher costs and prices [that] might result from... maintenance of fragmented industries and markets. ” (Brown Shoe (1962)) Indecision: “ I do not believe the debate over the purposes of antitrust laws has been settled yet. ” Rothery Van Lines (1986)) Consumer welfare: prevent the acquisition or exercise of ‘ market power ’” (Kovacic (2002))

4. Economic terms Market power -- ability to raise prices above competitive levels Consequences of market power –Wealth transfer –Allocative efficiency loss Output reduction Deadweight loss “Not high profits but a quiet life”

5. Monopoly profits: incentive to compete “the successful competitor, having been urged to compete, must not be turned upon when he wins” (Alcoa 1945) “The opportunity to charge monopoly prices--at least for a short period--is what attracts "business acumen" in the first place” (Trinko 2004)

6. When does the harm of market power outweigh its incentive benefits? Collusion with no benefit –Cartel –Other conduct Horizontal merger –If it creates market power without offsetting efficiencies Dominant position –If it is achieved through anticompetitive conduct

7. Sherman Act Section 1: “ Every contract, combination... or conspiracy, in restraint of trade ” Clayton Act: Merger whose effect is to “ substantially lessen competition or tend to create a monopoly ” Sherman Act Section 2: “ Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize ”

8. Naked vs. Ancillary Collusion Naked: Cartels, market allocation, agreement not to compete Ancillary: Joint venture –“ Cooperation is the basis of productivity. It is necessary for people to cooperate in some respects before they may compete in others, and cooperation facilitates efficient production. ” (Polk Brothers)

9. EU/US Debates GE/Honeywell Microsoft Merger Guidelines Revisions (SLC v. SIEC) Civil Actions