1. Chapter 20 Antitrust and Regulation of Competition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. 20-2 Background, Purpose, and Source of Antitrust Law Antitrust laws are federal statutes and the agencies charged with enforcement of these laws are the Department of Justice and the Federal Trade Commission. Violators of antitrust laws are subject to both civil penalties and criminal sanctions, including incarceration.

3. 20-3 Sherman Antitrust Act Sherman Act is divided into two parts: First, the act provides prohibitions against restraints of trade. The Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” The second part of the act covers monopolization. The Sherman Act provides a remedy against “[e]very person who shall monopolize, or attempt to monopolize... any part of the trade or commerce among the several States

4. 20-4 Rule of Reason Under this standard, a business alleged to have committed a violation may offer evidence that their actions were reasonable because they were justified and necessitated by economic conditions.

5. 20-5 Per Se Sherman Act Violations: Restraints The U.S. Supreme Court and other federal appellate courts have developed a body of case law that deems certain actions or transactions as a per se, or automatic, violation of the Sherman Act.

6. 20-6 Horizontal Restraints Meeting of the Minds Price-fixing Market Allocation Boycotts

7. 20-7 Vertical Restraints Vertical price-fixing occurs when a seller attempts to control the resale price of a product at a lower level in the supply chain.

8. 20-8 Nonprice Restraints The per se standard does not apply to nonprice vertical restraints. Rather, a court applies the rule of reason standard (discussed earlier in this section). Vertical restraints that do not involve price-fixing generally refer to some type of restraint on the distribution of a product in the marketplace.

9. 20-9 Tying Agreements Tying agreements occur when a seller refuses to sell a certain product (the tying product) unless the buyer also purchases a different product (the tied product) from the seller. Typically, this occurs where a seller has a substantial share of the market for the tying product, and is attempting to leverage the power of the tying product to gain market share for another of the seller’s products.

10. 20-10 Antitrust Law and Professional Sports One particularly difficult question under antitrust law is whether professional sports leagues, such as the National Football League, are a legitimate joint venture or whether sports leagues are a conspiracy to restrain trade that is prohibited by the Sherman Act.

11. 20-11 Monopolization The Sherman Act does not prohibit a business entity from becoming a monopoly, but it does outlaw affirmative action toward monopolizing or attempting to monopolize a part of trade or commerce.

12. 20-12 Clayton Act The Clayton Act (and its amendments) curb certain anticompetitive practices that are not specifically covered by the Sherman Act.

13. 20-13 Mergers and Acquisitions The Clayton Act was designed to prevent this monopoly strategy. The act prohibits business entities from acquiring the stock or assets of their competitors where the action will substantially lessen competition or tend to create a monopoly.

14. 20-14 Hart-Scott-Rodino Act Preventative statute that requires business entities that are contemplating mergers involving dollar amounts of a certain size to give advance notice to the FTC and the Department of Justice of their intention.

15. 20-15 Robinson-Patman Act Enacted in 1936, amended the Clayton Act provisions to provide for broader regulatory authority to curb price discrimination To violate law, a business entity must have made two or more sales to different purchasers at different prices. This means that quoting a discriminatory price or refusal to sell except at a discriminatory price are not violations of the act.