Federal gov may regulate business for any reason as long as advances gov economic need

States may regulate business as long as the laws do not interfere with interstate commerce or federal government activities.

1980 Federal government broke up Ma Bell because it acted like a monopoly

Enforcement Powers- 3 ways

1. US Department of Justice – can prosecute violations of the Sherman Act as criminal or civil.

2. FTC – enforces the Clayton Act. Can seek court sanctions for violations or cease and desist orders

3. Private actions can sue for damages and attorney fees.

Overview of Antitrust LawsCongress passed Sherman Act first and made violations automatic.

Federal Trade Commission Act and Clayton Act were passed to prevent unlawful mergers and anticompetitive business behavior.

Both are to protect consumers by encouraging businesses to operator efficiently.

The Sherman Act Section 1 prohibits all agreements “in restraint

of trade.” PRICE FIXING

• When competitors agree on the prices at which they will buy or sell products, their price-fixing is a per se violation.

• Prices should be set by market – not Companies.

Per Se Violation

It is a “per se” violation –Means no defense -

AUTOMATIC violation

Apple - Ebooks

RX ManuManufacture (A) of Cardizem was about to lose patent and another company (B) had developed a generic version. Lawsuit between them so A agreed to pay B $40 million per year NOT to market the generic.

PER SE violation

II. Predatory PricingPredatory pricing occurs when a

company lowers its prices below cost to drive competitors out of business.

To prove predatory pricing, show:• The defendant is selling its products below

cost.• The defendant intends that the plaintiff

goes out of business,

Predatory Pricing

Example – a large store (ie Walmart) comes into town offering very low prices so that loss is subsidized by other stores.

Difficult for Ma and Pa stores to show that Megastore will be able to make up its lost profits once the Ma Pa is out of the way.

Tying of Products

Section 1 of the Sherman Act prevents tying of product.

A tying arrangement is an agreement between a seller and a buyer where the seller agrees to sell a product or service (the tying product) to the buyer only on the condition that the buyer also purchases a different (or tied) product from the seller or the buyer agrees not to purchase the tied product from any other seller. 

Tying arrangements can be used to tie services, leases, franchises, licenses to intellectual property, or combinations of any of those things.

See Eastman Kodak v. Image Technical Services, Inc., 504 U.S. 541 (1992).

Plaintiffs included 17 small independent service organizations who alleged Kodak had illegally monopolized the aftermarket for maintenance services on Kodak high volume copiers and micrographics (microfilm) equipment.

Plaintiffs alleged Kodak used its control of repair parts to harm competition in the aftermarket for maintenance services.

Section 2 Sherman ActSection 2 of the Sherman Act forbids monopoly. The act is not meant to punish businesses that come to dominate their market passively or on their own merit, only those that intentionally dominate the market through misconduct, which generally consists of conspiratorial conduct of the kind forbidden by Section 1 of the Sherman Act

Monopoly Power:Refers to control of a specific market by

a single entity.But a firm may be monopolistic even

though it is not the only entity.May be proved by direct and indirect

evidence.

Monopolization

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Example 1. Does the company control the

market. – must exclude competitors or control prices

2. How did the company acquire or maintain control – using bad acts to get a monopoly. Microsoft insisting windows operating on each computer

The Clayton ActThe Clayton Act prohibits mergers that are anticompetitive. –

The government reviews mergers

FTC reviews over 1000 mergers a year.

The Clayton Act

Mergers: forbidden if it substantially lessens competition.

American Airlines and US Airways -huge merger, a deal that was worth $14 billion on paper and would create the world's biggest airline.

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Robinson Patman Act amends Clayton Act

The act requires a business to sell its products at the same price regardless of who the buyer is and was intended to prevent large-volume buyers from gaining an advantage over small-volume buyers.

Robinson Patman Act amends Clayton Act

The act only applies to sales of tangible goods that are similar in quality.

The act does not apply to the provision of services such as cell phone service, cable TV and real estate leases.

The Robinson-Patman ActPrice Discrimination

• It is illegal to charge different prices to different purchasers if:–the items are the same, and–the price discrimination lessens competition.

• MUST HAVE A GOOD REASON TO charge a lower price to a particular buyer.

Robinson PatmanThe Robinson-Patman Act does not require, for example, that Wholesale Company ABC and Wholesale Company XYZ both sell 32" flat screen televisions to all big box retailers for $250 per television.

What it does require is that if Wholesale Company ABC sells 32" flat screen televisions of equal quality to Target on August 10 and to Mom and Pop's Shop on August 11, that Target and Mom and Pop's Shop are each charged $250 per television.