Bài giảng Business Law (13th edition) - Chapter 49: Antitrust: The Sherman Act

Regulation of BusinessAdministrative AgenciesThe Federal Trade Commission Actand Consumer Protection LawsAntitrust: The Sherman Act11McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Regulation of BusinessThe Clayton Act,The Robinson-Patman Act, andAntitrust Exemptions and ImmunitiesEmployment LawEnvironmental Regulation11McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Antitrust: The Sherman ActPAETRHC49“Monopoly is a terrible thing, till you have it.”Rupert Murdoch,The New Yorker (1979)Learning ObjectivesThe Antitrust policy debateJurisdiction, types of cases, and standingSection 1 – Restraints of TradeSection 2 -- Monopolization49 - *The antitrust laws – Sherman Sherman Act, Clayton Act, Robinson-Patman Act – reveal public policy for promoting free competition as most efficient means to allocate resourcesFederal antitrust laws apply only to business behavior having some significant impact on interstate or foreign commerceEasy standard to meetOverview & Jurisdiction49 - *Sherman Act violations may lead to criminal prosecutions or civil litigation by federal government through Department of JusticeTo get a conviction, government must prove anticompetitive effect resulted from alleged misconduct and defendant’s criminal intentCivil cases require proof of anticompetitive effect or an unlawful purposeThe Cases49 - *Section 1 of the Sherman Act states that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations is declared to be illegal.”Section 1: Concerted Action49 - *Sherman Act applies only to behavior that unreasonably restrains competitionPer se violations conclusively presumed to violate Sherman Act § 1 because actions always have a negative effect on competitionCannot be excused or justified Rule of reason violations require detailed inquiry into actual competitive effects of defendant’s actions, including defensesNo violation if no anticompetitive effectAnalysis of Unreasonable49 - *Attempts by competitors to alter market forces by price control are per se illegal Horizontal: direct agreements among competitors about price or quantity of goods to be produced, offered for sale, or boughtVertical: attempt by manufacturer to control resale price (resale price maintenance) by requiring dealer to resell product at price dictated by manufacturerPrice-Fixing49 - *Agreements among competitors to divide up an available market by allocating territories or certain customers are illegal per seCourts distinguish naked restraints (no other purpose than to restrain competition) from ancillary restraints that are essential part of larger joint undertaking serving competitionExample: exclusive dealerships acceptableDivision of Markets49 - *A firm may refuse to deal with certain firms as a unilateral actionAgreements by two or more businesses to refuse to deal with others, deal with others only on certain terms and conditions, or coerce suppliers or customers not to deal with a competitors are joint restraints on trade and illegalBoycotts and Refusals to Deal49 - *Seller who refuses to sell a buyer one product (tying product) unless buyer also agrees to purchase different product (tied product) may have violated both § 1 of the Sherman Act and § 3 of the Clayton ActElements : two distinct products, both must be purchased, seller has market power, tied product important to seller’s businessTying Agreements49 - *Reciprocal dealing agreement: buyer exploits its purchasing power by making its purchases from suppliers conditional on reciprocal purchases (seller must purchase buyer’s products)Exclusive dealing agreement: seller requires buyer to buy product only from sellerEither agreement is illegal if market power is anticompetitiveDealing Agreements49 - *Sherman Act § 2 prohibits monopolization:Willful acquisition or maintenance of monopoly power in relevant market rather than monopoly as a consequence of superior product, business acumen, or accidentHaving a monopoly is not illegal, but act of monopolization is illegalThus intent to monopolize is a key elementSee U.S. v. MicrosoftMonopolization49 - *Test Your KnowledgeTrue=A, False = BThe three antitrust laws are the Sherman Act, Clayton Act, and Pricing Act.Section 1 of the Sherman Act prohibits concerted action in restraint of trade. Per se violations are conclusively presumed to violate § 1 of the Sherman Act.Using a rule of reason approach, conduct violates § 1 if a minimum anticompetitive effect occurs.49 - *Test Your KnowledgeTrue=A, False = BIf competitors alter market forces by horizontal price control, it is per se illegal. Agreements among competitors to divide up an available market by allocating territories is legal unless it destroys competition.A firm may refuse to deal with certain firms as a unilateral action.Having a monopoly is not illegal.49 - *Test Your KnowledgeMultiple ChoiceZyco will not sell to buyers unless they agree to buy their products exclusively from Zyco. Has Zyco violated antitrust law? (a) No, since freedom of contract is allowed(b) Zyco’s exclusive dealing agreement is illegal only if Zyco’s market power is anticompetitive (c) Zyco’s exclusive dealing agreement is per se illegal49 - *Test Your KnowledgeMultiple ChoiceThe elements of monopolization include: (a) Exclusive dealing agreements(b) Monopoly power(c) Willful anticompetitive conduct(d) all of the above(e) B and C only49 - *Thought QuestionsDoes America have a free market system?In the antitrust debate, are you a traditional theorist or a Chicago School theorist?Do you agree with the Microsoft ruling?49 - *