1. 1 The common law Sherman Act (1890) Clayton Act (1914) § 1 Sherman Act, 15 U.S.C. § 1 Trusts, etc., in restraint of trade illegal; penalty Every 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. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

2. 2 § 2 Sherman Act, 15 U.S.C. § 2 Monopolizing trade a felony; penalty Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

3. 3 § 2 Clayton Act, 15 U.S.C. §§ 132 Discrimination in price, services, or facilities (a) Price; selection of customers It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered:

4. 4 § 2 Clayton Act, (b) Burden of rebutting prima-facie case of discrimination Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.

5. 5 § 3 Clayton Act, 15 U.S.C. § 14 Sale, etc., on agreement not to use goods of competitor It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

6. 6 § 4 Clayton Act, 15 U.S.C. § 15 Suits by persons injured (a) Amount of recovery; prejudgment interest Except as provided in subsection (b) of this section, any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

7. 7 § 6 Clayton Act, 15 U.S.C. § 17 (not in packet) Antitrust laws not applicable to labor organizations The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.

8. 8 §7 Clayton Act, 15 U.S.C. § 18 (not in the packet) Acquisition by one corporation of stock of another No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

9. 9 Merger Guidelines 1968 Guidelines– no two companies with 5% market share allowed to merge 1982 Guidelines—much more lenient and rational. They are still in place. Justice Dept. Antitrust Division; Federal Trade Commission “Prosecutorial Discretion”

10. 10 White: 1982 Merger Guidelines “the appropriate or relevant market for merger analysis should generally be the smallest group of sellers that, if they coordinated their actions, could successfully (profitably) exercise market power -- e.g., by raising prices by a small but significant amount and sustaining that higher level for a significant period of time. To be successful, this effort at collective exercise of market power would not be thwarted by a sufficient number of buyers switching away to sellers of substitute products or to sellers of the same product located elsewhere. In essence, a relevant market is one that can be successfully monopolized.” Problem for applying to monopoly or cartel, as opposed to pre-merger: “the cellophane fallacy”. Dupont said it had only a small share of flexible wrapping materials in 1956, with cellophane. But that was because its price was high. Optimal monopoly pricing: till demand gets elastic enough.

11. 11 the remainder of the Guidelines... 1. Were the merger partners selling in the same market(s)? 2. What would be the post-merger level of overall seller concentration in each relevant market, measured in terms of the Herfindahl-Hirschman Index (HHI)?. What changes in seller concentration would occur as a consequence of the merger? 4. How easy is entry? 5. Are there other characteristics of the market -- the nature of the product, the numbers and types of buyers, the histories and characteristics of the sellers -- that would make the post-merger exercise of market power more or less likely? 6. And, in the spirit of Williamson (1968), are there readily identifiable efficiencies that would arise from the merger that would provide a sufficient offset to any perceived likelihoods of the exercise of market power.

12. 12 U.S. v. Virginia National Bankshares, Inc., 1982-2 Trade Cases 64,871. Antitrust Division lost. Two medium-sized banks in Virginia. F.T.C. v. Staples, 970 F. Supp. 1066. Staples and Office Depot. Small market share of office supplies. “Where Staples or Office Depot was alone in a metropolitan area, its prices tended to be higher than when a second OSS was also selling in the area, and prices were lower still when a third OSS (Office Max) was in the area.” Dreyer’s Ice cream merger

13. 13 Vertical Restraints 1. Resale Price Maintenance per se illegal in 1980 and now, except for 1997 exception for max. RPM. (Maximum, minimum) Why? Telser (1960) explanation– prevent free riding. Other explanations? --cartel leader, various. The Reagan Division stopped bringing RPM cases. Entered amicus brief for defendant in a civil case. Congress passed a law specially to stop Justice from arguing in favor of RPM in oral argument in Monsanto case. 2. Vertical integration, foreclosure 3. Exclusive dealing, foreclosure 4. Tying, foreclosure 1985 Vertical Restraint Guidelines--- not as useful. Too much disagreement, too many special circumstances. Withdrawn in 1993 (Clinton).