© 2014 Routledge, Inc., Taylor and Francis Group. All rights reserved. PowerPoint Presentation Design by Charlie Cook CHAPTER 10 Law Interpreting, Antitrust, and Judiciary Strategies © Routledge

Learning Outcomes After studying this chapter, you should be able to: 1.Compare and contrast four antitrust laws 2.Compare and contrast acquisitions and mergers 3.Describe the different types of mergers 4.Discuss antitrust enforcement and merger investigation guidelines 5.Explain merger investigation guidelines 6.Describe the types of laws, lawsuits, courts, and court functions 7.Define the key terms in this chapter

© Routledge Antitrust Laws Objectives of Antitrust Laws To protect competition To protect consumers To protect small business from large business

© Routledge Figure 10.1Antitrust Laws The Sherman Act (1890) Antitrust Improvement Act (1976) The Clayton Act (1914) Federal Trade Commission Act (1914) Preserving capitalism by protecting competition to benefit consumers Preserving

© Routledge The Clayton Act (1914) Anticompetitive mergers Tying contracts Price discrimination Interlocking boards of directors Defining anticompetitive practices

Acquisition or Merger? AcquisitionAcquisition  Is the purchase of a larger (or smaller) firm by a smaller (or larger) firm by acquiring all of its stock. MergerMerger  Occurs when two relatively equal sized firms combine to form a new firm. Hostile TakeoversHostile Takeovers  Occur when a firm does not want to be acquired, but the acquirer makes an unsolicited offer to buy the outstanding shares of the firm for more than the current stock market price. © Routledge

Consequences of Mergers and Acquisitions Increased debt equity Closure of unneeded facilities Increased economics of scale Lower prices to consumers Loss of jobs and employees

© Routledge Figure 10.2Types of Mergers Horizontal mergers Conglomerate merger Vertical mergers Nondirect competitor horizontal merger Restrain tradeRestrain trade Fix pricesFix prices Create monopolyCreate monopoly Restrain tradeRestrain trade Fix pricesFix prices Create monopolyCreate monopoly Backward or forward vertical mergers Refusal to dealRefusal to deal Exclusive dealingExclusive dealing Exclusive territoryExclusive territory Resale price maintenanceResale price maintenance Tying contractsTying contracts Refusal to dealRefusal to deal Exclusive dealingExclusive dealing Exclusive territoryExclusive territory Resale price maintenanceResale price maintenance Tying contractsTying contracts Specialized conglomerate Government approvalGovernment approval Elimination of potential competitorsElimination of potential competitors Government approvalGovernment approval Elimination of potential competitorsElimination of potential competitors

© Routledge Figure 10.3Supply Chain Raw materials DistributorDistributorManufacturerManufacturerSupplierSupplierWholesalerWholesalerRetailerRetailerCustomerCustomerConsumerConsumer Backward and forward vertical mergers

© Routledge Figure 10.4Antitrust Enforcement Department of Justice (DOJ) Federal Trade Commission (FTC) Department of Justice (DOJ) Federal Trade Commission (FTC) Investigations, settlements, and lawsuitsInvestigations, settlements, and lawsuits Guidelines and adviceGuidelines and advice Prevent or allow mergersPrevent or allow mergers Investigations, settlements, and lawsuitsInvestigations, settlements, and lawsuits Guidelines and adviceGuidelines and advice Prevent or allow mergersPrevent or allow mergers Private citizens, NGOs, and companies LawsuitsLawsuits State attorneys general InvestigationsInvestigations LawsuitsLawsuits InvestigationsInvestigations LawsuitsLawsuits Federal Courts Litigation determinationLitigation determination Law interpretationLaw interpretation PrecedentsPrecedents Consent decreesConsent decrees Litigation determinationLitigation determination Law interpretationLaw interpretation PrecedentsPrecedents Consent decreesConsent decrees

© Routledge Figure 10.5Investigating Merger Factors Market definition and concentration What specific products and geographic areas are affected by the merger and what market share will the merged firm have?What specific products and geographic areas are affected by the merger and what market share will the merged firm have? Competitive effects Will adequate competition continue and will consumer prices increase?Will adequate competition continue and will consumer prices increase? Market entry How easy is it for new competitors to enter the market?How easy is it for new competitors to enter the market? Efficiency gains and consumer benefits How will the merged company be more efficient, and how will it lower prices and increase customer service?How will the merged company be more efficient, and how will it lower prices and increase customer service?

© Routledge Judicial Concepts Common (precedent) law Legislative checks and balances Federal laws State and local laws Judicial constitutional review

© Routledge Court Functions Major functions of the judicial system Law interpretation (judicial review) Litigation outcome determination Protection of the rights of individuals

© Routledge Types of Lawsuits Individual or class action lawsuits Criminal lawsuits Civil lawsuits Public lawsuits

© Routledge Figure 10.6The Federal Courts Supreme Court – U.S. Supreme Court Appellate Courts – U.S. Court of Appeals ■ 12 Regional Circuit Courts of Appeals ■ 1 U.S. Court of Appeals for the Federal Circuit Trial Courts – U.S. District Courts ■ 94 Judicial District Courts ■ U.S. Bankruptcy Court – U.S. Court of International Trade – U.S. Court of Federal Claims Federal Courts and Other Entities Outside the Judicial Branch – U.S. Tax Court – Military Courts (trial and appellate) – Court of Veterans Appeals

© Routledge State and Local Courts State Supreme Court State Court of Appeals State General Trial Courts Local Courts

Business Nonmarket and Market Strategies and Ethics Information StrategiesInformation Strategies  Get advice and information from consultants, outside sources, experts, and stakeholders’ support Societal StrategiesSocietal Strategies  Build coalitions with activists  Develop good media relations Political StrategiesPolitical Strategies  Campaign contributions  Lobbying © Routledge

Judiciary Strategies: Lawsuits Reasons for Filing LawsuitsReasons for Filing Lawsuits  To enforce rights  To obtain damages  To correct unfair competitive practices Cost-benefit Analysis for LawsuitsCost-benefit Analysis for Lawsuits  Using settlements to avoid damages  Trying as opposing defendants to avoid damages Charge Categories for Antitrust LawsuitsCharge Categories for Antitrust Lawsuits  Per se (illegal) violations  Rule of reason violations © Routledge

Filing Lawsuits Consumers vs. Business Business vs. Government Government vs. Business Business vs. Business Types of Lawsuits

© Routledge Key Terms acquisition Antitrust Improvement Act antitrust laws civil lawsuits Clayton Act common law conglomerate mergers consent decrees criminal lawsuits director interlock Federal Trade Commission Act horizontal mergers judicial review legal precedents merger predatory pricing price discrimination price-fixing public lawsuits Sherman Act tying contracts vertical mergers