Law Antitrust - Instructor: Dwight Drake Scenario 1: Basic Facts Year: 1893 Location: Cleveland, Ohio Two major cement contractors – Smith and Jones They contract: Smith handles all north town business; Jones handles all south business Goal: To protect their businesses Larson – Large building contractor in south end doesn’t like Jones’ south-end monopoly

Law Antitrust - Instructor: Dwight Drake Scenario 1 In 1893, what would have been best arguments on behalf of Smith and Jone’s position? In 1893, what would have been best arguments on behalf of Larson’s position?

Law Antitrust - Instructor: Dwight Drake Scenario 3 In 1904, what would have been best arguments against Smith/Jone’s position? In 1904, what would have been best arguments in support of Smith/Jone’s position?

Law Antitrust - Instructor: Dwight Drake Pro 1893 Smith-Jones Arguments Historical background of Sherman Act: Huge trusts that punished masses Legislative intent of Sherman Act: Not clear, but big trust focus No authority under “commerce clause” Common law – “unreasonableness” showing required Freedom to contract – fundamental liberty

Law Antitrust - Instructor: Dwight Drake Pro 1893 Larson Arguments Clear words of statute Lack of clear legislative intent Uncertainties of “reasonableness” Congress, not court, is source for new conditions

Law Antitrust - Instructor: Dwight Drake E.C Knight Company Decided 1895 – First monopoly case American sugar bought four refiners and had U.S. monopoly. All in Penn. Government challenged. Supreme court affirmed dismissal. C.J. Fuller: Not interstate commerce. State, not Fed, issue.

Law Antitrust - Instructor: Dwight Drake Trans-Missouri Freight Railroad competitors set freight rates to protect each other. Majority (Peckman): No intent or reasonableness defense – all direct retrain agreements bad. Dissent (White): Liberty of contract, freedom of trade real purpose. Law against a few used to hurt many. Rule of reason should be standard. Railroad rate wars are ruinous.

Law Antitrust - Instructor: Dwight Drake Questions re: Trans-Missouri Freight Is price fixing ever good? Did railroad rate case make it harder for majority? For dissent? What are liberty of contract, freedom of trade? What are the sources of these rights? What is protectionism? Is it part of antitrust? Should it be?

Law Antitrust - Instructor: Dwight Drake Scenario 2: Basic Facts Year: 1900 Smith – Jones division contract expanded to four states Smith – Jones shared a portion of profits, made joint investments and rose to the level of a common law partnership Any new arguments?

Law Antitrust - Instructor: Dwight Drake Addyston Pipe & Steel th Circuit Taft Decision Cast iron pipe carter to control prices in key states Defendants’ arguments: - Members of association - No monopoly - Not all states – only partial restraints - Restraints reasonable to prevent ruinous competition - Other competitors existed outside cartel. - Public not injured when only ruinous competition stopped.

Law Antitrust - Instructor: Dwight Drake Questions: Addyston Pipe & Steel What percent of market? Did they set unreasonable prices? Was this relevant to decision? What is the difference between primary and ancillary restrain, per Taft? What was impact of common law? What is impact of public interest factor?

Law Antitrust - Instructor: Dwight Drake Taft’s Ancillary Restraints Non-compete from business seller Retiring partner non-compete Partners non-compete with other partners Non-compete from partial business buyer Employee non-comp covenants Contrast with “Naked Restraint”

Law Antitrust - Instructor: Dwight Drake Scenario 3: Basic Facts Year 1904 Smith-Jones form New Jersey holding company Smith-Jones consolidate through holding company. Smith-Jones acquire 10 other firms through holding company Divide market in 15 states