 “Market power” is the power of company to control the market for its product.  The law does allow for market monopolies when a patent is issued. During the “monopoly” the patent owner is protected from competition in the market to manufacture and sell its patented product or service. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

 Market power per se is not “bad.”  What is bad or illegal is how the market power is acquired and what firms do once they have that power.  Antitrust laws regulate the market power of companies to promote competition. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

 Competitive Behavior.  Goals of Antitrust Law. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

 Socially beneficial business activity involves cooperation and competition.  Public Policy and Contracts.  The law presumes freedom of contract, except when a contract is contrary to public policy, like price fixing and restraint of trade.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

 Public Policy and Contracts.  Economic Efficiency: public policy encourages competition and freedom of contract.  Restraints of Trade. Some agreements may reduce competition and may be illegal under the common law.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

 Interference with Free Trade.  Restraint (or antitrust law) is the means the government uses to promote competition and choice in the market place. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

 Trend Towards Monopoly.  In the late 1800’s, companies like Standard Oil (Rockefeller) became “trusts” which began to control the entire market.  The common law was impotent to deal with the industrial age.  Thus Congress dealt with expansion with “anti-trust” legislation.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

 Congress responded with the following federal statutes:  Interstate Commerce Act of 1887 and the Sherman Act of  The Clayton Act.  The Federal Trade Commission Act, authorized to prevent and correct unfair trade practices. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

 The Sherman Act:  Section 1. Requires two or more persons, as a person cannot contract, combine, or conspire alone. Concerned with finding an agreement.  Section 2. Applies both to an individual person and to several people, because it refers to every person. Deals with the structure of monopolies in the marketplace. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

 The Sherman Act:  Restraint of trade is any agreement between firms that has the effect of reducing competition in the marketplace.  Jurisdictional Requirements: only applies to restraints that have a significant impact on interstate commerce. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

 In contrast to the Sherman Act, the Clayton Act deals with very specific practices:  Price Discrimination: When sellers charge different buyers different prices for the same goods.  Exclusionary Practices: no exclusive-dealing or “tie-in” sales agreements. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

 Corporate Mergers: forbidden if it substantially lessens competition.  Interlocking Directorates: director on company “X” sitting on board of company “Y” of competing companies is forbidden. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

 The FTC’ sole substantive area is “unfair methods of competition” or “deceptive acts or practices” affecting commerce.  The FTC Act is a “catchall.” © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

 Agency Actions.  The DOJ enforces the Sherman Act.  DOJ or FTC can ask the courts to impose various remedies, including divestiture.  FTC has sole authority to enforce violations of Section 5 of the FTC Act. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

 Under the Clayton Act a private party can sue for treble damages (3 times the damages she has suffered) plus attorney’s fees. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

 Under the Sherman Act, the Plaintiff must show:  Defendant’s antitrust violations directly or indirectly caused injury; and  Defendant’s actions affected protected interests of the Plaintiff. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

 Treble Damages.  Private plaintiffs may recover up to three times damages for violations.  In price-fixing arrangements, defendants are jointly and severally liable. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

 Exemptions from Antitrust.  CASE 27.1 Clarett v. National Football League (2004). Why did the plaintiff claim the eligibility rules were an unreasonable restraint of trade? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

 Extraterritorial Application of U.S. Antitrust Laws.  Any foreign business conspiracy that has a substantial effect on U.S. commerce is within reach of the Sherman Act.  U.S. jurisdiction is automatically invoked when a per se violation occurs. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

 Application of Foreign Antitrust Laws. U.S. firms may be subject to antitrust laws of other nations if the firm has a substantial effect.  European Union Enforcement.  Increased Enforcement in Asia and Latin America. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

 Section 2 of the Sherman Antitrust Act deals with:  Monopolization or attempts to monopolize; and  Predatory pricing which is an attempt by a firm to drive its competitor from the market by selling its product at prices substantially below the normal costs of production. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

 The U.S. Supreme Court has defined “monopolization” as: the possession of monopoly power; and the willful acquisition and maintenance of the power.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23

 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. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24

 Relevant Product Market.  CASE 27.2 Newcal Industries, Inc. v. IKON Office Solutions (2008). What factors did the court consider in finding a relevant market existed?  Relevant Geographic Market. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25

 Intent Requirement:  Anticompetitive behavior must be “willful acquisition of power.”  Intent may be inferred from evidence that the firm had monopoly power and engaged in anticompetitive behavior. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26

 Unilateral Refusals to Deal.  Joint refusals to deal (group boycotts) are given close scrutiny.  Unilateral refusals to deal violate the Sherman Act if: the firm refusing to deal has (or is likely to acquire) monopoly power, AND the refusal is likely to have an anticompetitive effect on a particular market. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 27

 Acts intended to exclude competitors and garner monopoly power, and had a “dangerous” probability of success.  CASE 27.3 Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. (2007). What does predatory pricing have to do with this case? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28