1. The University of Chicago
11/15/2018
Class 3 Antitrust, Winter, Market Power Intro, Characterizing Horizontal Agreements
Randal C. Picker
James Parker Hall Distinguished Service Professor of Law
The Law School
The University of Chicago
Copyright © Randal C. Picker. All Rights Reserved.

2. Lorain Journal (US, 1951) Key Facts
11/15/2018
Lorain Journal (US, 1951)
Key Facts
1932: Lorain Journal buys Times-Herald, only daily newspaper competition
Sunday-News left as chief print competition
: Local monopoly in distribution of news and ads
1948: Radio station WEOL starts
November 15, 2018

3. Lorain Journal (US, 1951) Key Facts
11/15/2018
Lorain Journal (US, 1951)
Key Facts
Journal starts exclusivity policy: us or them
District court enjoined program
November 15, 2018

4. Two Questions What is the Right Definition of the Market?
11/15/2018
Two Questions
What is the Right Definition of the Market?
Did We See an Output Restriction?
November 15, 2018

5. Position of Lorain Journal
November 15, 2018
Casebook Draft

6. Other Newspapers
November 15, 2018
Casebook Draft

7. WEOL Radio Station
November 15, 2018
Casebook Draft

8. WEOL Radio Station
November 15, 2018
Casebook Draft

9. Understanding the Market
11/15/2018
Understanding the Market
Newspapers
Lorain Journal: Mon to Sat: 13,000 copies
Sunday News: Sun only: 3000 copies
Cleveland Plain Dealer, News and Press: Mon to Sat: 6000 copies in Lorain
Cleveland Sunday Plain Dealer: 11,000 copies in Lorain
Radio: WEOL
November 15, 2018

10. 11/15/2018
Analysis
Limits on unilateral right to refuse to deal, but not if purpose is to maintain or create monopoly
Business justifications for conduct?
Alternatives
Volume Discounts?
November 15, 2018

11. Jury Instructions Refused
“In particular the court refused the request to charge the following: ‘The essence of the law is injury to the public. It is not every restraint of competition and not every restraint of trade that works an injury to the public; it is only an undue and unreasonable restraint of trade that has such an effect and is deemed to be unlawful.’”
November 15, 2018
Trenton Potteries (US 1927)

12. Jury Instruction Given
“This disposition of the matter ignored the fact that the trial judge plainly and variously charged the jury that the combinations alleged in the indictment, if found, were violations of the statute as a matter of law, saying:”
November 15, 2018
Trenton Potteries (US 1927)

13. Jury Instruction Given
“ ‘. . . the law is clear that an agreement on the part of the members of a combination controlling a substantial part of an industry, upon the prices which the members are to charge for their commodity, is in itself an undue and unreasonable restraint of trade and commerce; . . .’”
November 15, 2018
Trenton Potteries (US 1927)

14. Sup Ct Holding
“The charge of the trial court, viewed as a whole, fairly submitted to the jury the question whether a price-fixing agreement as described in the first court was entered into by the respondents.”
November 15, 2018
Trenton Potteries (US 1927)

15. Sup Ct Holding
“Whether the prices actually agreed upon were reasonable or unreasonable was immaterial in the circumstances charged in the indictment and necessarily found by the verdict. The requested charge which we have quoted, and others of similar tenor, while true as abstract propositions, were inapplicable to the case in hand and rightly refused.”
November 15, 2018
Trenton Potteries (US 1927)

16. Modes of Analysis Per Se: Categories of Illegal Conduct
11/15/2018
Modes of Analysis
Per Se: Categories of Illegal Conduct
Rule of Reason: Categories of Examined Conduct
November 15, 2018

17. Per Se Illegality
“Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.”
November 15, 2018
Socony-Vacuum Oil (US 1940)

18. Per Se Illegality
“Where the machinery for price-fixing is an agreement on the prices to be charged or paid for the commodity in the interstate or foreign channels of trade, the power to fix prices exists if the combination has control of a substantial part of the commerce in that commodity.”
November 15, 2018
Socony-Vacuum Oil (US 1940)

19. Rule of Reason Framework
“Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.”
November 15, 2018
Chicago Board of Trade (US 1918)

20. Rule of Reason Framework
“To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable.”
November 15, 2018
Chicago Board of Trade (US 1918)

21. Rule of Reason Framework
“The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts.”
November 15, 2018
Chicago Board of Trade (US 1918)

22. Modes of Analysis Per Se: Categories of Illegal Conduct
11/15/2018
Modes of Analysis
Per Se: Categories of Illegal Conduct
Shrinking year-by-year
Price Fixing
Market Division
Tying (but only sort of)
November 15, 2018

23. Modes of Analysis Rule of Reason: Categories of Examined Conduct
11/15/2018
Modes of Analysis
Rule of Reason: Categories of Examined Conduct
Most everything else
November 15, 2018

24. U.S. v. ASCAP
NYT, Sept 1, 1934

25. U.S. v. ASCAP
Chi Trib, Feb 6, 1941

26. U.S. v. ASCAP
Chi Trib, Feb 6, 1941

27. U.S. v. ASCAP
Chi Trib, Feb 6, 1941

28. U.S. v. ASCAP
NYT, Feb 18, 1941

29. 106. Exclusive rights in copyrighted works
11/15/2018
106. Exclusive rights in copyrighted works
Subject to sections 107 through 121, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
November 15, 2018

30. 11/15/2018
106 (Cont.)
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
November 15, 2018

31. Broadcast Music (BMI) (1979)
11/15/2018
Broadcast Music (BMI) (1979)
Collective Rights Organizations
The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. are collective rights organizations.
They bundle together copyrighted materials and license them to users.
November 15, 2018

32. Broadcast Music (BMI) (1979)
11/15/2018
Broadcast Music (BMI) (1979)
Licenses
ASCAP:
BMI:
November 15, 2018

33. Price Setting or Price Fixing?
11/15/2018
Price Setting or Price Fixing?
Hypo
Treasure Island is a grocery store at 55th and Lake Park
TI buys lots of products from many companies (Kellogg, General Mills and others) and sells them for various prices
Section 1 violation? Is this different from BMI?
November 15, 2018

34. Selling the Public Performance Right I
11/15/2018
Selling the Public Performance Right I
Hypo
Company approaches composers one-by-one and seeks nonexclusive right to license nondramatic public performances
One-by-one sales
Each song offered for exactly the same price
Section 1 Violation? BMI?
November 15, 2018

35. 11/15/2018
Answer
Does anything in the case create “a contract … in restraint of trade?”
Suppose contract between ASCAP and composer says something like
“You C authorize us A to authorize users of your music. You C continue to have the right to also authorize music users, and you C can authorize other rights vendors to be able to authorize as well.”
November 15, 2018

36. Selling the Public Performance Right II
11/15/2018
Selling the Public Performance Right II
Hypo
All the composers get together and agree that they will sell the right to engage in nondramatic public performances; only way rights will be sold
One-by-one sales
Each song offered for exactly the same price
Section 1 Violation? BMI?
November 15, 2018

37. 11/15/2018
Answer
Horizontal price-fixing cartel
November 15, 2018

38. Understanding BMI Hypo: Collective Policing
11/15/2018
Understanding BMI
Hypo: Collective Policing
Each composer kicks in $100 to create song policing service
Copyright police listen to radio and report violations to composers
Does this violate SA 1? Is this Broadcast Music?
November 15, 2018

39. Answer As framed joint venture
11/15/2018
Answer
As framed joint venture
Highly unlikely to give rise to antitrust violation
What should we make of the idea that they could have policed separately and competed in policing but instead they have chosen to proceed collectively?
November 15, 2018

40. 11/15/2018
Answer
Says the Court
“It takes an organization of rather large size to monitor most or all uses and to deal with users on behalf of the composers. Moreover, it is inefficient to have too many such organizations duplicating each other’s monitoring of use.”
November 15, 2018

41. Understanding BMI Hypo
11/15/2018
Understanding BMI
Hypo
Each composer separately authorizes E, on a nonexclusive basis, to charge whatever it wants to for a song and to bundle it in whatever fashion E wants, but the composer also requires E to pay the composer a particular price per use of a song
Does this violate SA 1? Is this Broadcast Music?
November 15, 2018

42. Answer Again, no restraint of trade? Do ASCAP and BMI violate Sec. 2?
11/15/2018
Answer
Again, no restraint of trade?
Do ASCAP and BMI violate Sec. 2?
Even if no “restraint in trade” do they monopolize?
November 15, 2018

43. ASCAP License Structure
11/15/2018
ASCAP License Structure
Emerged from prior antitrust litigation
The Blanket License
The key feature is that the license fee is tied to the radio station’s gross revenue.
This means that the license fee is independent of actual use of ASCAP songs.
November 15, 2018

44. ASCAP License Structure
11/15/2018
ASCAP License Structure
The Per Program License
Revenue-based license but tied through formula to actual use of songs.
Licensee can sue to have federal court set “reasonable fee”
November 15, 2018

45. What Does CBS Want? Why? Per the Opinion
“CBS would prefer that ASCAP be authorized, indeed directed, to make all its compositions available at standard per-use rates within negotiated categories of use. But if this in itself or in conjunction with blanket licensing constitutes illegal price fixing by copyright owners,”
November 15, 2018

46. What Does CBS Want? Why? Per the Opinion
“CBS urges that an injunction issue forbidding ASCAP to issue any blanket license or to negotiate any fee except on behalf of an individual member for the use of his own copyrighted work or works.”
November 15, 2018