2.  Section 1 of Sherman Act regulates “horizontal” and “vertical” restraints.  Per Se vs. Rule of Reason.  Per Se violations are blatant and substantially anticompetitive.  Rule of Reason agreements do not unreasonably restrain 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. 2

3.  Rule of Reason—court will consider several factors:  Purpose of the Agreement.  Parties’ power to implement.  Effect (potential) on competition.  CASE 28.1 American Needle, Inc. v. National Football League (2010). What was the ‘concerted activity’ between the NFL teams and NFLP? © 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

4.  Horizontal restraints are agreements among Sellers (or Buyers) that restrain competition between rival firms competing in the same market. Buyer © 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

5.  Price Fixing. Agreement between competing firms in the market to set an established price for the goods or services they offer.  Price fixing is a per se violation of the 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. 5

6.  Group Boycotts. Agreement between two or more sellers to refuse to deal with a particular person or firm.  Group boycotts are per se violations of the 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. 6

7.  Horizontal Market Divisions. Occurs when competitors in the same market agree that each will have exclusive rights to operate in a particular geographic area.  Horizontal market divisions are per se violations of the 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. 7

8.  Trade Associations. Industry specific organizations.  Concentrated Industry: small firms control large percentage of market sales.  Rule of reason is usually applied to determine if a violation of the Act has occurred. © 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

9. Per se anticompetitive agreements imposed by Sellers upon Buyers (or vice versa) that may include affiliates in the entire supply chain of production.  Buyer © 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

10.  May restrain competition among firms that occupy the same level in chain.  Vertical restraints that significantly affect competition may be per se violations. © 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

11.  Imposed by manufacturers on the sellers of the products, to insulate dealers from direct competition with each other.  Territorial and customer restrictions are judged under the rule of reason. © 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

12.  Agreements between a manufacturer and a distributor or retailer in which the manufacturer specifies the retail price at which retailers must sell products furnished by the manufacturer or distributor.  © 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

13.  This is a type of vertical restraint and is normally a per se violation.  CASE 28.2 Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007). Why did the Court apply the rule of reason to 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. 13

14.  In contrast to group boycotts, manufacturers are free to deal with whomever they wish, rather than in concert.  But in some cases, a refusal to deal will violate antitrust laws:  Firm refusal to deal has, or will have, monopoly power, and  Refusal is likely to be anticompetitive. © 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

15.  Occurs when a seller charges different buyers different prices for identical goods, and may violate Section 2 (Robinson- Patman Act).  Customer Preferences.  Time and Cost Considerations. © 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

16.  Exclusive Dealing Contracts: seller forbids a buyer to purchase products from the seller’s competitors, that will “substantially lessen competition or tend to create a monopoly.”  © 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

17.  Tying Arrangements: sale of a product is conditioned on buyer’s agreement to purchase another product produced or distributed by the same seller.  CASE 28.3 Illinois Tool Works, Inc. v. Independent Ink, Inc. (2006). What factors did the court consider under the rule of reason? © 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

18.  Horizontal Mergers occur between firms at the same level in the production and distribution chain.  Factors to Determine Legality.  The Her fi ndahl-Hirschman Index: to determine market concentration. © 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

19.  Vertical Mergers: occur between firms at different levels in the production and distribution chain.  Conglomerate Mergers: between firms that do not compete with each other because they are in different markets. © 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