Chapter 43
Antitrust
Objectives:
1. Horizontal restraints of trade
2. Vertical restraints of trade
3. Monopoly
4. Clayton Act: (a) tying contracts; (b) exclusive dealing; (c) horizontal mergers; (d) vertical mergers; (e) conglomerate mergers
5. Robinson Patman Act; FTC
I.
A. Section 1, forbids restraints of trade
B. Section 2, forbids monopolies and attempts to monopolize
C. Criminal penalties and civil penalties, also treble damages
D. Restraints of trade under Section 1
1. Rule of reason (i.e. is the restraint unreasonable)
2. Per se violation (automatically invalid)
3. Abbreviated rule of reason (intermediate level)
Facts: Dentists had a professional organization.
Rules of org forbid deceptive advertising.
However, FTC alleges CDA applied rules to forbid
The truthful advertising of price and quality,
Especially discounts.
Administrative judge found that the application of
The rules were a per se violation, or were a
"quick look" violation. 9th Circuit affirmed.
Supreme Court: Need a deeper quick look.
Must review in light of disparity of info between
Patient and dentists. May not affect competition.
E. Horizontal restraint. Agreement at same level. E.g. Ford and GM
F. Vertical restraint. Agreement with supplier. E.g. moviemaker
And theaters
G. Concerted action only (must work with someone else to restrain
Trade)
H. Price fixing. All horizontal price fixing is per se illegal.
Vertical price fixing can also be illegal.
State Oil v. Kahn. P. 916. Kahn ran a gas station that sold
State Oil's oil. Kahn could charge any amount, but over a certain
Maximum, the excess went to State.
District Court applied rule of reason and found no violation.
Circuit Court reversed. Per se violation, vertical price fixing.
Supreme Court. Overruled previous case law. Rule of reason
Applies to vertical price fixing.
G. Market allocations. Competitors cannot divide up territorities
H. Boycotts. Cannot be used in a way that harms competition.
I. Tying arrangements. Monopolist in one product tries to use
That leverage to monopolize another product.
Kodak, p. 918. Facts: Kodak sells copiers, which need repair
Services and new parts. ISOs service copiers, independent of
Kodak. Kodak adopted policy to restrict sales of parts only to
Official Kodak repair services or those who repaired their own
machines.
ISOs sued, alleging an unlawful tying. Kodak moved for summary
Judgment. Supreme Court said denial of SJ motion was proper.
There is a triable issue of fact as to whether Kodak attempted
To monopolize the market for servicing its machines.
Kodak might prevail at trial, however. Big market definition issue
Here. Kodak will say that if it raises repair costs too high, that
It still faces competition from other copier makers.
J. Monopolies under Section 2.
1. Monopoly means one company provides all services or product.
Problem is that a monopoly will produce too little at too high
A price.
2. Market definition is absolutely critical.
Du Pont, p. 921. Facts: Du Pont sold 75% of cellophane
Sold in
Packing materials. Du Pont only made up 20% of that market.
Supreme Court. Du Pont wins. You need to consider reasonable
Substitutes.
3. Watch out at trade associations! P. 923
4. Compare intellectual property law. Patent by its nature
Is monopoly
II. Clayton Act
A. Tying contracts and exclusive dealing
B. Mergers
1. Types: Horizontal, vertical, and conglomerate
2. FTC review of mergers
Hospital
Corp., p. 925. Facts:
HCA owned one. HCA then buys two more for $700m.
Its share went from 14% to 26%. HCA became second largest.
Four firms controlled 91%.
Court found a Clayton Act violation. Court says problem is not
Lack of competition, but rather potential for collusion.
It's easier to conspire with a concentrated market.
3. HHI index for measuring concentration.
III. Robinson Patman Act
A. Limits price discrimination
B. No predatory pricing
IV. Federal Trade Commission