Chapter 24-2: Antitrust

Antitrust Law

Goals

Protect Consumers

Promote competition in the marketplace.

Violations

Rule of Reason:

An action that breaches antitrust laws only if it has an anticompetitive impact.

Per se:

An automatic breach of antitrust law.

Sherman Antitrust Act (1890)

Makes certain restraints of trade

and monopolistic acts illegal.

Monopolization (Sec. 2): illegal to monopolize or attempt to

monopolize a market. Having a monopoly

is legal unless it is either gained

or maintained

by wrongful tactics.

Resale

Price Maintenance (RPM) – A manufacturer sets minimum prices that

retailers may charge. Vertical price fixing.

Horizontal Price-Fixing: When competitors agree on the prices at which they will buy/sell products. (sec 1)

Predatory Pricing:

when a company lowers its prices below

cost to drive competitors out of business (making a loss leader)

Does

the company control the market?

How

did the company acquire or maintain its control?

The defendant is selling its products below cost.

The defendant intends that the plaintiff go out of business.

If the plaintiff does go out of business,, the defendant will be able to earn sufficient profits to recover its prior losses.

Clayton Antitrust Act (1914)

Regulates mergers and prohibits

certain exclusive dealing relationships.

Mergers:

The Clayton Act prohibits mergers that are anticompetitive.

Notify FTC if you have lots of assets/planning to merge.

Tying Arrangements:

An agreement to sell a product on the condition that a buyer also purchases another, usually less desirable, product.

Tied product:

Product you must purchase as the condition to buying the other product.

Ex: Software

Tying product:

Product offered for sale on condition that another product be purchased as well.

Ex: Microsoft Computer

Robinson-Patman Act (1936)

Prohibits price discrimination in hopes of keeping large chains from driving small, local stores out of business.

Illegal to charge different prices to different purchasers if...

Legal to charge a lower price to a particular buyer if...

The costs of serving this buyer are lower.

The seller is simply meeting competition.

The price discrimination lessens competition.

The items are the same.