Mgmt 200 Pg 645 674 Antitrust Laws State and Federal Antitrust Statutes The Sherman Act 11 29 2015 Came from Rockefeller Standard Oil Trust Every contract trust conspiracy in the restraint of trade or commerce is illegal Monopolize attempt to monopolize conspire to monopolize any part of the trade or commerce is a felony Clayton Act Added to Sherman Act Early prevention of monopoly Monopoly service Robinson Patman Act added o One firm or a few dominate the market for a product or o Restriction of price discrimination between buyers Cannot forbid a company from dealing with other possible buyers and sellers o When the sale of one good is tied to the sale of another good Cannot acquire part of corporation in order to substantially lessen competition or create monopoly Cannot be on the board of directs of two competing companies Federal Trade Commission Act Established the FTC Unfair methods of competition is unlawful o Business activity that may tend to create a monopoly by unfairly eliminating or excluding competitors from the marketplace Exemptions and other Clayton act exempts nonprofit activities and agricultural fishing Export Trading company act allows sellers of exports limited immunity Join together to sell products in other countries Parker doctrine state action doctrine allows state gov to restrict competition in certain industries state must place a substantial role McCarran Ferguson Act exempts insurance companies from federal antitrust laws as long as states regulate insurance Noerr Pennington doctrine lobbying a legislature is not illegal because first amendment allows for right to petition gov even if it is anticompetitive Labor unions activities National Labor Relations Act allows for collective bargaining and set conditions of employment Enforcement Sherman Act o Antitrust suits usually private civil suits o Most severe o Involve price fixing and bid rigging o Can face 10 years prison and 1 million in fines o Businesses can be fined up to 100 million o Injunction to stop illegal acts o Treble damages where parties harmed get 3 times actual money damages plus court costs and attorney s fees Clayton Act o Cease and desist orders Prohibit further violation o Department of Justice may bring civil proceedings under Clayton Act but FTC primarily handles it o FTC can investigate issue administrative orders o Easiest for FTC to bring criminal suit under Sherman Act over Justice Department FTC Act Remedies Available Restrain company or individual from certain conduct Force company to sell part of assets Force company to let others use its patents or facilities Cancel or modify existing business contracts In order to recover damages under antitrust laws the plaintiff must suffer from something the antitrust law is trying to prevent Per Se Rule and the Rule of Reason Per Se rule o Certain business agreements and activities are illegal if existence is found Agreement of prices to avoid competition o Northern pacific Railway Co V United States Certain activities are no chill Rule of reason o Court looks over evidence and facts in order to determine if the activity can be seen as competitive or avoiding competition Monopolization Spanish Broadcasting System of Florida v Clear Channel Communications SBS sued CC which owned HBC Sherman Act SBS believed both CC and HBC discouraged advertisers from placing SBS also claimed that both CC and HBC made it difficult for SBS to ads with SBS enter into new markets SBS lost then appealed Decision o Antitrust plaintiff must show harm to competition in general not just personal damage o Section 1 of Sherman act prohibits conspiracies that restrain interstate or foreign trade and if the restrain on interstate trade is found it must be UNREASONABLE SBS could not find an anticompetitive conspiracy o Under Section 2 it is a crime to monopolize Anticompetitive behavior Specific intent to monopolize Dangerous probability of achieving monopoly power SBS could not prove any of these because CC did not participate with HBC regardless of CC s 26 ownership o SBS lost Mergers Horizontal merger Involves two or more firms coming together to make a new firm o When two firms that were competitors join together o Broke up the Standard Oil Trust by using the Sherman Act Standard Oil v US Premerger notification o Must notify the Antitrust Division of the Department of Justice of FTC at least one month before merger o Transaction worth 70 million Determining market power o Merger guidelines Market power Mergers should not be permitted to create or enhance market power Maintaining prices over competitive levels for a significant period of time is market power Product and Geographic Markets o Determine market share Product market Geographic market Dividing firms sales by total sales within the market is the market share Potential Competition o Possibility that two companies become competitors can stop a merger o FTC v Procter Gamble Clorox PG makes household items and wants to merge with Clorox controls market for bleach FTC stops the merger because PG could potentially make bleach which is potential competition When Mergers Are Allowed o Failing firm defense Firm is not likely to survive without merger No prospective buyers and if there are buyers the acquiring firm affects competition the least Other alternatives for saving the firm have not worked Business Realities o Power Buyer Defense Merger that increases concentration to high levels can be defended by showing that the firm s customers are sophisticated and powerful buyers Court must find buyers smart enough to not allow merger to charge monopoly prices US v Baker Hughes Industry of drilling rigs had few sellers but court found buyers to be smart enough to not allow the merged firms to not charge insane prices Horizontal Restraints of Trade Price Fixing US v Trenton Potteries o Held that price fixing is illegal regardless of how reasonable the price may be PRICE FIXING IS ILLEGAL PER SE Freeman v San Diego Association of Realtors o 12 MLS services in San Diego o 11 of the services combined to turn into Sandicor o Sandicor set the fee for subscribing agent at 44 o Some of the associations paid more and some paid less o Freeman claimed that Sandicor s price was inflated o Decision Price was fixed Price fixing is illegal per se Can t just change the way the associations kept their books Not sure if there was price fixing there was a possibility Remanded Exchange of information Information Sharing o US v