Antitrust Regulation And Creditors Remedies Created by Pamela S Evers Assoc Prof UNCW for Educational Purposes 2001 w updates Historical Perspective Late 1800s Rockefeller creates the Standard Oil Trust controlling the US oil market Railroads also began to form trusts to close the market Political cultural and philosophical issues at turn of the century led to the Sherman Act of 1890 to regulate competition Historical Perspective 1911 Supreme Ct ordered the breakup of Standard Oil now Amoco Chevron Mobil Exxon now merged Key issue has a competitor been harmed 1960s the Chicago School of economists argued that issue was whether competition was harmed Post Chicago School suggests that competition not enough to protect consumers The Basic Laws Sherman Act prohibits all agreements in restraint of trade and monopolization Clayton Act prohibits anticompetitive mergers tying arrangements and exclusive dealing agreements Robinson Patman Act prohibits price discrimination that reduces competition The Violations 2 types per se and rule of reason Per se violations have no defense subject to both civil and criminal penalties Rule of reason violations are illegal only if they have an anticompetitive impact thus some defenses exist generally only civil penalties assessed The Violations The Dept of Justice civil and criminal and Federal Trade Commission civil only enforce antitrust laws individuals also may file suit Annual Shareholders Meeting of Wal Mart Potentially Illegal Strategies Strategies that may be illegal are either cooperative companies work together for mutual advantage or aggressive plan to create advantage over competitors Monopoly is a terrible thing till you have it Rupert Murdoch The New Yorker 1979 Cooperative Strategies Horizontal agreements are among competitors Efforts to divide the market per se violation Price fixing and bid rigging per se violation Refusals to Deal rule of reason Vertical agreements are among firms at different stages of production process Reciprocal dealing agreements rule of reason Price discrimination Robinson Patman Act enforcement now virtually abandoned Cooperative Strategies Mergers and joint ventures combine competitors to strengthen advantage Horizontal mergers involve firms in same market e g Exxon Mobil Vertical mergers involve firms at different stages of production strategy for industry conglomerates JVs for single purpose are common and almost always permitted e g Navistar Caterpillar JV Cases Toys R Us Inc v FTC 2000 TRU felt competition from discount clubs TRU asked major suppliers Mattel Hasbro Fisher Price to sell clubs only unique items or combo packs not sold to other customers thus clubs wouldn t have same items as TRU Manufacturers reluctant but agreed if all mfrs agreed TRU acted as coordinator for manufacturer agreement Cases Toys R Us Inc v FTC 2000 Result share of market slipped for clubs and FTC ruled that TRU engaged in illegal boycott refusal to deal Affirmed TRU s efforts anticompetitive and illegal Cases US v Waste Management 1984 Waste Mgmnt WMI acquired Texas Industrial Disposal TIDI both firms in refuse business Acquisition resulted in almost 50 market share in Dallas and generally such a large share is a prima facie illegality under prior case law Cases US v Waste Management 1984 Issue did WMI violate Clayton Act by acquisition Holding In this particular industry because of ease of entry into the market the merger doesn t violate the Clayton Act Aggressive Strategies Monopolization Predatory pricing Tying arrangements Allocating customers territory Exclusive dealing agreements Resale price maintenance RPM Price fixing AMD suing Intel for tying Monopoly Three questions What s the market How high can your price go Does the company control the market No monopoly unless you exclude competitors or control prices How did the company acquire control Possessing monopoly isn t illegal but using misconduct to acquire monopoly is illegal Predatory Pricing Tying Predatory pricing is when a firm lowers prices below cost to drive competitors out of market International law calls this act dumping a serious offense in international trade law Tying is an agreement to sell a product on the condition that the buyer must also purchase a different tied product Franchisors routinely sued for tying arrangements Film distributors have often been sued for tying Eastman Kodak v Image Technical Svcs Kodak tied service and parts Image Tech others filed an antitrust claim against Kodak Supreme Court held Kodak had the market power to raise prices and drive out after market competititors and remanded case to trial Unanimous jury returned verdict for plaintiffs of 23 M Clayton Act trebled damages resulting in 71 7 million award Controlling Distributors Retailers Sup Ct has ruled that a vertical allocation of customers or territory is illegal only if it adversely affects competition in the market thus it is a rule of reason violation Common in the apparel and food processing industries remember Nike and Federal Pants Exclusive dealing contracts require distributor or retailer to not carry products of any other supplier Controlling Distributors Retailers Resale price maintenance RPM or verticle minimum price fixing is when manufacturer sets minimum prices retailers may charge to prevent discounts Per se illegal but DOJ rarely pursues RPM cases thus RPM is quite common Maximum price fixing which benefits consumers is a rule of reason violation Controlling Distributors Retailers Horizontal price fixing is attempt by competitors to alter market forces by price control and per se illegal Denny s Marina Inc v Renfro Productions Inc is about price fixing at boat shows Controlling Distributors Retailers A boycott or refusal to deal often takes form of a manufacturer terminating a distributor for discounting or a business association expelling a member for activities contrary to interests of group Law unsettled whether these are per se illegal or rule of reason violations U S v Syufy 1990 Syufy entered cinema market in Las Vegas leading to bidding war and higher license fees eventually competition sold out to Syufy with majority of market but court held that Syufy did not engage in bad acts thus the rule of reason is that Syufy didn t violate law Syufy Bros Century 25 theatre in Union City CA United States v Microsoft Legal Analysis Holding Court examined Microsoft s anticompetitive conduct restricting licenses tying Internet Explorer and Windows exclusive
View Full Document
Unlocking...