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Antitrust Law
Rutgers University, Newark School of Law
Sharfman, Keith


For the assignments there may be references to statutes with an appendix of the Sherman Act, these are often in the back of the book.


Page 170 has all the economics you need to know for this course. The case law, however, involves a great deal of economic language.

Open book, handwritten exams

Exam: 2-3 questions, one likely about mergers.

Introduction to Antitrust Law

What is it, what it does, who it is designed to protect, and so on.

We generally like markets in the western world, but should they be regulated and for what purpose?

Sherman Act, Sec. 1: There are certain types of actions and conduct that in some way restrain trade.

Bork revolutionized the thinking about antitrust in that he postulates that legislative intent is opaque and it can be safely ignored in the efforts to achieve economic efficiency.

Posner is also a big name, became famous because of his work in antitrust.

Hovencamp tries to argue that there are several points where the Chicago School is wrong in that it does not conform to the conservative goal of economic efficiency.

Philip Areeda is one of the critical people in the field (from Harvard), wrote the leading treatise in antitrust. One of the first academics to bring economic thinking to the doctrinal analysis of antitrust law. Died about five years ago.

Elhaughe has taken up Areeda’s mantle.

Pitofsky is a leading moderate in antitrust (Georgetown).

Salop also falls into this realm (also from Georgetown presumably).

The liberal position is more enforcement; the conservative position is less enforcement.

The FTC can only bring civil cases; the antitrust division of the DOJ can bring civil and criminal cases. They share jurisdiction in the civil arena. Somewhat ironic that those who are charged with economic efficiency are configured inefficiently.

Demand Curve (p170)

The reserve price is the maximum price a consumer will pay for a good.

The excess money that people would pay over the price one pays for a good is called the consumer surplus.

To say something is inelastic is to mean that demand doesn’t change much even if the price changes.

The competitive cost is the consumer price that includes a reasonable profit for the business.

The monopoly price is the price a vendor can demand if that vendor as monopolized the market (read: some price higher than the competitive price.

The are certain points which represent the monopoly price and quantity within the market, as well as the Optimum price and quantity.

The dead weight triangle (far right) represents those who would buy the good but will not buy because of the monopoly.

The monopoly overcharge (left rectangle) is reserved for those who are willing to overpay for a good.

Review of last class

There are different possible goals of anti-trust; the legislative history is not entirely clear (and not entirely authoritative according to some):

We don’t like single-sellers in any market (populist reading); possibly supported by legislative sources

Antitrust laws are designed for consumer welfare, protecting them from the higher prices arising from monopolies (prices would be lower and products most widely available if trade was unconstrained and there was open competition). This can play itself out in various ways: Chicago School (Bork, Posner) – Economic and allocation efficiency; others are open to finding a wider harm to consumers in different circumstances (Stanford school?). This is where modern case law (over the last 30 years) lies.

Potovsky: Even though efficiency/consumer welfare is the guiding principal, there is an undercurrent of political and ethical concern that allows a degree of prosecutorial discretion.

Much of this comes in the context of mergers, which ostensibly eliminates competition from the market. Agencies can operate from a position of presumptive unlawfulness, and can move to investigate mergers (liberals will block, conservatives have a heyday.

We then reviewed the graphic on page 170.

Individuals are willing to pay different amounts for the same good or service, but there is a sweet spot of intersection between the maximum consumer reservation price and profitability. Consumers who are willing to pay more (but actually pay less) are surplus. For extra units that could be produced unprofitably but would therefore attract more consumers, those consumers are not considered.

The monopoly price is where profits are maximized (anythin

ve relief.

18 carriers west of the Mississippi who fix rates, rules and regulations for traffic, and so on.

District Court dismisses complaint, affirmed by Circuit Court, makes it to SCOTUS. Defendants argue that the agreement would not have been void at common law. SCOTUS disagrees, the statute is broader than common law and forbids any restraint of trade.

Good news in notes cases and US v. Addyston Pipe, p56: SCOTUS backs of from this extreme position. In Addyston, only unreasonable restraints are unlawful (the birth of reason).

Unreasonable is defined by reducing quantity and raising price; if this standard is not met, then the restraint is per se reasonable.

There are per se violations (e.g., price fixing), that even though they don’t increase price/reduce quantity they are still regarded as a violation. At this point, the reasonableness standard does not need to be met and the government.


We are once again drawing the chart showing the demand function as shown on p170 of the text.

Any price between the competitive price and the monopoly price is the “supracompetitive” price.

The triangle of lost transactions that represent sales between the competitive price and the monopoly price is the social loss or “deadweight” cost. These sales represent the restraint of trade in violation of section 1 of the Sherman Act. These people have no remedy.

Those in the upper left rectangle, whose reserve price is greater than the competitive price and who purchase the good or service at the (artificially) higher price are those who are harmed, and they may have a remedy (possibly treble damages plus attorney fees). These sales are in violation of the Sherman Act.

You have to monopolize or attempt to monopolize when otherwise you wouldn’t be to violate the Sherman Act.