¨ Sherman Act
o Passed in 1890
§ Justifications
· Concern that economic power of large business was squeezing out small business; wanted to preserve structure of economy to include small business
· Concern about influence of large business on legislation, economy and democracy
· Antitrust law is premised on the principle that competition, as opposed to monopolization or cartelization, tends to maximize the economic performance of the market
o §1 – Rule of Reason (conspiracy charges)
§ Prohibits every contract, combination . . . or conspiracy that is an unreasonable restraint of interstate trade or commerce . . . . (Standard Oil)
§ Once you’ve determine to apply the ROR rather than the per se standard, analyze whether the competitive harms outweigh the pro-competitive benefits (NCAA)
§ The ROR test (involves an in-depth look at the market impact of a restraint):
· Whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition.
o Consider (Chicago Board):
§ The facts peculiar to the business to which the restraint is applied
§ The business’ condition before and after the restraint was imposed
§ The nature of the restraint, and its effect, actual or probable
§ The instrument of the restraint
§ The evil believed to exist
§ The reason for adopting the remedy
§ The purpose or end sought to be attained
§ Intent
· Rule of reason balances the anti-competitive effects of a restraint against its pro-competitive benefits to determine the net impact on competition
· First, ask whether the competitor possesses market power in the relevant market where the alleged anticompetitive activity occurred
o If market power is found, then proceed under the ROR to assess the pro-competitive justifications for the conduct
· When cooperation is pro-competitive, use the ROR standard
o Appalachian Coals
§ A cooperative enterprise, which carries with it no monopolistic menace, is not to be condemned as an undue restraint merely bc it may effect a change in market conditions, where the change would be in mitigation of recognized evils and would not impair, but rather would foster, fair competitive opportunities
o NCAA
§ Held that by curtailing output, blunting ability to respond to consumer demand, NCAA has restricted rather than enhanced intercollegiate athletics, and it violated §1
§ “interstate trade or commerce”
· §1 prohibits every contract, combination . . . or conspiracy that is an unreasonable restraint of interstate trade or commerce . . . .
o Must be commercial in nature
§ Courts classify a transaction as commercial or noncommercial based on the nature of the conduct in light of the totality of surrounding circumstances
§ The exchange of money for services, even by a non-profit organization, is a quintessential commercial transaction
· The payment of tuition in exchange for educational services constitutes commerce
o When non-profit organizations perform acts that are the complete antithesis of commercial transactions, they are immune from antitrust regulation
§ However, this immunity does not extend to commercial transactions with a public-service aspect
o Some labor activities immune from antitrust legislation
§ Labor union strikes are immune
o §1 Per Se Offenses (conspiracy charges)
§ Certain antitrust offenses are deemed per se offenses, and are presumed to be unlawful (no need to do balancing like ROR)
§ Apply per se standard where the nature of the agreements are so plainly anticompetitive that no el
s to monopolize and conspiracies to monopolize any part of interstate trade or commerce
o Consumers are injured by a monopolist who restricts output and raises prices bc the higher price creates a monopoly overcharge on the quantity sold by the monopolist
§ This overcharge involves a transfer of wealth from consumers to the shareholders who own the monopoly firm
§ The higher price limits demand, creating a loss of potential consumption benefits
· Gas prices example
o Pricing above competitive levels restricts consumption below the efficient level of a perfectly competitive market.
o Those consumers lose the benefit of the bargain they might have received.
§ In analyzing a §2 violation, it’s a 2 step inquiry:
· 1) Whether the firm possesses monopoly power in the RELEVANT MARKET
o “monopoly power” defined:
§ The ability to control prices or exclude competition
o “passive” monopolists
§ §2 condemns both passive monopolists and actives
o Commodities that are reasonably interchangeable by consumers for the same purposes make up a relevant market.
§ Price, use, and qualities considered
o Geographic definition of relevant market:
§ Is the market local or national?
o Consider:
§ The interchangeability of products for consumers/cross-elasticity of demand/substitutability – – – will buyers substitute one product for another?
If increases if the price of product A lead buyers to switch to product B,
