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Antitrust Law
St. Louis University School of Law
Greaney, Thomas L.

Spring 2012
I.        Introduction
A.     goals/values of antitrust
1.      major goal: to prohibit transactions that will make things worse for consumers (not so interventionist to be proactively trying to create a market that is best for consumers)
a)      note: AT isn’t about protecting competitors from competition
2.      desire to have a better distribution of wealth – vis-à-vis anti-monopolistic aspects?
3.      efficient use of resources – don’t want to allow companies to gain while shrinking the size of the pie (i.e., not gaining by good business practices, but by cheating…)
B.     three major historical turning points in US antitrust
1.      Industrial Revolution – brought about the first antitrust laws
a)      led to better communication, transport of goods, etc. – regional businesses suddenly found themselves in competition with distant businesses
b)      competitors wanted to quell competition, so they came together into cartels – creation of the trust form, which arose in all major industries
c)      huge aggregations of wealth/power within the trusts
d)      concerns re aggregations of power – exploitation of the ordinary person economically, politically, etc.
2.      Hitler/WWII – shock of observing how fascist govts used big enterprise to carry out their designs; big enterprise came to work lockstep with Hitler
a)      hugely dangerous politically – high concentration of economic power could play into the hands of a despot
Ÿ  this led to strengthening of merger laws (1950)
3.      globalization – impact starting around 1980
a)      barriers to entry had become much lower as a result of trade agreements that lowered tariffs, etc., and now US companies besieged by robust competition from abroad
b)      led to rethinking of laws in general – many groups began to argue that US law was too handicapping of US business
Ÿ  great drive to cut back law, let business do what it had to do to be competitive in the global market
c)      loosening took place not in the wording of statutes (which were very broad), but also in those enforcing the laws (judges, commissioners, etc.)
d)      US AT law is now much more relaxed than it used to be
Ÿ  with the exception being hard-core cartels
II.     Major Statutes and Laws
A.     main federal AT laws
1.      Sherman Act (1890)
a)      §1 prohibits agreements/conspiracies in restraint of trade
b)      §2 prohibits monopolization, attempts to monopolize, and conspiracies to monopolize
2.      Clayton Act (1914)
a)      §3 – prohibits potentially anticompetitive acquisitions, exclusive dealings, tie-ins, and interlocking directorates
b)      §4 – establishes standing under the Clayton Act
c)      §7 – prohibits anticompetitive mergers
Ÿ  note: doesn’t apply to persons purchasing such stock solely for investment, and doesn’t prevent a corp from forming a subsidiary
3.      Federal Trade Commission Act (1914)
a)      §5 – prohibits unfair methods of competition and unfair/deceptive acts/practices
b)      FTC – admin agency, can’t sue criminally, but can sue civilly
Ÿ  when a case is brought under FTC Act, only injunctions are awarded, no fines
Ÿ  FTC Bureau of Competition recommends which cases to bring; case is heard before an ALJ; ruling may be appealed to the FTC, then the fed app court
4.      Robinson-Patman Act (1936)
a)      prohibits price discrimination in the sale of goods when it harms competition
b)      exceptions are made where the discriminatory low price is cost-justified or necessary to meet competition, and it doesn’t hurt competition
c)      note: price discrimination can implicate Sherman §2, esp. if there is predatory pricing
5.      Celler-Kefauver Amendment (1950) – amended §7 of Clayton Act
a)      prohibits potentially anticompetitive mergers and acquisitions
6.      Hart-Scott-Rodino Act (1976)
a)      requires pre-merger notification (to both DoJ and FTC) and waiting period
B.     state laws
1.      almost all states have versions of Sherman Act, merger laws – about 90% of these are interpreted as the fed laws are interpreted
2.      note: we don’t have a strong law of preemption in antitrust – states can apply their own laws even in areas that have a lot of spillover into interstate commerce (even where the center of gravity of the transactions is interstate commerce)
C.     regulatory laws that spillover into antitrust
1.      most regulated industries allow AT laws to operate even when their regulations are operating
a)      even when regulatory regime is paramount, there’s usually a process where they’ll hear from AT enforcers re certain mergers, etc.
D.     interplay b/t intellectual property law and antitrust law
1.      e.g., Microsoft
2.      interesting emerging issues of which area of law is paramount in such conflicts
III.   Enforcement of Antitrust Law
A.     in federal govt, two major AT enforcers
1.      DoJ Antitrust Division (part of the executive branch)
a)      only the DoJ AD can bring a criminal antitrust action
b)      note: very high fines and jail time for criminal violations of Sherman Act
Ÿ  also note: Σ doesn’t say what’s criminal or civil; has just become practice that DoJ will only prosecute as criminal matters cartel activity that is “so evil”
2.      Federal Trade Commission (admin agency, not part of the executive)
a)      enforces §5 of FTC Act; interpreted in line with what Sherman Act prohibits
b)      note: §5 can be enforced against all of the same conduct of §§1 or 2 of Sherman Act – question is whether it can be enforced against more conduct…
3.      overlapping jurisdiction b/t these two fed enforcers
a)      explicitly overlapping jurisdiction in §7 of Clayton Act
b)      can both enforce R-P Act (though they don’t like to enforce this, given philosophy that price discrim is just part of competition)
c)      under HSR, jurisdiction over merger practice is given to both enforcers
Ÿ  this is the only area where there’s contentious overlap b/t the enforcers – parties have to file with both enforcers; FTC and DoJ are supposed to confer and then decide which will enforce; 1% of the time, they squabble over it
B.     private party enforcement
1.      parties can get injunctions, and treble damages
a)      judgment for govt is prima facie evidence of violation in a private suit against same Δ
2.      standing to sue has been cut back quite a lot by the cts – must show that they are in the line of antitrust injury (injured by that which made the conduct illegal under the AT law)
a)      direct purchaser suing for price fixing is exactly in the line of standing, but there are many cases where it’s not clear that π is suing for AT injury
Ÿ  note: indirect purchasers cannot sue (Illinois Brick rule) – exception: narrow cases where indirect purchaser is party to an ag that doesn’t present the complex problems of tracing, may be allowed to prove passed-on overcharges
b)      five material factors to consider in the standing analysis
Ÿ  harm was direct rather than remote
Ÿ  harm was an AT injury (or inextricably intertwined with it)
Ÿ  intent to harm π or those of π’s class
Ÿ  prospect that standing will lead to duplicative recovery or difficult questions of apportionment of damages
Ÿ  prospect that standing will leave significant violations undetected/unremedied
C.     state enforcement, via the state Attorneys General
1.      can bring action on behalf of residents of their state for violations of fed AT law; can also, of course, bring actions to enforce state AT law
2.      relief for harm to state’s general economy – can’t sue for damages, but can sue for injunctions
IV.  Evolution of the Law of Antitrust
A.     Trans-Missouri (US 1897) (p.12) – first case to construe §1 Sherman
1.      question of what “in restraint of trade” means
a)      Δ args: only Ks that imposed unreasonable restraints of trade are prohibited by §1; justification of ruinous competition; claim that prices charged were reasonable
2.      holding: ALL contracts in naked restraint of trade are prohibited
a)      note: ancillary restraints are permissible; but these Ks were naked restraints
b)      reasonableness isn’t an element of the analysis, b/c it’s too difficult to define – emergence of the per se rule

a)      note: a monopolist will try to make its marginal cost and marginal revenue be equal
B.     history: changing attitudes toward antitrust law
1.      pre-1980 enforcement – concerned with protecting small companies and ensuring access to markets; sought to prevent concentration and producing mergers; believed that concentration would lead to poor performance
2.      1980 – shift to viewing competition policy from the consumer perspective; AT should let business do what it wants, should never intervene unless an actor was lessening output or unnecessarily raising prices
3.      post-1980 Chicago School – efficiency is the paramount purpose of the AT laws; best deal for consumers isn’t necessarily the cheapest, consumers may choose higher quality or higher priced configurations; govt should only intervene when actors are welfare-reducing
4.      post-1990 post-Chicago School – accepts Chicago School premise that output limitations are a primary concern, but doesn’t agree that markets always work well
a)      output can be limited in ways more harmful to consumers
b)      there may be harms outside of consumer welfare and output limitations that AT should be concerned with – may impose costs on rivals
C.     international approaches to antitrust law
1.      most countries don’t limit their enforcement to consumer benefit – also consider:
a)      competitors and a desire to level the playing field, preserve balance of power
b)      notions of fairness
c)      desire to preserve economic oppty
d)      fairness vs. exploitation and coercion and market integration
D.     graphs, demand curves, and monopolists
1.      in a monopoly situation, a firm has market power (power to raise prices significantly and profitably)
a)      incentive to produce less and charge more, create scarcity
b)      monopolist still has to figure out profit-maximizing price – even a monopolist can charge too much (at some point, ppl won’t want or be able to buy product at that price)
2.      monopoly output (QM) is significantly lower than competitive output (QC) – see handwritten graphs, p.61
a)      QC would be based on where the efficient cost meets the demand curve; QM is based on where the marginal costs (profit-maximizing costs) of monopolist meet demand curve
3.      cost to public welfare – too few resources were allocated to this market
a)      from efficiency viewpoint, should have had devoted much more resources to the market (rectangle created by efficient cost meeting QC); but only the monopolist’s resources (smaller rectangle created by efficient cost meeting QM) were allocated
b)      from allocative econ point of view, AT is about trying to prevent such misallocations
4.      why aren’t we worried about monopolist’s surplus revenue (rectangle above the resources devoted in the monopolist’s world)?
a)      welfare triangle is a dead loss – no-win situation, given the scarcity created
b)      the rectangle is a surplus – money going from consumers to monopolist’s pocket…
Ÿ  minimalist view is just the triangle, trying to prevent the pie from shrinking
Ÿ  US AT is concerned about consumer welfare, though, so rectangle is impt
c)      note: if the trans does create market power, it usually hurts both consumer welfare as well as general public welfare, so this debate is something of a nonstarter