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Antitrust
Temple University School of Law
Caine, Burton

Caine

Antitrust

Spring 2015

Introduction/RoadMap

The are 3 causes of action in antitrust law:

1. Challenges to conspiracies or multilateral conduct are under Sherman Act Sect. 1

2. Challenges to monopolies or unilateral conduct are under Sherman Act. Sect. two

3. Challenges to Accquisitions are under Clayton act Sect. 7

To make a case under the antitrust Doctrine the Plaintiff must

1. Point to specific conduct (merger, monopoly , conspirarcy etc)

2. Show that the conduct is unreasonable.

a. Prove market Power

b. Prove conduct is harmful

i. Causes prices to go up or

ii. Cause output to go down

New case that changes price fixing rule:

3 PER SE CATEGORIES: 1) Price fixing;

2) Division of territories;

3) Group refusals to deal(Boycott). Characterization is essential – the first part of the analysis.

IS THERE AN AGREEMENT? IF NO AGREEMENT, YOU ARE NOT IN SECTION 1.

IS THERE AN ATTEMPT TO MONOPOLIZE?

If there is an agreement, proceed in this order: Per se – Quick look – Rule of Reason

Don’t need to prove antitrust injury if the government is bringing the suit. Government just has to show injury to competition.

No private actions under the FTC Act –only the FTC can bring suit.

Restraint ancillary to a lawful agreement is not a violation.

Don’t assume a question is even an antitrust question.

Quick look is a PROCESS (what facts do we look at? All of them? Or are a couple of facts enough?) Per se is a CONCLUSION.

Per se = your proffered defense is not a defense. E.g. “the fixed price was reasonable,” “competition is bad.” No inquiry into intentions or effect.

Quick look = a quick look at this fact tells us enough to conclude it is a violation. If it fails quick look, proceed to RoR. See the CA Dental Assn case for an illustration of the distinction.

Noerr immunity does NOT just apply to agreements; applies to all of antitrust. We don’t really know exactly what Noerr stands for.

Douglas does not like big business will more that likely find defeadants in violation of antitrust

Stevens thinks that everything is per se illegal violation of antitrust law

Monopoly Power: Power to control process or exclude competition

I. MONOPOLIZATION AND MARKET DEFINITION

A. General Principles

a. Sherman Act § 2

“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States … shall be deemed guilty of a felony….”

b. MONOPOLY = the power to control price, alter the way the market determines price, and eliminate competition. Smaller market share is suggests lack of market power, but does not foreclose on it.

c. There are three causes of action

i. Monopolization

ii. Attempted Monopolization

iii. Conspiracy to monopolize

B. Monopoly

1. Market Share

a. Large market share and large market power does not necessarily mean there is a monopoly

b. Exercise of market power to raise prices is not in and of itself illegal

2. Proving Monopoly

a. (Grinnell Corp.)

i. The plaintiff must prove

1. The possession of monopoly power in the relevant market

2. The willful acquisition or maintenance of that power as distinguished from growth or development as a result of growth or development of a superior product or business acumen or historical accident i.e. exclusionary conduct.

b. Alcoa

i. possession of a monopoly (in that case 90%) is not enough. The plaintiff must also show that there was exclusionary conduct.

3. INQUIRY:

1) What is the relevant market? Two subsidiary questions:

a) What is the product market?

-interchangeability; fungibility; similar functionality; which products compete?; consumer preference

b) What is the geographic market?

2) Was monopolist’s conduct illegal?

a) Monopolization: general intent sufficient

b) Attempt to monopolize requires:

1) predatory or anticompetitive conduct

2) specific intent

3) dangerous probability of success in monopolizing the relevant market

C. Cases

1. Alcoa (2d Cir. 1945) (J. Hand)

Alcoa was an extremely large aluminum production company. The government alleged that after its initial patents expired Alcoa took several steps to ensure it remained to sole or dominant producer in the U.S.

a. 90% market share is certainly enough to show monopoly power, however exclusionary condut must also be shown.

b. Doesn’t matter if monopolist actually uses its power or that its profits are reasonable, only that it possesses the power to obtain supercompetitive profits and acts to maintain that power. Alcoa’s violation was acting to maintain its power (bottom of p. 139).

c. Defining the relevant market:

ear of Alcoa is over.(posner)

a. The lawful monopolist can compete like everyone else.( as seen in Dupont)

b. No duty to help competitors; this would be holding an umbrella over inefficient competitors.

6. Broadway Delivery (2d Cir. 1981)

Trial court instruction precluding a finding of monopoly power where defendant’s market share was less than 50% was in error but was harmless because plaintiff had not submitted enough evidence to put the question of market power to the jury in the first place.

If you have 1% of a stock is big enough you could still have antitrust violation, even a small amount of a significant company could be antitrust….look at the big picture

7. U.S. v. E.I. duPont de Nemours (Cellophane) (U.S. 1956)4:3 vote

a. DuPont produced 75% of cellophane sold in U.S. Cellophane was less than 20% of all “flexible packaging materials” sales.

b. Relevant product market = all flexible packaging materials.

i. To determine product market, see what cellophane competes with. Look at “cross-elasticity.” And interchangebillity:

ii. Cellophane competed with other flexible packaging materials because if the price of cellophane went up a penny, consumers would switch to these other items. “Great sensitivity of customers in the flexible packaging markets to price or quality changes prevented DuPont from possessing monopoly control over price.”

iii. There are alternatives on the market for cellophane:

iv. Dissent: Felt that relevant product market should have only been cellaphone..look at behavior of buyers and sellers, shows control.

v. Dupont vs Alcoa:Alcoa contrast with facts here according to the majority bc Alcoa controlled all aluminum and Dupont didn’t have control of all cellphane… Alcoa had power to determine who it competes with. With Dupont there were no barriers to entry and other companies competed….

8. ITS v. Eastman Kodak (9th Cir. 1997)

a. Services can be a product market. Product market = servicing of Kodak copy machines.