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Temple University School of Law
Mehra, Salil K.

Antitrust Mehra Spring 2018

1-13 Sherman Act

Sherman Act

Sec. 1- prohibits unlawful restraint of trade

What is “restraining trade?” What is “unlawful” restraint of trade?
Need cooperation of more than one person/firm to restrain trade

Sec. 2- Prohibits monopolies

What does it mean to “monopolize?”
Only need one firm/person to monopolize

Perfect Competition v. Monopoly

Wheat v. Patented (only) Drug
If prices on one farmers wheat goes up, other farmers will compensate and buyers will not be affected
If price on the drug goes up, buyers will no choice but to buy it anyway
Oligopoly- a small number of firms has the large majority of market share

112-129 Market Structure and Monopoly Power

US v. Aluminum Co. of America

2 Prong test- is there a monopoly and had there been some kind of bad act on the part of the monopoly

Some monopolies are unintentional and don’t deserve to be punished, so there must be some kind of additional bad act to be liable under Sherman Act
Alcoa’s bad act was predatory expansion, which probably wouldn’t hold up today even though the test does

Can have a monopoly without monopolizing

Monopolizing= taking affirmative steps to take control of the market by harming competition, as opposed to having a monopoly “thrust upon you”
Should not punish companies that compete so well they beat out all their competitors, because competition is a goal

Note Cases

Berkey v. Kodak- Kodak did not not need to give advanced notice to competitors about 110 camera technology because a notice requirement to competitors would discourage innovation and would force companies to figure out what sufficient notice would be. Companies are entitled to profit off their innovation, at least for a while
Intel- Intel cannot withhold disclosure to competitors if that disclosure is predicated on the competitor dropping IP suits against Intel. Harms innovation on both sides, so Intel is not in the same position as Kodak, cannot justify non disclosure because of their right to profit of innovation if they are requiring their competitors to waive their right to profit of their own innovations
No positive duties on monopolies
No duty to disclose info to competitors so they can compete
But cannot use disclosure as leverage/self-help to resolve IP claims, because that hurts competition as well

129-171 Market Structure and Monopoly Power continued

US v. E.I. du Pont- Cellophane case

A firm has monopoly power under § 2 of the Sherman Act if the firm controls price or competition in an identified market.
Issue in this case is what the relevant market is, just cellophane or all flexible packaging materials
Cross-elasticity- measure of change or substitutability, how willing are consumers to substitute a competing product if the price of their preferred product goes up
Court decides that all flexible packaging materials is relevant market because there is good elasticity between cellophane and other materials
Cellophane fallacy- degree of substitutability depends on base price; the higher the price goes, the more inferior the substitutes people would be willing to use. For cross-elasticity analysis to be accurate, the price must be reasonably competitive to begin with

Note Cases

International Boxing Club- championship boxing matches are a separate, identifiab

es, cartel is more able to raise prices to get more profits
Cartel must be durable to be profitable. If members defect or more competitors enter the market, the cartel loses market power

Chicago Board of Trade v. US

The fact that an agreement or regulation restrains trade is not solely determinative of whether the agreement or regulation violates antitrust law.
Nearly all agreements and regulations related to trade will result in some restraint, and the primary question for antitrust policy is whether the restraint will serve to promote or destroy competition. As a result, consideration must be given to the nature and scope of the restraint and the likely effect of the restraint as implemented
What is intention of the restraint? Intent here is not to increase profits or restrain competition, it is to encourage people to buy and sell during the market hours so that the market price is fair, which is a good thing
What is the scope of the rule? Only applies to grain-to-arrive, which represents only a small portion of the grain market, so doesn’t really restrain the grain trade
What is the effect of the rule? This rule effects such a small portion of grain sales that it has very little impact on the market price. Nothing really changed in terms of price or volume after this rule compared to before. In fact, market conditions actually improved after this rule