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Antitrust
University of California, Hastings School of Law
Crew, Eugene

Antitrust (Crew – Fall 2010)
Generally (Ch.1, 2)
·         Antitrust is pro-competition
·         Antitrust law is all in the cases; The Sherman Act was made purposely vague by Congress
·         Sherman Act: 15 USC §1,2
o    §1 – combine, contract, conspire to unreasonably restrain è requires concerted action
§ Do not fix the fight
§ Unreasonable == “substantial adverse effect”
§ Define the market
§ Harm to consumers/competition
·         Evidence: higher prices, lower output, less choice, intent
§ Per se unlawful (courts see these all the time, and made them automatically a violation)
·         Tying, price fixing, market divisions, output suppression, group boycott
o    §2 – Monopolize
§ Do not bite your competitor’s ear off
§ Monopolize, attempt to monopolize, combine/conspire to monopolize
§ (Grinnell) Monopolization requires:
·         (1) monopoly power; and
·         (2) The willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
§ Attempted monopolization (Supp 278)
·         Required elements
1.       Specific intent to monopolize
2.       Predatory act designed to effect that intent
3.       Dangerous probability of monopolization
·         Often intent can be inferred from conduct à just 2 &3 need to be shown
·         Justice Holmes in Swift & Co v. United States – “Where acts are not sufficient in themselves to produce a result which the law seeks to prevent,-for instance, the monopoly,-but require further acts in addition to the mere forces of nature to bring that result to pass, an intent to bring it to pass is necessary in order to produce a dangerous probability that it will happen. But when that intent and the consequent dangerous probability exist, this statute, like many others, and like the common law in some cases, directs itself against that dangerous probability as well as against the completed result”
 
·         Economics is not the end-all be-all of antitrust as the Chicago school suggests
o    The rational consumer does not really exist
 
Restraints
·         Horizontal – between companies (competitors)
o    Output suppression
§ Raises prices if demand stays constant
o    Market allocation/division
§ Divide the market (territorially, etc)
o    Group boycott/Refusal to deal
§ Agree not to sell
o    Tying agreements
§ If want to buy R, have to buy S as well; 2 different products; tying and tied
§ Must have sufficient market power in tying product
§ Not insubstantial $ amount in tied market affected (harm)
·         Vertical – between buyer & seller
·         Ancillary Restraints
o    Acceptable – see Addyston Pipe
o    Ex: Sell a bakery w/ a 2 year do not compete covenant
o    Comes up a lot with joint ventures
o    D naturally has burden of showing ancillary
Cases
·         United States v. Addyston Pipe & Steel (SCOTUS, 1899) [26] {Taft} s110
o    Reasonableness of the restraint à Ancillary Restraints are okay
·         United States v. Trans-Missouri Freight Association (SCOTUS, 1897) [22] {Peckham}
o    All restraints unacceptable (later this was loosened)
Cartels and Other Joint Conduct by Competitors (Ch.4)
 
Horizontal Restraints
·         Buyers and sellers are on the same plane
o    Most of the per se violation occur here
·         No exception for the learned professions
·         Civil – Did the restraint have a substantial adverse effect on competition?
·         Criminal – Look at intent as well, even for per se
·         Joint Ventures
o    If per se unlawful, and imbedded in a lawful joint venture,
§ If an ancillary restraint è apply the rule of reason (BMI)
§ If not, per se unlawful (quick look)
·         Market allocations are a per se violation
·         Output suppression per se unlawful (Standard Mfg v. US [172])
·         Plus factors (Petroleum Products) that can infer an agreement:
o    Radical departure from prior practice
o    Awareness that co-defendants had been solicited to conduct themselves similarly
o    Invitation to engage in the alleged conspiracy when it was solicited
o    Ds have a substantial profit motive for the concerted action
o    Actual participation in the scheme
o    Was D’s conduct an interdependent action in the sense that compliance would not profit any single D unless all complied
·         Noerr-Pennington doctrine (Eastern Railroad Presidents v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961))
o    Private entities are immune from liability under the antitrust laws for attempts to influence the passage/enforcement of laws, even if the laws they advocate for would have anticompetitive effects
 
Price fixing
The Foundation Cases
·         Chicago Board of Trade v. United States (SCOTUS, 1918) [166] {Brandeis}
o    Restriction on after hours price changes in grain trade
o    Rule of reason
o    The true test of legality is 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    To determine that question the court must ordinarily consider
§ the facts peculiar to the business to which the restraint is applied;
§ its condition before and after the restraint was imposed;
§ the nature of the restraint and its effect, actual or probable.
o    The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts.
o    This is not because a good intention will save an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences
·         United States v. Trenton Potteries (SCOTUS, 1927) [169] {Stone}
o    Pottery for bathrooms, controlled 82% of the market
o    Price fixing à per se unlawful à no defense of reasonableness allowed
·         Appalachian Coals v. United States (SCOTUS, 1933) [172] {Hughes}
o    An outlier case (1933 Depression Era) à wanted industry to survive à not a case of wide application
o    Agent sells all coal on behalf of producers
o    Enough competition at the time, this will not allow fixing of prices
 
Supply/Output Restriction
·         United States v. Socony Vacuum (SCOTUS, 1940) [177] {Douglas}
o    Bought up supplies of refined products to drive up the price of gasoline
o    Distinguished Appalachian Coals, Chicago Board of Trade, apply Trenton Potteries è per se violation
 
Agreements Limiting Price Competition
·         Kiefer Stewart v, Joseph E Seagrams & Sons (SCOTUS, 1951) [185] {Black}
o    Vertical alcohol resale price agreements (RPMs) à per se unlawful
o    Note in 2007 (Leegin v. PSKS now rule of reason applied)
·         Goldfarb v. Virginia State Bar (1975) [187] {Burger}
o    Minimum fee schedule for lawyers == price fixing
 
Data Dissemination
·         Maple Flooring Manufacturers v. United States (SCOTUS, 1925) [191] {Stone}
o    Freight rate book, 70% market share
o    Statistic gathering and dissemination, but no allegation of price fixing
o    No violation of §1; everyone had access to the information
·         Sugar Inst. v. United States (SCOTUS, 1936) [194] {Hughes}
o    Code of ethics à do not change price w/o letting other members know
o    §1 violation
·         United States v. Container Corp. of America (SCOTUS, 1969) [197] {Douglas}
o    On demand, information exchanged about the latest price charged
o    Effect: price stabilization à price fixing à per se violation
o    How is this different from Maple Flooring
§ Information not shared w/ the entire market, including buyers
§ Timeline-wise, Socony Vacuum decided between these 2 cases
o    Fortas (Concur)
§ Not a per se violation, but there is an unreasonable restraint of trade
·         United States v. Citizens S. National Bank (SCOTUS, 1975) [201] {Stewart}
o    Clarified that disclosure/exchange of price information is not a per se violation
o    See Fortas’ concurrence in Container Corp
o    Need actual proof that the practice resulted in an unreasonable restraint of trade
·         United States v. United States Gypsum (SCOTUS, 1978) [202] {Burger} s105, 108
o    Gypsum manufacturers telephoned each other to determine each other’s price
o    Intent cannot be inferred from effect; D must b

case showing the plus factors
 
Market Allocation
Horizontal Market Divisions
·         United States v. Topco Associates (SCOTUS, 1972) [343] {Marshall}
o    Independent grocers from different regions formed a buying coop and private label brand called Topco w/ each grocer getting an equal share, and an exclusive territory to market the new brand
o    These grocers were the small firms in their regions; each one held only 6% of the market on average.
o    SCOTUS took a hard line and ruled that TOPCO had committed a per se violation of the Sherman Act.
o    Dissent (Burger) – ancillary to the pro-competitive joint venture (probably prophetic view)
·         Polk Bros v. Forest City Enterprises (7th Circuit, 1985) [350] {Easterbrook} s111,112
o    P & D had an agreement; P to erect building w/ partition, do not sell/stock competing products
o    D wanted to breach covenant to not compete, P sued for injunction
o    Joint venture è rule of reason
o    Not a naked restraint, rather it is ancillary à injunction granted
o    More modern view than Topco
·         Palmer v. BRG of Georgia (SCOTUS, 1990) [353] {per curiam}
o    Law student sued because of price increases in bar prep courses
o    Revenue sharing agreement between HBJ and BRG à per se unlawful market division (Topco)
 
Boycotts and Other Concerted Refusals to Deal
 
Development of a Per Se Analysis: Collective Agreements Aimed at Competitors
·         Eastern States Retail Lumber v. United States (SCOTUS, 1914) [356] {Day}
o    Blacklist of those who sold direct to the public à group boycott è per se unlawful
·         FOGA v. FTC (SCOTUS, 1941) [357] {Black}
o    Boycott agreement to prevent “style pirates” between 12,000 retailers
o    Per se violation à FTC cease and desist order upheld
·         Klor’s v. Broadway-Hale Stores (SCOTUS, 1959) [358] {Black}
o    Broadway-Hale, and 10 household appliance manufacturers/distributors agreed not to sell, sell at discriminatory prices, household appliances to Broadway-Hale’s small, nearby competitor, Klor’s
o    Group boycotts, or concerted refusals by traders to deal with other traders, have S been held to be in the forbidden category è per se unlawful, do not look at reasonableness
·         Nynex v. Discon (SCOTUS, 1998) [363] {Breyer}
o    Nynex decided to buy from one seller rather than Discon (strictly vertical), plus no group
§ Right of companies to switch suppliers for any reason which is not anticompetitive
o    Allegation of harm w/o proof is not enough
o    Not a per se violation of the antitrust laws à rule of reason must be applied
·         Brooke Group v. Brown & Williamson (SCOTUS, 1993) [367] {Kennedy, dissent Stevens} – skipped
o    Holding
§ No per se rule of non-liability under Robinson-Patman Act for predatory price discrimination when recoupment is alleged to take place through supracompetitive oligopoly pricing, but
§ Competitor’s alleged below-cost sales of generic cigarettes through discriminatory volume rebates did not create competitive injury in violation of Robinson-Patman Act.
o    Special motive does not matter
o    Similar to Matsushita; P’s required to show:
§ Changed prices below an appropriate measure
§ Dangerous probability of recouping its investment in below-cost prices
o    Very hard to meet this standard
o    Professor does not like this case