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Antitrust Law
University of California, Hastings School of Law
McCall, James R.

ANTITRUST
 
I. Introduction
 
A. History and Economics
 
1. Antitrust Statutes
 
a. Sherman Act (1890): vague; invited courts to make antitrust common law; of course limited to interstate commerce. 
i. Section 1 deals with contracts, combinations, and conspiracies in restraint of trade or commerce. Makes illegal any unreasonable restraint on trade.
ii. Section 2 deals with unilateral actions to monopolize or conspire to monopolize any part of trade or commerce. 
 
b. Clayton Act (1914): designed to tighten up the Sherman Act. 
i. Section 3 prohibits tying of products (silent as to services) that substantially lessens competition or tends to create a monopoly. 
ii. Section 4 provides both public and private rights of action for violations of Sherman or Clayton Acts.
 
2. Economics Behind A/T Law
 
a. Basic Rule: A/T laws are designed to protect competition. 
 
b. Works on assumption that you already have a market economy.
 
c. If there is no competition to protect, then no need for A/T law. 
i. If industry heavily regulated, then no need for A/T law.
ii. Free markets are the most efficient system of allocation
 
d. A/T law needed when the market is the regulator.
 
e. Monopoly is when one firm controls 100% of the product market
i. We use the term loosely because true monopolies don’t really exist. 
ii. When defining the a monopoly you have to look at the definition of the product and the market.
 
f. Monopsony is when one buyer controls all of good’s consumption
 
g. Economics plays a big role in understanding A/T law.
i. Debate is not whether economics should be used in A/T analysis. Debate is what kind of economics should be used.
ii. In last 20 years, Chicago school has started to dominate A/T field.
iii. Chicago School => allocative efficiency and consumer welfare (Bhagwat)
iv. populists => protect small business from big business. Control robber barons
v. Biggest difference between Chicago School and everyone else is that Chicago School thinks there is too much A/T law, which hurts the economy; overregulation hurts free market.
 
3. History of Antitrust Law
 
a. Some common law of antitrust developed
 
b. Common law evolved from voiding all restraints on trade to permitting almost all of them.
i. restraints that were ancillary to some otherwise lawful transaction
ii. reasonable as to public interest
iii. almost anything, even naked restraints, were upheld.
iv. in U.S. only unreasonable restraints were void.
v. unreasonable if greater restraint than necessary, imposes undue hardship, creates a monopoly, etc. 
vi. Examples of enforceable restraints include: covenant not to compete by seller of business, business partners, employees, etc.
vii. Examples of unenforceable restraints include: naked restraints not incidental to the sale of a business, exclusive dealing contracts with intent of creating a monopoly, etc.
viii. Common law monopoly granted by the monarchy
 
4. Competition as an Economic Model
 
a. Perfect Competition (which does not happen in real world). However, goal of A/T law is to get us closer to perfect competition.
i. ideal manner in which markets should work
ii. Perfect competition should occur with:
* numerous buyers and sellers
* no collusion
* homogenous products
* full knowledge
* free access to markets
* no barriers to entry
iii. Results
* price = MC = MR (productive efficiency)
* no economic profits will exist (allocative efficiency)
* equilibrium, markets

s less frequently than it seeks equitable relief.
iv. When DOJ does pursue criminal proceedings, it is usually only for a per se violation or egregious predatory conduct.
 
b. Private actions
i. Section 4 of the Clayton Act provides a private right of action to any person injured by reason of anything forbidden by A/T laws, plaintiff shall receive treble damages, and reasonable attorney’s fees.
ii. Section 16 of Clayton Act provides a private right of action for equitable relief from threatened loss or damage by a violation of A/T laws.
iii. Due to strong incentives for private actions under Clayton Section 4, and Clayton’s Section 4 language is so broad, the courts have limited the number of suits by requiring the plaintiff to have both A/T standing and A/T injury.
 
c. A/T standing
i. Proximate cause is necessary for recovery.
ii. The injury to the plaintiff must be the direct result of the defendant’s actions. Would-be plaintiffs who suffered an injury indirectly from a firm’s actions most likely will be unable to sue under Clayton Section 4. 
iii. indirect injurees might be able to recover, very unlikely, if they can prove some reason why the directly injured party cannot sue or they can’t sue the party that directly injured them. Court created balancing test in Associated General Contractors
* is direct victim in a good position to sue?
* how direct is the injury?