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Antitrust
University of Dayton School of Law
Gerla, Harry S.

ANTITRUST
 
–          3 1 hour essays
–          on 3 of 4 topics: Monopolization (Sec. 2), Mergers, Sec. 1 horizontal, or Sec. 1 vertical
 
Overview
 
–          Main AT sections are §1 & 2 of Sherman Act (government criminal enforcement) and §7 of Clayton Act (private right of action – allows for treble damages)
o       To be a crim violation must show action entered into purposely or knowingly to restrict/unjure competition
–          Statutory language is very broad, often left up to courts
–          Congress gave cts virtually a blank check to develop a common law for violations of the statutes
 
Remedies – injunctive action by govt (often FTC or DOJ); criminal action; private civil action under Clayton Act allows for treble damages and fees
 
What are goals of AT statutes?
1.      enhance competition – what is competition? Business, economic, etc.
2.      enhance efficiency of economy – max. output of products and services
3.      enhance internal efficiency of firms by preventing firms from restricting competition
 
What tools should courts use in AT?
–          some argue only principles of neoclassical econ. be used
–          some say shouldn’t only be these principles
o       neoclassical too limited
o       use Industrial Organization – suggests fewer firms in market more cust. will pay
o       fewer firms in market more likely they will collude and act together (structured conduct paradigm) – don’t need a monopoly
–          or use a post-Chicago model – some truth to the neoclassical and IO models, but need to look at more to determine behavior
o       Game Theory – mathematical approx. of how will behave
o       Psychology influences
o       Want to bring in other insights
 
§1 HORIZONTAL
 
Cartels
–          worst type of AT violations
–          most common form is price-fixing – competitors decide jointly on a profit-maximizing price and enforce the agreement
–          groups must include all significant producers or all significant buyers
o       must be competitors (horizontal restraint)
o       barriers must keep non-cartel members our of the market or keep from expanding
o       must have good means to administer the cartel
–          to have a horizontal violation must not be 1 entity (no horizontal relationship)
o       such as trade organizations – members do not share the risk
o       whereas, law partners are in a partnership and do share risk
–          cartels tend to get together to do certain things
o       fix prices, fix output, arrangements not to compete (divide territories, customers, etc.)
o       traditional cartels forbidden by §1 Sherman
–          some contracts are so bad they are virtually illegal
o       have no procompetitive justification (per se illegal)
–          others are more in gray area
o       reasonableness of the K or restraint of trade that has to be judged (cts. do not judge on price can’t figure out what a reasonable price is, the market will do that)
o       IS the restraint ANCILLARY to a legitimate business venture
§         Is the restraint reasonably necessary to the success of a legitimate business venture?
 Ancillary restraints can be ok in certain circumstances, but if a NAKED restraint merely to restraint competition with no other valid purpose it would be per se illegal
–          Hard core price and output fixing and for group boycotts which involve innocent third parties; and resale price maintenance – if this is what is occurring ct will not allow any argument that act is ancillary to fixing
–          Horizontal max and min price fixing are per se illegal
–          In vertical only min price fixing is per se
o       Max is ROR
–          can have a network product that is a joint venture

itors to do/not do X)
o       some restraints may help competition
o       some restraints can be ok (limited duration exclusive distribution agreement)
o       does the restraint actually produce the procompetitive effect claimed
o       is it reasonably necessary?
o       restraint must have a real obvious procompetitive effect
o       are there plausible procompetitive effects AND no obvious alternatives
o       if def presents procompetitive effects and no obvious alternative method will get a full ROR
–          NCAA – SC applied ROR because involved an industry in which horizontal restraints and structure are needed in order to have competition
o       There was a clear limitation on output (how many school could have on TV)
o       Product was college football and it was joint
§         Need multiple schools to have sport
§         Per se rule invoked when surrounding circumstances make the likelihood of anticomp conduct so great as to render unjustified further exam of challenged conduct
 
Trade Associations – prof assoc unlikely to be per se unreasonable, will more likely do ROR
            – most do no have obvious anticompetitive effects
 
Group Boycotts
–          in some instances group boycotts can be allowed
–          classic group boycott is aimed at competitors
 
PER SE RULE
–          some prohibited practices by their very nature have a substantial impact on competition and are illegal
–          don’t need to prove market power, but always a factor