Federal Antitrust
Fall 2017
Daniel Crane
I. The Basics
Types of anticompetitive conduct: Collusion; Exclusion; Merger
1890s “Enacting the common law.” à values from Dyer’s, Schoolmaster’s, Darcy v. Allein. (see Policy Outline).
Legislative history shows Congress didn’t think they were doing anything radical.
That trusts injured consumers through higher prices and lower quality, but also that want to help the little guy compete.
US v. Trans-Missouri Freight (1897) p. 35: Reject RoR in favor of literal reading of Sherman Act. Rejects “would have been legal at common law” argument. (Misstep)
Other Laws:
Section 3 of Clayton act: tend to monopoly/suppress competition. Like Section 2.
Section 4 of the Clayton Act giving the private cause of action + Treble damages.
Section 6 of the Clayton Act à Labor isn’t an article of commerce.
Section 5 of the FTC Act, “unfair competition” à coextensive with sections 1 and 2 of Sherman Act. So they can get an injunction. (But supposedly goes beyond it?) In theory allows FTC to go after unfair practices not covered by sections 1 and 2. In practice they don’t get anywhere in courts.
One possible open area: “solicitation to price fix” or other incipient violations-waiting-to-happen.
“Guidance” includes:
(1) guided by consumer welfare
(2) to the extent that the FTC brings a case, they will argue under RoR
(3) if illegal under section 1 or 2, will use that.
II. Antitrust Immunity
Noerr-Pennington Petitioning Immunity
Petitioning activity is going to be fine, whether to the legislature (Noerr), executive (Pennington), or administrative/judicial systems. UNLESS the sham exception applies.
Sham Exception: Must be an attempt to directly interfere with the business. To be a sham, it cannot depend on successfully persuading the government to take the recommended action. It must be unmediated by the success of the petition.
E.g., by bringing a bogus lawsuit, you can scare away all the investors and the competitor goes out of business.
It is an appropriation of the political process to run the competitor out of business (regardless of the outcome of the political process.).
NOTE: some lower courts say that actual fraud on courts/adjudicators (rate regulators) might be a sham (even though damage came from government). But actual fraud on legislator/executive is not a sham.
In Lawsuit Context, Sham Exception applies: if the lawsuit is (1) objectively baseless (no reasonable litigant could realistically expect to win, probably need around 25 or 30% chance of winning, something like objective good faith for Rule 11 sanctions) AND (2) subjectively intended to directly interfere with the rival in an anticompetitive way. Professional Real Estate Investors.
Concurrence notes that must take into account risk * expected value à % alone doesn’t capture incentives.
IF APPLIES à FULL ANTITRUST ANALYSIS.
Cases:
Eastern RR Pres. Conf. v. Noerr Motor Freight (p. 390): paying people to convince legislators to favor legislation against trucking, making truckers less competitive. Antitrust laws don’t apply to petitioning activity. Resolves on statutory interpretation grounds (constitutional avoidance) Footnote 23.
Pennington: applies the same thing to executive petitions.
Professional Real Estate Investors: Former defendants bring sham exception case against former plaintiffs, saying was a harassing lawsuit. The Sham exception applies in the judicial context when it is an objectively baseless lawsuit that was subjectively intended to directly interfere with the competitor.
Parker v. Brown State Action Immunity:
Doesn’t apply to federal government! Protects state actors and private actors working under state authority.
Modern Test: From Midcal: In order to get immunity:
(1) It must be clearly articulated and affirmatively expressed as the policy of the state to suppress competition
If it is permissive, can be a clear and articulated state policy, but still look for coercion. Southern Motor Carriers.
“Home Rule Authority” (for regulation) to municipalities is not enough: municipalities are not the state for Parker purposes—State must affirmatively speak first. County Comm. v. Boulder.
If you give the power to suppress competition explicitly, it may be enough.
The power given must very predictably lead to suppression of competition.
State granting the right to Authority acquire or lease hospitals is not a clear articulation of state policy because Court doesn’t think the state considered the consolidation/reduction of competition. FTC v. Phoebe Putney. So it gets RoR as a merger case!
AND (2) the implementation of the policy must be actively supervised by the state.
N. Carolina Dental: delegate to a dental board, they are private actors and self-interested in suppressing competition. State must disinterestedly and actively supervise the board.
The mere possibility of a veto after board action is not enough: FTC v. Ticor Insurance case. Need the state to actually issue a decision endorsing it.
NOTE: municipal actors ARE state actors under this prong. Municipalities can enforce it, as long as the state clearly articulated it.
Private actors working under state action are also protected. Omni Outdoor Adv.
Possible Exception: Commercial Activity (look for contracts with the government)
No exception for conspiracy or corruption! Omni Outdoor (to Parker OR Noerr-Pennington)
Goal: let political accountability do its work. Representation reinforcement.
Must be clear, with political ownership. Ensure that the political process works.
PROBLEM: Cost externalization. People who are harmed by the state action may be outside the state! That means they don’t vote.
Cases:
Parker v. Brown: California statute limiting raisin production. Held: the Sherman Act does not preempt anticompetitive state action. Comes out of Lochner era, Court wants to be done invalidating state statutes.
Inversion from the original meaning of “monopoly”à now the state just uses police powers!
Chicago school doesn’t like because think that the state is the problem, not the solution (leave markets alone!).
Boulder Case: Fails clear articulation because the State’s position is one of “mere neutrality” towards the municipality suppressing competition
FTC v. Phoebe Putney: Fails clear articulation because Georgia did not affirmatively express a policy allowing hospital authority to make acquisitions that substantially lessen competition.
N.Car. Dental: No active supervision because the dental board is run by a
conclude that they didn’t agree.
Twombly: same, need more than parallel action. It must be more probable than not that there was agreement. Tend to exclude the possibility of independent action. You don’t necessarily have to plead the plus factors. But functionally need them. Clear reason why they would want to exclude a competitor individually, no collusion implied. Common understanding à retailiation is still just conscious parallelism.
Matsushuita Electric v. Zenith Radio: claim so implausible that dismissed at summary judgment
Note On Facilitating Practices:
Facilitating practices can be evidence of a price fixing agreement, like plus factors (they are structural conditions). See above. Blomkest.
OR: they can be the agreement that pulls the claim into Section 1. Todd. The fact that they make conscious parallelism easier might mean that it is an anticompetitive in and of itself. Rule of Reason. If conscious parallelism is easy, then it might be an unreasonable restraint of trade even if it isn’t per se illegal as price fixing.
Types of Facilitating Practices:
Information exchange
Most Favored Nation: market-wide disincentive to lower prices.
Meeting competition clauses: same as above.
Base-Point Pricing: Set delivery prices based on arbitrary shipping amount. Arbitrary pricing component means there is less incentive to lower prices for other firms. (note: still must be agreement).
Resale Price Maintenance: Leegin indicates that major concern with RPMs is that it makes it easier to enforce a price-fixing cartel at either the manufacturer or retail level (as hub/spokes). Creates a mechanism to catch cheaters. It is most suspicious when it is (1) pervasive in the market and (2) retail-firm originated. Leegin. [NOTE: can indicate agreement or BE the agreement]. Some states keep Per Se analysis. Prices go up based on RPM (but maybe quality does too).
Information Exchange as a Section 1 Violation
KEY QUESTION: does this information exchange facilitate anticompetitive pricing? If it does, then it could be an unreasonable restraint of trade.
Important factors:
In Todd: Structure of the industry, fungibility (makes it easy to agree on price), elasticity (inelastic indicates market power), market concentration. (all the factors that make it likely for an anticompetitive agreement to be successful).
Timing: Information about future is more risky.
Specificity: The more specific, the more suspicious. Aggregated data is less useful for cartels.
Public Dissemination/Information Sharing: If secret then more suspicious. If public, might benefit the public.
Meetings or Communications in addition to the information exchange.
