Federal Antitrust Policy, The Law of Competition and Its Practice
Author: Hovenkamp, Herbert
Copyright Date: 2020
36 chapters have results for Federal Antitrust Policy: The Law of Competition and Its Practice
Preface 5 results
- This sixth edition of
- This book seeks to give a full, although brief, accounting of United States antitrust law. Today the union of antitrust and economics is so complete that one cannot study antitrust seriously without at least minimal exposure to economics.
- A citation to “Antitrust Law” in the footnotes refers to Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application (22 vols. plus Supp., 2014–2021).
- Law school antitrust curricula vary considerably, with some classes focusing only on questions of substance, some involving many questions of enforcement and procedure, and some being quite creative in their application of economics. I have tried to accommodate all of these to one degree or another. I have also attempted to provide a level of detail and analysis that makes this book a useful resource for the practitioner, judge or other antitrust scholar.
- I chose the word “policy” for the title, since this book attempts both to state the “black letter” law and to present policy arguments for alternatives. Although I frequently disagree with court decisions, in all cases I have tried to state clearly what the legal rule is, and then give the reasons for my disagreement. Of course, I have my own views. But here I have tried to present alternative views fairly, and to uncover the premises upon which they rely.
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Chapter 16. Private Enforcement 433 results (showing 5 best matches)
- Properly used, the antitrust injury doctrine can serve the useful function of requiring the plaintiff to show at an early stage the precise relationship between its injury (or threatened injury) and the amount of competition in the market. The result may expose those complaining of a rival’s increased efficiency; it may also serve to uncover breach of contract claims or other common law claims disguised as antitrust suits. Although many plaintiffs may have been wronged in some abstract or common law sense, or perhaps even by violation of some other federal statute, they do not have an antitrust claim unless their injury results from a practice designed to increase price, decrease output, or eliminate rivals with monopoly as a goal.
- The plaintiff who is not affected in the right way by an injury to competition must be distinguished from the one who is injured when there is no harm to competition at all. Some decisions seem to confuse “antitrust injury” with the lack of any violation. For example, in denied standing on antitrust injury grounds to a maker of abrasives (such as automobile sand paper) who was ousted from several retailers’ shelves by the aggressive but above cost bidding of a rival. The court concluded that the plaintiff was injured by greater competition rather than less, and that seems to be true. But the proper avenue would then have been to dismiss the complaint for lack of an antitrust violation, not for lack of standing. A rival who is excluded from the market by a dominant firm’s ...clearly have standing. Further, accepting the complaint as true, the plaintiff was clearly injured and the injury was “caused” by the defendant’s aggressive behavior. The problem was that the behavior did...
- This chapter is concerned mainly with enforcement of the federal antitrust laws by private persons. It also includes a few issues, such as statute of limitation, jury trial, motions to dismiss, and summary judgment, use of experts, and collateral estoppel that may be relevant to both public and private enforcement of the antitrust laws. These discussions are placed here for convenience, and because most questions have risen in the context of private antitrust litigation.
- In antitrust litigation as in any other federal litigation a plaintiff seeking to get an antitrust trial must first get over two rather high procedural hurdles. First, the plaintiff must file an antitrust complaint that shows its entitlement to relief; successful resistance to a motion to dismiss entitles the plaintiff to discovery and development of a record. Second, prior to trial today virtually every private antitrust plaintiff must also withstand a motion for summary judgment, which examines the record to that point and determines whether a trial is justified.
- In denying recovery, the Supreme Court observed that many antitrust violations could cause “losses which are of no concern to the antitrust laws.” In order to recover, a plaintiff must show not only that an antitrust law has been violated and the plaintiff injured. It must also show “antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Such an injury should “reflect the anticompetitive effect * * * of the violation * * *.” Today “antitrust injury” has been established as a requirement for private actions under virtually all of the antitrust laws. It has become an essential element of private plaintiff standing.
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Chapter 20. Antitrust Federalism and the “State Action” Doctrine 223 results (showing 5 best matches)
- On the early use of state law against anticompetitive practices, see Herbert Hovenkamp, Enterprise and American Law: 1836–1937, chs. 20 & 21 (1991); James May, Antitrust Practice and Procedure in the Formative Era: the Constitutional and Conceptual Reach of State Antitrust Law, 1880–1918, 135 Univ. Pa. L. Rev. 495 (1987). On state antitrust law generally, see 14 Antitrust Law Ch. 24 (4th ed. 2019), which develops the most important differences between federal and state law.
- State and local governments are not free to regulate without any restraint whatsoever. Nevertheless, the mere fact that state law differs from federal antitrust policy is generally not enough to preempt the state or local law. This is often the case where the state or local law regulates more intensively than federal antitrust law does. For example, upheld a state statute forbidding vertical integration by petroleum refiners into retailing, notwithstanding that federal antitrust law generally permits vertical ownership and regards most of it as efficient. upheld a state antitrust statute with no effective statute of limitation, even though this may have permitted an antitrust action to survive longer than permitted by the federal four year statute. Finally, state antitrust laws that permit indirect purchasers to sue for damages have been upheld, notwithstanding that federal law limits damage recoveries to direct In its ...Court held that the federal Natural Gas Act did not... ...of...
- Questions concerning the relation between state antitrust policy and federal law implicate the Supremacy Clause relatively more often. The easy case concerns the state law that purports to permit something that federal antitrust prohibits. The great railroad case first established that the fact that a merger was legal and had been approved under the law of a particular state had nothing to do with its legality under federal antitrust law—to that extent, state law was preempted.
- One could take a variety of approaches to the problem of allocating decision making affecting competition between state government and federal antitrust. One approach is an efficiency test: efficient, or competitive state or local regulation should be permitted, but harmful regulation should be found inconsistent with federal antitrust policy. Such a rule has an intuitive appeal. First, it furthers a general federal policy of making efficiency the principal goal of antitrust enforcement. At the same time, it ensures that federal and state policy will be harmonious.
- One situation where state antitrust law may stand “as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” occurs when a plaintiff maintains a state antitrust action not because the relief offered is superior, but because maintaining a distinct lawsuit has strategic value. Under the liberal consolidation provisions of the Federal Rules of Civil Procedure, numerous federal antitrust suits involving the same defendants and claims will be joined together in a single proceeding, at least at the pretrial stage. Although this procedure is efficient, it is particularly beneficial to a defendant who can now respond to discovery and other requests once rather than a dozen times. One way a plaintiff can avoid transfer is to stay out of federal court altogether. However, the federal courts have exclusive jurisdiction over federal antitrust claims, so the plaintiff will have to proceed under state law. In this situation the “nuisance value” of a...
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Chapter 15. Public Enforcement of the Federal Antitrust Laws 88 results (showing 5 best matches)
- There are two views about the wisdom of the FTC’s use of § 5 to go beyond the substance of the antitrust laws generally. One view looks to the substance of those laws, with their central concern for competition. If the case law under the antitrust laws defines our concerns for competition correctly, then it is wrong for the FTC to go further. In effect, it would turn antitrust into the regulation of “unfair” rather than anticompetitive trade practices. This suggests that the decisions noted above, condemning tying and exclusive dealing without any showing of harm to competition, are incorrect.
- See also 14 Antitrust Law, Ch. 24 (4th ed. 2019), which surveys and updates state antitrust law and compares it with federal law; ABA Antitrust Section, State Antitrust Practice and Statutes (4th ed. 2009);
- But there is an alternative view, perfectly consistent with the proposition that the FTC’s antitrust concern should be limited to identifying practices that are economically anticompetitive. The FTC is a regulatory agency, which is more specialized than courts and not as bound by strict rules of procedure and evidence. Further, its general remedy, at least in most cases, is a “cease and desist” order. Findings of violations of the FTC Act that are not also antitrust violations will not support subsequent private actions for treble damages. As a result, application of the FTC Act to practices that do not violate the other antitrust laws are appropriate when (1) the practice seems anticompetitive but is not technically covered by the antitrust laws; and (2) the social cost of an error seems to be relatively small.
- The Federal Trade Commission is a regulatory agency established during the Wilson Administration in 1914. The Commission consists of five Commissioners appointed by the President subject to Senate confirmation for seven-year terms. The FTC has authority to enforce the substance of all of the antitrust laws. This includes direct authority with respect to the Clayton Act and the Robinson-Patman Act. With respect to the Sherman Act, the FTC has no direct enforcement authority, but its authority to challenge “unfair methods of competition” under § 5 of the FTC Act has been interpreted to include all practices condemned under the Sherman Act.
- The public enforcement of the federal antitrust laws is largely in the hands of the Antitrust Division of the Department of Justice (“Division”) and the Federal Trade Commission (“FTC”). Technically, only the Division has authority to engage in public enforcement of the Sherman Act. However, the FTC may bring actions challenging unfair methods of competition under § 5 of the Federal Trade Commission Act, which has been interpreted to include everything in the Sherman Act, plus a few practices that are not covered by the Sherman Act. The Division and the FTC have concurrent authority to enforce the Clayton Act. Since the jurisdiction of the two agencies overlaps, they have developed clearance procedures for notifying each other before conducting investigations or filing actions. If both are found to be pursuing the same inquiry, the two agencies decide which will handle it, based generally on considerations of expertise, staff availability, and so on. If the matter involves likely...
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Chapter 2. History and Ideology in Antitrust Policy 266 results (showing 5 best matches)
- Antitrust has always been closely tied to prevailing economic doctrine. To be sure, antitrust policy makers sometimes applied economics ineptly, sometimes gravitated toward the fringes of economic theory rather than the center, and sometimes pushed good points too far. But even the common law was driven largely by the then-prevailing rules of classical political economy concerning the nature of competition and the efficiency consequences of various anticompetitive practices. The older common law was quite tolerant of collusion and most vertical practices simply because classical political economy had an extremely robust view of the market, particularly of the role of potential competition and easy entry in disciplining any attempt to raise prices above With the rise of neoclassicism in the 1870s and 1880s (best identified with the development of the marginal cost and marginal revenue curves), the analysis became more subtle and economists became increasingly aware of market...
- The classic, highly factual account is Hans B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (1955). A few of the others are Rudolph J.R. Peritz, Competition Policy in America, 1888–1992: History, Rhetoric, Law (1996); William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (1981); Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1890–1916: The Market, the Law, and Politics (1988); Herbert Hovenkamp, Enterprise and American Law: 1836–1937 (1991); Tony Freyer, Regulating Big Business: Antitrust in Great Britain and America, 1880–1990 (1992); Herbert Hovenkamp, The Opening of American Law: Neoclassical Legal Thought, 1870–1970, chs. 11–12 (2015). The legislative history of the antitrust laws is collected in Earl W. Kintner, The Legislative History of the Antitrust Laws (1978). On the history of antitrust policy toward vertical restrictions, see Laura Phillips Sawyer, American Fair Trade:...
- Disingenuous or not, all of this was immensely valuable to emergent federal antitrust policy. One of the great accomplishments of Taft’s opinion was to fuse the emerging economic model of competition with the traditional legal doctrine of combinations in restraint of trade. In the process Judge Taft created the illusion that the law of combinations in restraint of trade had always been concerned with competition as defined in neoclassical economics. The result was a Sherman Act whose ideology was much more economic than that reflected in either the common law or the Congressional history. Congress’ own notion that the Sherman Act simply federalized the common law cut the courts free from the Act’s legislative history, but Taft’s decision effectively freed the courts from the substance of the historical common law. From that point on, federal courts forged their own set of antitrust rules through an essentially common law process in which only Sherman (and later Clayton) Act...
- As noted in § 2.1c, the New Deal period saw substantial inroads of economic theory into antitrust policy. But at that time the dominant economic ideology was also quite suspicious of unregulated markets and inclined to believe that government regulation would work better. Beginning after 1935 or so, American antitrust policy became increasingly aggressive against mergers and various vertical practices. Once again, the change did not occur in spite of prevailing economic doctrine. On the contrary, it was driven by economic theories such as those developed in Edward Chamberlin’s theory of monopolistic competition, a New Deal classic that emphasized the role of imperfections such as product differentiation in American markets. Within this framework competition was regarded as a fragile state of affairs that could be maintained only by constant antitrust supervision. The reaction to this New Deal ideology led directly to the concept of “workable competition,” which was extremely...
- But a half century of subsequent economics has strongly indicated the contrary. Oligopoly, monopolistic competition and their variations seem to be highly durable, and competition appears to be more fragile than Stigler believed. In most empirical economic analysis today various models of imperfect or monopolistic competition perform much better than models of perfect competition. As a result, a good case can be made that the error cost framework should be flipped: false negatives are more costly than false positives. This does not mean that antitrust law should leap to irrational theories of competitive harm, as it has sometimes done in the past. Nevertheless, there are tweaks that would improve error cost analysis. One is to make the plaintiffs burden in a rule of reason case lighter. In a rule of reason antitrust case the plaintiff must typically show power and make out a prima facie case of anticompetitive effects sufficient to require the defendant to provide an explanation. At...
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Chapter 5. Joint Ventures of Competitors, Concerted Refusals, Patent Licensing, and the Rule of Reason 683 results (showing 5 best matches)
- For bona fide joint ventures, the purpose of the antitrust laws is not to destroy the venture or undermine its principal purposes, but rather to evaluate how the challenged restraint operates within the venture and condemn unreasonably harmful restraints. SSOs should be addressed accordingly. The goal of the standard setting venture is to facilitate competitive operation and entry, interoperability, as well as preserve appropriate competitive incentives for research and development. Antitrust analysis necessarily involves testing conduct against these goals, but only to the extent of looking for practices that are anticompetitive. This means it must identify practices that reduce market wide output unreasonably or that are unnecessarily exclusionary or harmful to consumers because of their impact on competition. Antitrust law has no statutory authorization to oversee the standard essential patent process aside from its power to police anticompetitive practices.
- Another reason for applying a more aggressive antitrust standard to joint activity than unilateral conduct harkens back to the “restraint of trade” standard stated in § 1 of the Sherman Act. Conduct restrains trade when it results in lower market output—measured by quantity or quality—and thus higher prices than competition would produce. By contrast, efficient conduct results in higher output and thus lower prices. Antitrust tries to determine the classification in which a particular venture rule belongs. By contrast, the antitrust laws do not recognize an offense of merely “being a monopoly.” A firm with monopoly power is free to set its monopoly price, and is thus also free to reduce its output accordingly. Because most dominant firms are the result of either historical accident or a long period of growth resulting from efficiency, we ordinarily leave the dominant firm alone as long as it does not engage in anticompetitive exclusionary practices designed to perpetuate or strengthen
- Claims of patent misuse might initially be tested by antitrust principles, but that cannot be the end of the story. After all, “misuse” is a creature of IP law, which protects values that are distinct from the competition values protected by antitrust. One value is protection of access to the public domain. Another is protection against practices that serve to restrain rather than promote innovation, even though they may not be technical antitrust violations.
- “Misuse” typically arises because, in the court’s view, the patent is being used inconsistently with the policy of the IP laws or competition policy. This naturally invites the question of what the source of law is, given that most of these practices are not explicitly forbidden by the IP laws themselves. As a general matter the courts have readily found misuse in the case of well established antitrust violations. Many, but not all, instances of patent misuse are practices analogous to unlawful tying arrangements, which are taken up in chapter 10. Clayton Act § 2, which was intended to be applied to tying and exclusive dealing, applies its proscriptions to all goods and commodities, “whether patented or unpatented.” In general, a “tie” of two products, or ..., is unlawful only if the seller has market power in the tying product or substantial anticompetitive effects result from the requirement. Indirectly, by admitting various defenses, many courts effectively assess both of these...
- On the interest rate claim, an injunction against American Express would not be able simply to order AmEx to set a “competitive” interest rate. Rather, it would have to develop some criteria by which the competitive interest rate is determined, and this rate might change as the inflation rate changes. An interest rate order directed against a single firm effectively regulates its prices—an activity for which federal courts are not well suited and which in any event seems quite contrary to the general antitrust goal of facilitating competition rather than regulation. By contrast, an interest rate injunction against the Visa venture requires no more than is required in any cartel case: an order prohibiting the Visa members from fixing an interest rate. After that, competition among the 6000 Visa issuing banks would probably produce the appropriate rate. Thus, for example, a court order forbidding the NCAA from fixing the maximum price of basketball coaches need do no more than enjoin...
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Chapter 7. Exclusionary Practices in Monopolization and Attempt Cases 481 results (showing 5 best matches)
- the Federal Circuit held that a firm that acquired but did not use a patent could obtain an injunction shutting down a competitor who infringed the plaintiff’s unused patent but not any patent that the plaintiff actually practiced. decision has generally been interpreted to deny injunctions to non-practicing patentees, the court created an exception for a firm that is actually competing with the infringement defendant, although not infringing any patent that the plaintiff was actually using. This rationale excessively subordinates competition policy to a poorly articulated value in patent law—effectively permitting a dominant firm to acquire patents on competing technologies and thus deny entry to competitors, even if it is not practicing these particular patents itself. The purpose of the Patent Act is to facilitate innovation, not to permit people to withdraw it from the market altogether. The decision highlights an ongoing concern about patent-antitrust policy: antitrust...
- There is no room in this analysis for balancing the benefits or worth of a product improvement against its anticompetitive effects. If a monopolist’s design change is an improvement, it is “necessarily tolerated by antitrust laws,” unless the monopolist abuses or leverages its monopoly power in some other way when introducing the product. To hold otherwise “would be contrary to the very purpose of the antitrust laws, which is, after all, to foster and ensure competition on the merits.” “Antitrust scholars have long recognized the undesirability of having courts oversee product design, and any dampening of technological innovation would be at cross-purposes with antitrust law.”
- More problematically, many of the things that the common law of torts branded as “unfair” were really nothing more than simple competition. That creates a conflict to the extent that the policies of the antitrust laws may be inconsistent with those expressed in other bodies of law, such as trademark or unfair competition. For example, an Internet marketing company might enable pop-up advertisements for a competitor’s goods to appear when the computer user is viewing the competitor’s Web site. Or a search engine firm such as Google might sell “sponsored” links that appear in a search for a competitor’s brand. In many cases the conflicts with competition policy are best met by adhering to a narrow construction of the Lanham Act and declining to find infringement simply because information about the competing good is made available to the searcher as well. As the Second Circuit has observed, “the Lanham Act must be construed in light of a strong federal policy in favor of vigorously...and
- create interconnection obligations, in some settings antitrust may be a superior device for doing so. First, antitrust is less likely to be affected by interest group pressures. Second, if the antitrust laws are properly applied they tend to be more selective, generally imposing interconnection only in the presence of a history that justifies it, clear dominance, and relatively clear necessity if competition is to be created or maintained. This may minimize the consequences of one forceful critique of traditional regulation by government agencies, which is that they impede innovation. Microsoft has received a few selective orders to share technology or keep access channels open where competition is unlikely without its cooperation. This includes the browser market in the United States or the server software market in Europe. By contrast, the interconnection obligations imposed by the 1996 Telecommunications Act are global, imposing very broad sharing obligations, in some cases even...
- Under this heading we note several practices, many of which can be addressed under other antitrust statutes, such as § 2 of the Sherman Act. The basic claim is that the defendant took an action that deprived its competitor of access to a needed input or a channel of distribution, and thus raised its costs.
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Chapter 8. Predatory and Other Exclusionary Pricing 289 results (showing 5 best matches)
- Even an act of pure malice by one business competitor against another does not, without more, state a claim under the federal antitrust laws; those laws do not create a federal law of unfair competition or “purport to afford remedies for all torts committed by or against persons engaged in interstate commerce.”
- Further, the Court observed, the two practices were not merely formally similar. They were also similar in ways that bore on risk and likelihood of success, and the antitrust policy’s concerns with overdeterrence. Both predatory selling and predatory purchasing are high risk-low payoff strategies. Further, both price cutting by the seller and aggressive bidding by the buyer are the “very essence of competition,”
- One objection to this focus on structure is that if the goal of antitrust law is deterrence, then the law should look at conduct rather than results. Refusing to find predatory pricing in competitive markets sounds a little like failing to find attempts generally. The common law offense of “attempt,” after all, is directed toward . Someone who points a gun at someone and pulls the trigger may be convicted of an attempt even though the powder is wet or the firing pin defective. thought the gun would work, and if we want to deter murders, that should be the thing that counts. So, the argument goes, if the goal of antitrust law is deterrence, then we want to deter people from attempting antitrust violations, even those where the likelihood of success is small. Indeed, the attempt itself can be socially costly. Failed predation has been described as a “gift” to consumers, because it produces low prices today and no subsequent monopoly prices later. ...competitors, and it may impose...
- But ability to exclude an equally efficient rival need not be the only test for an exclusionary practice. The fact that the defendant is pricing at less than its opportunity costs serves to explain why the price is irrational but for its impact on a rival, and socially harmful in that it prevents a more competitive market structure from emerging. What matters is not whether a hypothetical equally efficient rival would be excluded, but whether any of the rivals who are likely to appear on the scene will be excluded. A hub-dominant carrier nearly always has scale and scope advantages over new entrants. Under the Tenth Circuit’s ruling the antitrust laws would simply be impotent against predatory pricing by hub dominant carriers.
- In its most traditional form, “predatory pricing” refers to a practice of driving rivals out of business by selling at a price below cost. The predator’s intent—and the only intent that can make predatory pricing rational, profit-maximizing behavior—is to charge monopoly prices after rivals have been dispatched or disciplined. Predatory pricing is analyzed under the antitrust laws as illegal monopolization or attempt to monopolize under § 2 of the Sherman Act, or sometimes as a violation of
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Chapter 19. Antitrust and Federal Regulatory Policy 208 results (showing 5 best matches)
- Government regulation is ubiquitous and takes many different forms, many of which have little to do with antitrust policy or even with competition as such. For example, OSHA regulates job safety, Title VII regulates race discrimination and sexual harassment in employment relations, and various agencies regulate product quality and safety. None of these regulatory regimes is on an obvious collision course with the antitrust laws. The relationship between antitrust and regulation generally becomes problematic when the regulatory regime (a) controls price; (b) restricts entry or gives incumbent firms an advantage over new or potential entrants; or (c) requires or permits some practice that antitrust law ordinarily prohibits.
- This chapter is concerned with the relationship between federal antitrust policy and other forms of federal regulation. Then chapter 20 on the “state action” doctrine considers the relation between federal antitrust and the regulatory policies of state and local government. At first glance, the questions raised in these two chapters seem quite different from one another. After all, federal regulation and the federal antitrust laws are passed by the same level of government, and Congress has the authority to repeal, amend or create exceptions to the antitrust laws any time it wishes. By contrast, the relationship between federal statutes and state and local government regulation is governed by the Supremacy Clause of the Constitution, which demands that state and local law give way to valid, inconsistent federal law.
- The case for limiting the role of antitrust in the regulated industries is strongest when the federal regulatory statute exempts firms from antitrust liability. For example, the Shipping Act of 1984 contains a set of antitrust-like provisions that apply to common carriers regulated by the Federal Maritime Commission, and expressly prohibits private antitrust actions based on activities within the jurisdiction of that agency. Likewise, federal statutes regulating railroads and trucking permit firms to engage in joint rate making without running afoul of the antitrust policy against By contrast, in other cases, the federal regulatory statute may contemplate concurrent federal or even state authority. For example, in the Supreme Court concluded that provisions of the Natural Gas Act had been “meticulously“ drafted in order to protect the authority of individual states to engage in regulation of natural gas transactions within their territory. Further, this included application of...
- For more detailed analysis, see 1A Antitrust Law ¶¶ 249–251 (5th ed. 2020). In addition to the immunities discussed in the text, see the Charitable Donation Antitrust Immunity Act of 1997, which provides that “the antitrust laws, and any State law similar to any of the antitrust laws, shall not apply to charitable gift annuities or charitable remainder trusts.” . And see (provision immunized an agreement among universities and other charities suppressing competition in such annuities);
- In other cases, a federal agency has the authority to grant antitrust immunity as an administrative decision, although such authority will not generally be presumed. As a general matter, such “exemptions from antitrust laws are strictly construed,” and an antitrust court can, under appropriate circumstances, second guess both the agency’s interpretation of the law as well as its fact determinations.
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Chapter 21. The Reach of the Federal Antitrust Laws 163 results (showing 5 best matches)
- This section is concerned with the power of the federal courts to use the federal antitrust laws to reach activities that occur abroad, that contain a measure of foreign government involvement, or that raise actual or potential conflicts with the law of a foreign sovereign. Such conflicts pose significant problems for United States antitrust policy for two reasons. , American antitrust policy is more aggressive than the policy of many other countries, often condemning activities that other sovereigns regard as legal. That aggressiveness also applies to its system of remedies; in other countries treble damages are virtually unheard of and United States law is far more tolerant of private actions. , where antitrust is concerned, American enforcers and courts have been quite willing to assert American authority over activities occurring abroad, and not particularly accommodating of the conflicting policies of foreign nations. As a result, scholars of conflict of laws and international...
- Speaking more generally about extraterritoriality and comity concerns, the court observed that it is quite common for American products to be assembled from at least some foreign produced components that were subject to price fixing. Further, this price fixing often occurs in nations that either do not have antitrust laws or else where they are underenforced. The court observed that if such cartelists sell directly into the United States, then invocation of the Sherman Act by U.S. plaintiffs is not problematic, but the problem is different when the foreign cartel member sells to a foreign subsidiary, who then incorporates the price-fixed component into a finished product before shipment into the United States. Such situations fell within Supreme Court warnings about unnecessary U.S. interference with “a foreign nation’s ability independently to regulate its own commercial affairs.” ...position would “enormously increase the global reach of the Sherman Act, creating friction with...
- and thus it is still governed by the The Act follows earlier case law in not requiring a intent to affect American domestic commerce; rather, intent is measured, if at all, by an objective doctrine: foreseeability. The requisite effect must be direct, substantial and “reasonably foreseeable.” Further, the FTAIA expressly references the federal antitrust laws by the term “this title,” referring to 15 U.S.C., and thus does not limit the extraterritorial reach of state antitrust law. At least one decision has held that state antitrust law can be applied to conduct that occurs abroad if it causes injury within that state.
- Nonprofit entities participate in the commercial world all the time. Nonprofit hospitals provide services in competition with for-profit hospitals. Universities and their athletic teams buy and sell their services. Even churches, synagogues and other religious entities are engaged in buying and selling. Further, when nonprofits participate in commercial markets they often, although not always, do it in the same way that for profit firms do. They sell their services at whatever price the market will bear. They may have incentives to collude or even to engage in exclusionary practices. More fundamentally, a firm’s nonprofit status is merely one form of organization that actors voluntarily choose from among the menu of organizational modes offered by state law. Antitrust law is ordinarily indifferent to which form of organization the parties choose. It generally applies equally to corporations, partnerships, and sole proprietorships. The organizational type usually does not matter at...
- However, the relevant sovereign in a federal antitrust case is the federal government, not the state. This means that
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Chapter 1. The Basic Economics of Antitrust 429 results (showing 5 best matches)
- Antitrust law’s concern with this of monopolization, rather than merely with the outcome, is quite apparent from the statutory scheme. The law of monopolization requires not only a monopoly position, but also the commission of one or more anticompetitive “exclusionary practices,” thus signaling that the process by which monopoly is to be created determines its legality. We condemn collusion, attempts and conspiracies to monopolize, tying arrangements, exclusive dealing, mergers and other practices only because we believe that these tend to facilitate the creation of monopoly. We may sometimes be wrong about our underlying facts or even about the economic theories we employ, but the basic premise remains the same: the principal target of the antitrust laws is not static monopoly as such, but rather the manifold mechanisms by which monopoly is created or preserved. Indeed, there is no law of “no fault” monopoly; the innocent monopolist does not violate the antitrust laws simply by...its
- Monopolistic competition has become strongly relevant to merger policy. For example, it has strongly influenced the Government’s analysis of “unilateral effects” mergers. In general, a firm’s decision to diversify its product from those of rivals is not presumptively anticompetitive and, except for a few brief flirtations, has not been considered an antitrust violation. Product differentiation itself also serves to explain many vertical restrictions on distribution, tying arrangements, exclusive dealing and other practices that may sometimes be anticompetitive. Finally, the theory of monopolistic competition has had a considerable role to play in antitrust assessments of market power, particularly the extent to which competitive diversity or intellectual property rights enhance single-firm power.
- But the more pronounced effect of monopolistic competition is to limit the degree of head-to-head competition among firms. For example, a firm facing an efficient rival making an identical product could either cut its price to the bone in order to compete strictly on price, or else it could figure out a way to differentiate its product in order to make it distinguishable from its rival. Importantly, the decision to design a unique product is ordinarily unilateral and usually unreachable under the antitrust laws. Further, consumers typically prefer product variety. Nevertheless, the result is also higher margins and lower output than occurs under perfect competition.
- See 11 Herbert Hovenkamp, Antitrust Law ¶ 1807 (4th ed. 2019); Bruce H. Kobayashi, The Economics of Loyalty Discounts and Antitrust Law in the United States, 1 Competition Pol’y Int’l 115 (2005).
- Finally, one of the many costs of resource movement is the administrative cost of the cumbersome and imperfect machinery antitrust uses to analyze and deter anticompetitive practices. To the extent that the goal of competition policy is to increase wealth, administrative costs may counsel that certain practices be left unchallenged because the gains from enforcement will not exceed losses when enforcement costs themselves, including error costs, are included.
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Chapter 14. Price Discrimination and the Robinson-Patman Act 150 results (showing 5 best matches)
- The theory of injury embodied in the Robinson-Patman Act is an intellectually hostile, impenetrable swamp. On the one hand, the Supreme Court has held that the “antitrust injury” requirement for antitrust standing applies to the Act. This suggests a requirement of some kind of injury to “competition.” Courts have assessed such a requirement in “primary-line” Robinson-Patman cases, which involve a form of predatory pricing. In its the Supreme Court emphasized that the “may substantially lessen competition” language of the Act required a showing that competition was or would likely be injured by the defendant’s practices. This required a showing that the practice would create or perpetuate either monopoly or oligopoly. The Court then crafted a set of rigorous substantive rules designed to weed out cases where these threats were not sufficiently apparent.
- Secondly, while the Robinson-Patman Act is quite hostile toward economic competition, it is nevertheless disguised as an antitrust law. Furthermore, its inconsistencies with the other antitrust laws are so substantial that businesses have often complained that they can comply with the Robinson-Patman Act only by violating the other antitrust laws, or vice-versa. The Supreme Court has responded by trying to interpret the Act so as to make it consistent with the other antitrust laws. however, has done some violence to the Robinson-Patman Act and to its legislative history.
- Interbrand competition, our opinions affirm, is the “primary concern of antitrust law. The Robinson-Patman Act signals no large departure from that main concern. Even if the Act’s text could be construed in the manner urged by Reeder and embraced by the Court of Appeals, we would resist interpretation geared more to the protection of existing than to the stimulation of competition. In the case before us, there is no evidence that any favored purchaser possesses market power, the allegedly favored purchasers are dealers with little resemblance to large independent department stores or chain operations, and the supplier’s selective price discounting fosters competition among suppliers of different brands. By declining to extend Robinson-Patman’s governance to such cases, we continue to construe the Act consistently with broader policies of the antitrust laws.”
- See §§ 8.9b and 10.6e. In , Judge Wyzanski condemned price discrimination between different machine “types” as discriminatory. He acknowledged that there was no discrimination among customers. Rather, defendant USM was charging lower markups on machines in which it faced greater amounts of competition. But that is perfectly rational behavior consistent with competition. For example, a tiny home builder might bid with high or low margins depending on the amount of competition. See also 3A Antitrust Law ¶ 721 (4th ed. 2015); and Richard A. Posner, Antitrust Law 202–205 (2d ed. 2001) (somewhat agnostic conclusion that price discrimination as an exclusionary practice should generally be permitted for the time being, but might be condemned when more is known about it).
- By contrast, the courts continue to recognize secondary-line Robinson-Patman claims brought in robustly competitive markets where antitrust law’s ordinary “antitrust injury” requirement could never be met. In characterized the market at issue as “highly competitive,” but then gave no further thought to the question, which was not before it, about how price discrimination could ever injure “competition” in such a situation. Likewise, many circuits hold that the injury required by the statute is not an injury to economic competition at all, but merely an injury to a competitor. As a result, there is a major anomaly in the way that the same statutory language is interpreted in primary-line as opposed to secondary-line situations. The courts generally reach this result by observing that primary-line (predatory pricing) cases under the statute are covered by the language of the original 1914 provision, while “secondary-line” cases are covered by the 1936 amendments. ...to its prohibition....
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Chapter 17. Damages 296 results (showing 5 best matches)
- Many practices alleged to violate the antitrust laws are efficient. Others are inefficient and have few socially redeeming virtues. Still others may simultaneously increase both the efficiency of the participants and their market power. A perfectly designed antitrust policy would exonerate the first set of practices, condemn the second set, and condemn the third set only when the competitive harm caused by the restraint exceeds its social value. A theory of damages based on the same principle would make them unprofitable when they are inefficient but leave them alone when they are not.
- Certain complexities in the law of damages limit the contribution of theoretical economics. The economics revolution in antitrust has been concerned chiefly with the “quality” of antitrust injury. It has helped policy makers determine when certain practices, such as vertical integration, are beneficial to society and when they are harmful; or alternatively, whether the plaintiff is complaining about anticompetitiveness or efficiency. But the law of damages has the much more difficult task of injury; the difference between saying that a certain practice is harmful and quantifying the amount of harm can be significant.
- The costs of harmful conduct and the system of preventing it are of three kinds: 1) the costs imposed by the conduct itself; 2) the costs of detecting, apprehending and determining the guilt of alleged violators; 3) the costs of imposing sanctions on condemned violators. An optimal antitrust policy would minimize the sum of these three costs. However, the costs are not independent of each other. Sometimes one cost will rise as another declines. For example, the substantive law of antitrust is calculated so as to minimize costs of the first type: a well-designed antitrust policy will condemn socially costly acts and approve socially beneficial ones. By contrast, the rule is designed to minimize costs of the second type—in this case, the costs of operating the system that determines when the antitrust laws have been violated. Expansive use of rules (either of legality or illegality) might well reduce costs of the second type ...cause an increase in costs of the first type....
- The optimal deterrence model’s application to the law of exclusionary practices is thus a radical departure from the existing law of damages. Under all prevailing antitrust damages rules for exclusionary practices in lawsuits brought by competitors, the measure of damages is based on the plaintiff’s business losses, not on the defendant’s monopoly gains and the size of the deadweight loss. Indeed, there is probably no useful correlation between the amount of an injured competitor’s lost profits and other consequential damages, and the amount of the monopoly overcharge and deadweight loss caused by the defendant. An efficient practice, which produced no monopoly overcharge and deadweight loss at all, and an inefficient, monopolizing practice might both drive a competing firm out of business. The victim’s losses might be precisely the same whether or not the practice was efficient. In one case, however, optimal damages would be zero, in the other very large.
- Most of the law continues to be based on concepts of justice and compensation that are inconsistent with any notion that the purpose of antitrust enforcement (including private enforcement) is to deter conduct only to the extent that it is inefficient. But the economics revolution in the substantive law of antitrust cannot be ignored in the law of damages, or nearly everything given by one hand will be taken back by the other. The availability and amount of damages determines the amount of antitrust enforcement that exists. More importantly, it affects the cost-benefit calculus any firm undertakes when it considers whether to undertake a risky, probably efficient practice whose legality is uncertain and which is likely to injure certain competitors. The great majority of antitrust cases are filed by private plaintiffs, and most of these include a damage claim. As a result, most antitrust enforcement comes from private parties whose personal motive is not optimal efficiency or the...
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Chapter 13. Conglomerate Mergers 106 results (showing 5 best matches)
- Potential competition doctrines have greater vitality in European competition law. See Jeffrey Church, Conglomerate Mergers, 2 Issues in Competition Law and Policy 1503 (ABA Section of Antitrust Law 2008); Damien J. Neven, Analysis of Conglomerate Effects in EU Merger Control, in Handbook of Antitrust Economics 183 (Paolo Buccirossi ed., 2008); Jeremy Grant & Damien J. Neven, The Attempted merger Between General Electric and Honeywell: A Case Study of Transatlantic Conflict, 1 J. Competition L. & Econ. 595 (2005).
- Today, courts are unlikely to condemn a merger merely because it increases the efficiency of the post-merger firm. Nevertheless, the courts have never developed a general “efficiency defense” in conglomerate merger cases. Although economists can produce dozens of reasons why conglomerate mergers produce efficiency, measurement of the cost savings that result from a particular merger is extremely difficult, certainly in litigation. Rather, antitrust law searches for ways to identify those mergers that threaten competition. These are condemned, even though they may produce significant economies. Mergers that are unlikely to increase the market power of the post-merger firm and that will probably not facilitate collusion, oligopoly behavior or inefficient exclusionary practices are generally left alone.
- § 7 on the theory that the merger facilitated reciprocity with third parties. Consolidated Foods operated food processing plants as well as wholesale and retail food stores. It acquired Gentry Inc., which manufactured dehydrated onion and garlic that were commonly used in processed food. During the ten years following the acquisition, Consolidated frequently urged its suppliers of processed food to purchase their dehydrated onion and garlic from Gentry. The Court found “that the ‘reciprocity’ made possible by such an acquisition is one of the congeries of anticompetitive practices at which the antitrust laws are aimed.”
- The 1984 Antitrust Division’s Merger Guidelines are significant for conglomerate merger law for several reasons. First, they reiterate that the government still regards certain product extension and market extension mergers as theoretically anticompetitive, notwithstanding the fact that few such mergers are being challenged. Second, the Guidelines offer simplified standards for evaluating potential competition mergers. Third, they ignore virtually all rationales for condemning conglomerate mergers except potential competition. Reciprocity is never mentioned.
- “Potential” competition is a misnomer. Potential competition is really actual competition assessed from the supply side rather than the demand side. As Chapter 3 indicated, a firm’s market power is limited by two things: consumer response to a price increase and new entry by competitors in search of higher profits. A firm’s knowledge that its price increase will flood the market with new sellers is competition just as “actual” as its knowledge that a price increase will cause a loss of many customers.
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Chapter 18. Antitrust and the Process of Democratic Government 168 results (showing 5 best matches)
- The approach that antitrust takes in these areas is clearly not a solution to the problem of regulatory “capture,” or even an attempt at a solution. The democratic process contains many flaws, but curing them is not antitrust’s assignment. Congress never intended the antitrust laws to be used for this purpose, and they are very poorly designed for it. For example, the antitrust laws are concerned mainly with competition and economic efficiency. Although government policy is also concerned with competition and efficiency, governmental concerns range far wider, and governments constantly balance distributive, moral, and economic concerns. So if Congress wanted to draft “anticapture” legislation it could do so, but one would hardly imagine that this legislation would forbid “monopoly” or “combinations in restraint of trade” while explicitly saying nothing about abuses of governmental process.
- One additional consideration is important. The antitrust laws are concerned mainly with preserving competition and economic efficiency in the production and distribution process. By contrast, economic efficiency is almost never the exclusive goal of government process. Indeed, in many cases it is not even an articulated goal. An antitrust policy that condemned regulation too readily merely because it was inefficient might undermine legitimate, alternative goals of regulation.
- Importantly, antitrust itself is a form of market intervention. So-called , or letting things alone, is never really an option. The sovereign must always make a choice, even if the choice is to develop institutions that will let private decision making determine price, output and quality. Regulating competition is assuredly a form of regulation, just as much as regulating prices. For example, federal prohibition of a merger or a resale price maintenance contract is a form of interference in the market: it prevents a market choice that the participants would otherwise make.
- In Walker Process Equipment v. Food Machinery & Chemical Corp., the Supreme Court held that the wrongful filing of a civil suit could constitute an antitrust violation. Walker, the antitrust plaintiff, had alleged that Food Machinery, the antitrust defendant, had fraudulently obtained a patent by lying in its patent application about prior uses that would have made the patent invalid. § 2 of the Sherman Act. The Court held that if Food Machinery had knowingly obtained its patent by fraud and then filed an infringement suit, this suit would be stripped of its “exemption from the antitrust laws.” failed to explore most of the fundamental issues raised by . But implicitly at least, the Court held that certain kinds of lawsuits did not qualify for petitioning immunity—perhaps when the lawsuit was badly motivated from the start because the plaintiff (later the antitrust defendant) knew that it had no basis in fact for its legal claim.
- This chapter, the following chapter on federal regulation, and chapter 20 on state and local regulation (the “state action” doctrine) all deal with variations of the same question: Given that the democratic process often produces anticompetitive results, when should the federal antitrust laws intervene in either the process or the result itself? Although the technical rules differ from one area to the next, the conclusions in these three chapters converge on the same principle: Antitrust intervention is not appropriate when the wrong being challenged is the policy choice of a sovereign government. Rather, antitrust applies when private parties are able to evade or manipulate the democratic process in such a way as to give themselves effective, unsupervised control over a market. Whether the antitrust dispute arises in the context of petitions to the government (this chapter), federal regulation (chapter 19) or regulation by state and local government (chapter 20), this underlying...
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Chapter 12. Mergers of Competitors 558 results (showing 5 best matches)
- Some empirical studies suggest that likelihood and success of collusion in a market varies with HHI. Howard P. Marvel, Competition and Price Levels in the Retail Gasoline Market, 60 Rev.Econ.Statistics 252 (1978). Others have found that the HHI generally predicts such behavior better than the CR4. Keith Cowling & Michael Waterson, Price-Cost Margins and Market Structure, 43 Economica 267 (1976). However, other studies suggest that the HHI is no more reliable than the CR4. Compare
- A second reason for applying a higher standard to merger claims alleging future predation or other exclusionary practices is that the latter practices are illegal and most often readily detectable. As a result, there is less need for the extra margin of deterrence that we apply to mergers facilitating oligopoly coordination or harmful unilateral price increases. We condemn mergers that facilitate oligopoly under a fairly aggressive standard because the oligopoly itself, once it has been achieved, is often out of antitrust’s reach. To be sure, this is not a complete answer: the social cost of an anticompetitive practice can be minimized if we can reach the practice before rather than after it occurs. But importantly, the other antitrust laws have their own deterrent effects if they are properly applied. The post-merger firm bent on predation must still compare the anticipated benefits against the risk of detection and prosecution. ...in the oligopoly industry is free to set its...
- by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws. * * * ”
- The antitrust laws are concerned with the effects of certain practices on competition, not with the ownership of corporations. Legal “control” of a corporation should therefore not necessarily be the threshold for considering partial acquisitions under the Clayton Act, and the Supreme Court has said as much. control of a corporation if he owns and votes 50% or more of its shares. Realistically, however, ownership of far less than 50% will enable someone to have effective control of a corporation. In the case of a large corporation, ownership of 15% to 20% of the shares by one person could make him an enormous shareholder with tremendous influence in the buying, selling, entry and exit decisions of the corporation—particularly if all other shareholders were substantially smaller. The Supreme Court has not wasted much time deciding whether one company owned enough shares to have legal “control” of another company. More often than not, it has assumed control when the percentage of...
- See 4 Antitrust Law ¶ 914e (4th ed. 2016); and see Gregory H. Werden & Luke Froeb, Unilateral Competitive Effects of Horizontal Mergers, in Handbook of Antitrust Economics (Paolo Buccirossi, ed., 2008); Oliver Budzinski and Isabel Ruhmer, Merger Simulation in Competition Policy: A Survey, 61 Comp. L. & Econ. 277 (2009).
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Chapter 3. Market Power and Market Definition 513 results (showing 5 best matches)
- This range of concerns quickly shades from “antitrust” to “consumer protection.” As a general premise, the goal of the antitrust laws is competitive pricing and output consistent with the nature and (legal) structure of the market at hand. Competition in concentrated markets for durable goods is inherently imperfect, however, and so the policy question becomes one of degree: how many and what kinds of deviations should be tolerated?
- The policy problem of such single brand “relevant markets” is very real, because such findings have the potential to make a wide range of single firm distribution decisions subject to antitrust challenge. For example, suppose Chrysler is thought to be a “monopolist” in the market for “Chrysler transmissions,” simply because these transmissions have different specifications than the transmissions of other automakers. At that point Chrysler is no longer free to streamline its auto service business, thus displacing some independent service providers, without antitrust challenge. The threat of overdeterrence is particularly severe in concentrated markets because the focus of competition in such markets is often on factors other than price. Firms try to capture customers by having the best or the most responsive service networks, the best warranty protection, the most reliable equipment, and the like. Excessive antitrust scrutiny could penalize firms for engaging in the kind of
- Market power is a firm’s ability to profit by reducing output and charging more than a competitive price for its product. In the (cellophane) case the Supreme Court defined market power as “the power to control prices or exclude competition.” But that definition is both imprecise and incomplete. Market power itself is not an “exclusionary” practice: in fact, the exercise of market power—the sale of products at a supracompetitive price—generally attracts new sellers into the market. While exclusion of competitors is not market power, it is an important mechanism by which a firm obtains or maintains market power. Further, the ability to hold market power for a significant period of time is always important to antitrust policy makers. The more durable market power appears to be, the greater its social cost, and thus the greater the gains from getting rid of it.
- For example, many monopolization cases involve “exclusionary” practices that are plausible only because the defendant occupies a large portion of the relevant market in question. This is certainly true of predatory pricing, where the relative costs of predation are a function of the predator’s market share. But the same thing is true of the various “foreclosure” offenses, whether under § 2 of the Sherman Act (monopolization and attempt), § 1 of that statute (vertical agreements), § 3 of the Clayton Act (tying and exclusive dealing), or Clayton Act § 7 (vertical and some other mergers). In each of these cases the claimed harm to competition results, not from the defendant’s ability to raise price above marginal cost, but rather from its ability to cut rivals off from sources of supply, distribution outlets and the like. The real “power” basis of the offense, then, is market share, not market power as such. To be sure, antitrust’s central concern is increased market power. But when we...
- One question worth considering is whether the Agency should simply stop the inquiry and challenge the merger when collusive practices are found. Suppose, drawing from the previous example, the Antitrust Division observes that coordinated interaction (oligopoly or collusion) is already occurring among A, B, C & D, the four makers of cellophane. The question is whether to permit a merger among two of these firms. Need the Division bother to guess at the competitive price and then estimate the cross-elasticity of demand with wax paper at that price? If the merger standard condemns mergers that may substantially lessen competition, then the existence of the coordinated interaction itself tells us that the market is
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Chapter 9. Vertical Integration and Vertical Mergers 180 results (showing 5 best matches)
- See Volker Nocke & Lucy White, Do Vertical Mergers Facilitate Upstream Collusion?, 97 AM. ECON. REV. 1321 (2007); Jeffrey Church, Vertical Mergers, in 2 Issues in Competition Law and Policy 1455, 1489–1490 (ABA Section of Antitrust Law 2008).
- Before its 1950 amendments § 7 applied only to mergers that might lessen competition “between” the acquiring and acquired firms. A vertical merger involves firms that were not competitors before the merger. The legislative history of the 1950 Celler-Kefauver Amendments to § 7 is discussed in 4 Antitrust Law ¶¶ 902–903, 1002 (4th ed. 2016); and in
- Both the economic theory and the antitrust law of vertical integration have gone through dramatic cycles. Much of economics and antitrust law prior to 1970 reflected a deep suspicion of vertical integration, and the result was aggressive antitrust rules, including per se illegality for some forms of vertical integration by contract, such as tying and resale price maintenance. —namely that vertical integration and vertical contracting are virtually never competitively harmful and should be governed by benign antitrust rules approaching per se legality.
- For this reason, many members of the Chicago School argued strenuously that most vertical practices should be lawful. See, e.g., Richard Posner, Antitrust Law 225–228 (2d ed. 2001);
- whether du Pont’s commanding position as General Motors’ supplier of automotive finishes and fabrics was achieved on competitive merit alone, or because its acquisition of the General Motors’ stock, and the consequent close intercompany relationship led to the insulation of most of the General Motors’ market from free competition.
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Chapter 4. Antitrust Policy Toward Collusion and Oligopoly 404 results (showing 5 best matches)
- The basic question exposes a tension between the law of § 1 conspiracies and the law of monopolization under § 2. Antitrust is generally more hostile to inter-firm agreements than to alleged exclusionary practices by the single firm. But this extra deterrence gives plaintiffs an incentive to try to turn single-firm conduct into a conspiracy or combination. If Kodak’s practice can be characterized as a conspiracy between its president and vice president; or if General Motors’ policies can be characterized as a conspiracy among Chevrolet and Buick (both wholly owned subsidiaries), then the plaintiff can take advantage of § 1’s more expansive reach. He might even be able to turn price setting by the single firm, a completely legal act, into a
- A seller must decide on a price; and if tacit collusion is forbidden, how does a seller in a market in which conditions (such as few sellers, many buyers, and a homogeneous product, which may preclude nonprice competition) favor convergence by the sellers on a joint profit-maximizing price without their actually agreeing to charge that price, decide what price to charge? If the seller charges the profit-maximizing price (and its “competitors” do so as well), and tacit collusion is illegal, it is in trouble. But how is it to avoid getting into trouble? Would it have to adopt cost-plus pricing and prove that its price just covered its costs (where cost includes a “reasonable return” to invested capital)? Such a requirement would convert antitrust law into a scheme resembling public utility price regulation, now largely abolished.
- Apart from variations in oligopoly, the other empirically robust imperfect competition model is variations on the theory of monopolistic competition. One important difference between oligopoly and monopolistic competition is that oligopoly tends to emphasize how firms coordinate with one another, while the theory of monopolistic competition is more concerned with individual strategies for limiting competition by differentiating one’s own product. As a result, monopolistic competition has a smaller role in the antitrust analysis of collusion than do theories of oligopoly. It does have a large role to play in merger policy, however. Somewhat oversimplified, “coordinated effects” challenges to merger are driven manly by theories of collusion or oligopoly, while “unilateral effects” merger challenges are driven more by monopolistic competition theories.
- See Ariel Ezrachi and Maurice E. Stucke, Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy (2016); Ai Deng, What Do we Know About Algorithmic Tacit Colusion 33 Antitrust (fall 2018); Anita Banicevic, et al, Algorithms: Challenges and Opportunities for Antitrust Compliance (ABA Antitrust Section Fall, 2018).
- Cf. Louis Kaplow, Competition Policy and Price Fixing (2013) (minimizing traditional conspiracy requirements); and Malcolm B. Coate, Should economic theory Control Price fixing Analysis (FTC Working Paper April 10, 2014), available at
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Chapter 11. Intrabrand Restraints on Distribution 310 results (showing 5 best matches)
- rule of reason concerns the court’s capacity to measure something as intangible as the balance between interbrand and intrabrand competition. Assuming for argument’s sake that a vertical restriction injures intrabrand “competition,” can any court really balance the reduced competition in one “market” (Sylvania televisions) against the increased competition in a different market (all televisions)? First of all, the Court could not have been defining “competition” as marginal cost pricing. It would be nonsense to say that the intrabrand effect of the restraints permitted individual sellers to price above marginal cost, while the interbrand effect tended to reduce the prices to marginal cost. If injury to competition is appropriately understood as practices that enable a firm to profit by reducing output and increasing price, then it makes no sense to say that intrabrand competition is reduced while interbrand competition is increased. A restraint that reduces the output of the...
- Vertical nonprice restrictions vary with the nature of the product and its distribution system. A manufacturer might specify the locations of its retail outlets and not deal with anyone who resells the product somewhere else. The manufacturer might restrict the number of retailers with whom it will deal in a particular city, sometimes by giving a particular retailer a contractually-guaranteed exclusive right to sell there. Occasionally a manufacturer makes this decision after it has established multiple dealerships in a city, and then it must terminate one or more existing dealerships. Many lawsuits alleging illegal territorial restrictions are brought by such terminated dealers. Territorial restraints are sometimes placed on traveling distributors rather than retailers, with each distributor assigned to a primary or exclusive territory. ...particular customers to a distributor by size or type, and forbid other distributors from making sales to those customers. Finally, in... ...and...of
- Few areas of antitrust law have provoked more reconsideration of established rules, or more disagreement between courts and commentators, than vertical price and nonprice restraints. Like all practices, they can be governed by three possible legal rules: illegality, rule of reason analysis, or legality. Unlike most other practices, however, in this area serious arguments have been made for all three positions.
- See 8 Antitrust Law ¶ 1648c (4th ed. 2017); Martin K. Perry & David Besanko, Resale Price Maintenance and Manufacturer Competition for Exclusive Dealerships, 39 J.Indus. Econ. 517 (1991).
- This potpourri of factors may say something about the degree of competition in the retail market for televisions—but it is a long way from “balancing” injury to intrabrand competition against benefits to interbrand competition. In fact, the Court overlooked the factors that would seem most relevant—that Sylvania never had a significant share of any market relevant to the case, and that its market share increased after the restraints were put into place. Increases in output or market share are not good evidence that a practice is monopolistic, particularly when the increase is in the range from 2% of the market to 5%.
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Chapter 10. Tie-Ins, Reciprocity, Exclusive Dealing and Most Favored Nation Agreements 426 results (showing 5 best matches)
- The antitrust world would be a much better place if its per se rule were jettisoned and tying practices subjected to rule of reason treatment. Tying is not even arguably in the category of highly suspicious restraints for which the per se rule is reserved.
- The fifth element of the test for illegality—a “not insubstantial” amount of commerce in the tied product market exception to the federal antitrust laws (perhaps there is such an exception, but it is not unique to tying arrangements). To the extent that tying law is concerned with limits on competition facilitated by foreclosure or increased collusion, of a relevant market foreclosed by the arrangement. The “quantitative substantiality” rule that tying law uses states a minimum dollar amount which generally does not vary with the size of the market.
- Nearly every product or service sold can be divided into components or parts. A coat can be sold without its buttons, a desk without its drawers and a jar of pickles can probably be sold without its lid. The market would come to a standstill, however, if the antitrust laws gave every customer a legal right to atomize his purchases as much as he chose.
- A variation of this occurred under airline price regulation. Many air fares were set so high that empty seats and excessive flights resulted. A firm might avoid the price regulation and increase ridership by selling the air ticket at the regulated price but throwing in a rental car at no additional cost. This scheme might actually benefit everyone except competitors: the airline makes an even higher profit, output is increased, and customers effectively pay a lower price. The rental car in this case is the tying product and the airline ticket the tied product: presumably the airline will not give a free rental car to someone who does not purchase an airline ticket. Such tie-ins are also a kind of regulation avoidance. However, it is difficult to fault on economic grounds a practice that increases output at the regulated price. In any event, the practice is best challenged under the law of the regulatory regime in question and not under the antitrust laws.
- The fourth element, “anticompetitive effects,” is the most ambiguous, with some courts permitting broad-based inquiries into the effect of the arrangement on competition. Others use the term as a synonym for coercion and still others as a synonym for competitive injury. If a tying arrangement is really a violation of the antitrust laws, as the Supreme Court has often stated, then a separate analysis of anticompetitive effects is peculiar. The whole point of analysis is to avoid expensive individualized inquiries concerning competitive effects of particular arrangements. As a result, the use of an “anticompetitive effects” requirement probably reflects considerable doubt about the wisdom of the
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Chapter 6. Exclusionary Practices and the Dominant Firm: The Basic Doctrine of Monopolization and Attempt 186 results (showing 5 best matches)
- Courts generally have not adopted this approach. The whole notion of a “sliding scale” implies that courts are able to measure market power or the effect of alleged exclusionary practices much more precisely than they really can. Rather, courts have developed a compromise. If the evidence suggests a high degree of monopoly power, then the courts have identified a certain set of practices that will condemn the defendant of illegal monopolization. If the evidence suggests a smaller amount of market power, then courts have used the law of attempt to monopolize, which carries stricter and more explicit conduct requirements. In all events, the plaintiff must provide reasonably specific allegations of substantial market power in its complaint—a conclusion required by the Supreme Court’s decision, which tightened up antitrust pleading requirements.
- The monopoly power requirement in monopolization cases helps courts to characterize a firm’s conduct and predict its consequences. Much of the “exclusionary” conduct at issue in litigated monopolization cases is ambiguous when considered alone. For example, in a competitive market a refusal to deal, a dramatic price reduction, or even tortious business practices are absolutely consistent with competition on the merits.
- In antitrust litigation most practices are considered to be analyzed under a rule of reason. A rule is generally appropriate only after judges have had long experience with a certain practice, and have concluded that the practice produces many pernicious results and almost no beneficial ones. The rule of reason was originally formulated by the Supreme Court in a monopoly case as a means of distinguishing permissible from impermissible exclusionary practices. The meaning and scope of the rule of reason in monopolization cases are nevertheless ambiguous.
- The offense of attempt to monopolize is one of the most difficult of federal antitrust violations. On the one hand, many acts alleged to be illegal attempts may also be illegal monopolization or violations of another antitrust law. In such cases a separate “attempt” offense is unnecessary. On the other, expansive use of the attempt offense to reach conduct not condemned by the other antitrust laws may do more harm than good to the competitive process. If attempt analysis focuses too heavily on unfair conduct and too little on market power the offense can operate to protect inefficient businesses from their more efficient rivals. In the great majority of cases, a firm that is nondominant to begin with cannot create a dominant position by purely unilateral conduct.
- Intent has often been antitrust’s ghost in the machine. Courts use it to help them make sense of conduct that they do not fully understand. Problematically, however, the essence of competition is the intent to triumph over one’s rivals. One of the most perplexing problems in antitrust policy is discerning between illegitimate and legitimate intent—a problem that looms distressingly large if intent is the only thing we have to help us characterize ambiguous conduct.
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Table of Contents 347 results (showing 5 best matches)
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Table of Cases 281 results (showing 5 best matches)
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- Publication Date: July 9th, 2020
- ISBN: 9781684674350
- Subject: Antitrust Law
- Series: Hornbooks
- Type: Hornbook Treatises
- Description: Nearly all of the aspects of federal antitrust policy are covered in this treatise. And it’s written so you don’t need a background in economics to understand it. Expert narration states the “black letter” law and presents policy arguments for alternatives. Text also includes an analysis of recent Supreme Court and lower-court decisions.