ANTITRUST LAW TABLE OF CONTENTS

Transcription

1 ANTITRUST LAW TABLE OF CONTENTS INTRODUCTION I. ANTITRUST DEFINED... 3 II. STATUTORY FRAMEWORK... 3 III. ECONOMICS OF MARKET POWER... 3 HORIZONTAL RESTRAINTS IV. BACKGROUND ON CARTELS... 5 V. EARLY CASE RULES... 5 VI. MODERN APPROACH: RULE OF REASON V. PER SE RULE... 5 VII. CHARACTERIZATION TEST FOR RULE OF REASON VS. PER SE RULE... 6 VIII. CONSPIRACY DOCTRINE... 7 IX. FACILITATING PRACTICES (FP): DATA DISSEMINATION... 9 X. CONCERTED REFUSALS TO DEAL XI. IMMUNITY IN DEALINGS WITH THE GOVERNMENT MONOPOLIZATION XII. BASIC CONCEPTS XIII. CONDUCT INQUIRY XIV. MARKET POWER INQUIRY XV. ATTEMPTED MONOPOLY VERTICAL RESTRAINTS XVI. BASIC CONCEPTS XVII. RETAIL PRICE MAINTENANCE (RPM) XVIII. EXCLUSIVE DISTRIBUTORSHIPS, CUSTOMER & TERRITORY RESTRICTIONS XIX. VERTICAL AGREEMENT & REFUSAL TO DEAL XX. TYING ARRANGEMENTS XXI. EXCLUSIVE DEALING REQUIREMENTS CONTRACTS MERGERS XXII. APPLICABLE LAW XXIII. ECONOMICS XXIV. VERTICAL MERGERS XXV. HORIZONTAL MERGERS

2 XXVI. CONGLOMERATE MERGERS ANTITRUST & PATENT LAW XXVII. ANTITRUST LAW CONFLICT WITH PATENT SYSTEM XXVIII. PRICE RESTRICTED LICENSES XXIX. PATENT ACCUMULATION XXX. PACKAGE LICENSING (TYING) PRICE DISCRIMINATION XXXI. INTRODUCTION XXXII. PRIMARY LINE INJURY XXXIII. SECONDARY LINE INJURY CALIFORNIA ANTITRUST LAW XXXIV. CARTWRIGHT ACT XXXV. UNFAIR COMPETITION ACT (UCA) XXXVI. UNFAIR PRACTICES ACT (UPA) PRIVATE ACTIONS XXXVII. ANTITRUST INJURY DOCTRINE XXXVIII. DIRECT PURCHSERS CAUSE OF ACTION XXXIX. JOINT & SEVERAL LIABILITY

3 INTRODUCTION I. ANTITRUST DEFINED 2 overarching philosophies: A. Traditional (activist): laws intended to preserve competitive process; protect small business; ensure fairness B. Consumer welfare (Chicago School): only legitimate purpose is to promote consumer welfare through lower prices. Much narrower application of laws. II. III. STATUTORY FRAMEWORK A. Sherman Act 1. Restraints of trade-- 1: Prohibits every contract, combination...or conspiracy in restraint of trade 2. Monopoly-- 2: Illegal to monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce 3. Enforcement: Enforced by DOJ Antitrust Div. and private parties. Also criminal penalties, injunctions and damage actions ( 1) B. Clayton Act 1. Price discrimination-- 2: Prohibits price discrimination between different purchasers where the effect is to substantially lessen competition or to tend to create a monopoly in any line of commerce 2. Restrictive arrangements-- 3: Prohibits sales on condition that buyer not deal with competitors of the seller (i.e., tie-in sales, exclusive dealing & requirements Ks) where the effect is to lessen competition or to tend to create a monopoly 3. Mergers and acquisitions-- 7: Prohibits mergers where the effect may be to lessen competition or to tend to create a monopoly 4. Enforcement: Enforced by DOJ, FTC and private parties; provides for treble damages ( 4); also injunctive relief ( 16). No criminal penalties. C. Robertson-Patman Act: Amends Clayton Act 2 on price discrimination D. CA State Laws (see separate section) ECONOMICS OF MARKET POWER A. Supply and demand: Competitive producers face inelastic demand curve -- price v. quantity is flat -- if one producer raises price, he will lose all sales. Price is set where market demand curve and market supply curve cross. If suppliers move in, supply curve moves up, price moves down 3

4 Horizontal Restraints HORIZONTAL RESTRAINTS OF TRADE IV. BACKGROUND ON CARTELS A. Defined: 1. An association of companies that cooperate to eliminate competition among themselves by fixing prices, allocating production or territories. 2. Perfect scheme allows members to realize monopoly B. Factors to consider for effective cartel: Number of firms, elasticity of demand; preventing or restricting entry; policing agreement for defectors; setting production amounts; adjusting to market changes C. Justifications and rebuttal 1. Competition is harmful (reduce uncertainty, fund good activities, etc.) Rebuttal: cartels more harmful by distorting resource allocation; Congress should regulate if claim is true 2. Necessary to combat countervailing power (e.g., single supplier ) Rebuttal: may lead to parties agreeing to restrain trade V. EARLY CASE RULES A. Per se rule: Certain activities, such as price fixing, result in substantial restraint of trade without redeeming procompetitive benefits thus they are illegal as a matter of law. Effect of rule is that trials are shortened, and businesses have a bright-line standard regarding some practices 1. Trans-Mission (1897): All restraints are per se illegal, whether reasonable or not. 2. Ancillary agreements are permissible if reasonable (ex: protect other party of K) [Addyston Pipe (1898) (Taft)] ; Direct-Indirect test for ancillary agreement focus on purpose or intent of restraint [Joint Traffic Ass n (1898)] B. Development of Rule of Reason [Chicago Bd of Trade (1918) (Brandeis)] 1. Facts: Board required the price set at the close of business for toarrive grain to be maintained during the nonregular (evening) trading hours, rather than being set at each individual trade during the nonregular hours. 2. Held: agreements which adversely impact competition may be permissible if they are reasonable. It applies to those activities which have not already been classified as per se illegal. 3. Reasoning a) Convenience of members; b) Breaks up monopoly of warehouses; c) MAIN: distributes business more widely and protects ignorant sellers VI. MODERN APPROACH: RULE OF REASON V. PER SE RULE A. Output Restrictions [Socony (1940) Oil case] 5

5 Horizontal Restraints 1. Facts: defendants agreed to buy oil from particular small, independent refiners in spot transactions, in large quantities, at the fair going market price ;; the agreement was intended to stabilize price and regulate the supply. However, the purpose and effect was to set prices, and it doesn t matter what the intent or motive was. 2. Held: restricting output is form of price fixing -- per se illegal. (even where industry was in distress); Purpose and effect are separate inquiries. (Footnote 59 goes further and suggests we infer market power and effect from intent.) B. Territorial Divisions [Topco (1972) Grocery case] 1. Held: Geographic market division is per se illegal because practical effect is to give each firm a monopoly therefore each firm has power to fix prices as to a particular product 2. Philosophical division: a. Controversy over case b/c Ds argued w/o exclusivity there would be no Topco brand free rider problem (distributors who sell product and free-ride off advt efforts of nearby competitor) b. Ct failed to balance decrease in intrabrand competition and increase in interbrand competition; Here ct emphasizes process of competition. C. Separate Product Doctrine [BMI v. Columbia(1979)] 1. Held: Blanket license is a different product than license from individual owners; therefore restraint is ok 2. Rule application: R of R applies because efficiency of arrangement reduces transactions costs may even be necessary to achieve contract. (But note tension btw this case & Topco, where ct rejected efficiency arg) D. Maximum Price Fixing [Maricopa (1982)] 1. Held: Maximum price fixing is per se illegal because maximum can turn into minimum 2. Rule application: Per se rule b/c 1) restraint not necessary to achieve efficiency; 2) same product being offered not separate product like BMI. E. Canon of Ethics [Nat l Soc. of Engineers (1978)] 1. Held: Ethical canon against bargaining on price is form of restraint, and is illegal under rule of reason 2. Rule application: R of R applied because Ds gave public safety reason (purpose/effect unclear);; but didn t work b/c any competitor can claim competition reduces quality VII. BOTTOM LINE: CHARACTERIZATION TEST FOR RULE OF REASON VS. PER SE RULE A. Per Se Rule: Does the conduct fall into a category identified by courts as conduct so plainly anticompetitive, so lacking in any beneficial results, that it is not worthwhile analyzing it in detail? If so, per se illegal 6

6 Horizontal Restraints Key Q: Is the likely purpose or effect to raise prices? (more than de minimus effect) 1. price fixing (includes fixing min or max;; using common list prices;; production or purchase limits; elimination of competitive bidding or short term credit) 2. geographic partitioning (territories, customers, and/or products) 3. group boycotts (see below) B. R of R applies where 1) the purpose or effect is unclear (not obviously aimed at making profit) or 2) D can show practice makes market more efficient or increases competition C. Factors in R of R inquiry: [Chicago; Engineers] 1. Structure of industry c. Is the agreement necessary to achieve contract btw two parties? (BMI; Chicago Bd of Trade) b. Does the agreement create a separate product altogether? (BMI) 2. Facts peculiar to firm s operation in industry 3. History and duration of restraint 4. Reasons why restraint adopted 5. Inquiry limited to effects on competition a. Does the agreement promote competition rather than suppress it? (BMI; Chicago Bd of Trade; but see Topco) Must be economic reasoning -- not just competition is bad variant (Engineers, Maricopa). D. Quick Look R of R: Sometimes cts will employ intermediate analysis between per se rule & R of R where per se condemnation is inappropriate, but where no elaborate industry analysis is necessary to demonstrate anticompetitive character of an inherently suspect restraint [Engineers?; Indiana Fed. Of Dentists] E. Practical Effect of Characterization: When deciding which rule to apply, Ds usually get a chance to argue restraint is actually procompetitive VIII. CONSPIRACY DOCTRINE A. Background 1. Oligopolies may be able to impose restraints on market without explicit agreement between parties--they recognize their interdependence, and can cooperate informally to keep prices high. 2. Tacit and inferred express agreements may be deemed illegal under related questions: FACT-BASED INQUIRY a. When does tacit collusion rise to an actionable offense? b. What evidence do you need to infer an agreement (meeting of the minds)? 7