Chapter 24: Antitrust Law and Promoting Competition Flashcards
Antitrust Laws
Protect trade and commerce from unlawful restraints of trade and anticompetitive practices.
Restraints of trade
agreements between firms that reduce competitiveness in the marketplace.
Sherman Antitrust Act (Sherman Act)
Act to Protect trade and commerce against unlawful restraints on trade and monopolies.
Major Provisions of Sherman Act:
Provisions for a Trust (Sec. 1)–
1. Every _______________, combination in the form of a ____________ or otherwise, or _______________, in restraint of _____________ or _____________ among the several States, or with ____________ nations, is hereby declared to be ______________ [and is a _______________ punishable by _____________ and/or ___________________].
Provisions for a Monopoly (Sec. 2)–
2. Every person who shall ______________, or _____________ to ________________, or combine or ________________ with any other person or persons, to ________________ any part of the __________ or _______________ among the several States, or with _____________ nations, shall be deemed guilty of a ______________ [and is similarly punishable].
- contract; trust; conspiracy; trade; commerce; foreign; illegal; felony; fine; imprisonment
- monopolize; attempt; monopolize; conspire; monopolize; trade; commerce; foreign; felony
Monopoly
Market in which there is a single seller, or a limited number of sellers.
Section 1 Violation Requirements:
1) _____________ between ____ or more parties that…
2) ______________ restrains ________________, and…
3) affects ________________ __________________.
Agreement; 2; unreasonably; competition; interstate commerce
Section 2 Violation Requirements:
1) The ______________ of _____________ power in the relevant ___________, and…
2) the willful ______________ or ________________ of that power, as distinguished from _____________ or _______________ as a consequence of a _______________ product, business ______________, or historic ____________.
possession; monopoly; market; acquisition; maintenance; growth; development; superior; acumen; accident
“per se” Latin Meaning
“on its face”
Per Se Violation
restraint on trade that is so blatantly/substantially anticompetitive, that it is inherently (per se) illegal.
Rule of Reason (Test)
test whether or not an anticompetitive restraint on trade is a reasonable restraint on trade.
Why was the Rule of Reason Developed?
If the test wasn’t made, practically any trade restraint (agreement) between businesses/firms would violate the Sherman Act.
Price-Fixing Agreement
- Per se violation of Section 1 of Sherman Act (blatantly/substantially anticompetitive).
- Agreement between firms to fix prices of goods at certain level.
Group Boycott
- Per se violation of Section 1 of Sherman Act
- Two or more sellers refuse to work with firm or business
Market Divisions
- Per se violation of Sec.1 of the Sherman Act for competitors (firms) in the same market to divide customers and territories.
Explain TV Market Divisions Example:
Let’s say you have 3 different firms selling separate Television brands.
They each come together in concerted action and make an agreement for Business 1 to sell his TV’s in x (state), Business 2 sell his TV’s in y (State), and Business 3 in z (state)
This illegal trust makes it so that the tv businesses don’t have to compete against each other (no one has to lower prices, to get greater consumer attention etc…)
Trade Associations:
Trade associations may engage in _____________ activities including _____________ information, representing the members’ ____________ interest before govt. bodies, and setting ________________ standards to govern the ________________ the business’s are in.
Using the rule of reason, if a court finds that the _______________ of a trade association ______________ trade, but this restraint _______________ the ___________ and the ________________, then it is considered a _________________ __________________ on trade.
joint; exchanging; business; regulatory; industry; practices; restrains; benefits; public; association; reasonable restraint
_____________ restraints on trade and commerce take place on the ____________ (just _______) level of _______________ (production of goods / products). ________________ restraints, however take place at ______________ different levels of __________________.
Horizontal; same; one; operation; Vertical; many; operation
Vertical Restraint
A restraint of trade, made by agreement of firms, at different levels of manufacturing and distribution process.
Resale Price Maintenance Agreement
agreement between retailer and manufacturer that specifies what the retail price (store price) of a good must be.
Predatory Pricing
One firm tries to drive it’s competitors out of the market by pricing their goods at prices SUBSTANTIALLY below the normal costs.
Monopolization:
1) The willful _____________ of ____________ __________ of the _____________ _____________…
2) The willful ________________ and ______________ of that ______________, separate from _____________ and ________________, as a consequence of ______________ product, business ________________, and historic ______________.
possession; monopoly power; relevant market; acquisition; maintenance; power; growth; development; superior; acumen; historic accident
Clayton Act (1914)
An act is illegal only if it serves to substantially reduce competition or creates a monopoly power.
Price Discrimination:
when a seller charges competing prices to different buyers for identical goods/services.
Requirements for Price Discrimination:
1) The seller must be engaged in interstate commerce.
2) The goods have to be of similar grade / quality.
3) The good has to have been purchased by two or more purchases.
Defenses to Price Discrimination:
1) Cost Justification: If the ____________ proves that a particular ____________’s purchases _________ the ____________ of production to make the product/service, then he won’t be held liable for price discrimination.
2) Meeting Competitor’s Prices: If the ____________ charged ______________ prices in a ___________ ____________ attempt to meet their _______________ lower prices, they won’t be held liable for price discrimination.
3) Changing Market Conditions: If a _______________ lowered their prices in ______________ to changing ______________ affecting the market or _________________ of goods, they won’t be held liable for price discrimination.
seller; buyer’s; reduce; cost
seller; lower; good faith; competitor’s
seller; response; conditions; marketability
Exclusive Dealing Contract
Contract wherein seller prohibits buyer from purchasing goods/services from seller’s competitors
Tying Agreement
Seller conditions the sale of product on the purchaser’s AGREEMENT to buy ANOTHER product from the seller.
(Seller: “if you want x, you gotta buy y as well.”)
1) The _________________ of ________________ (_______) prosecutes all _____________ under the _______________ Act.
2) Violations under the _______________ Act are not a ___________, but may be enforced by the ___________ and ____________ _______________ __________________ (_______) through civil action proceedings.
Department; Justice; DOJ; violations; Sherman
Clayton; crime; DOJ; Federal Trade Commission (FTC)
Requirements for Remedies for a Party Injured due to Violations under the Sherman Act:
1) The ________________ violation of the Sherman act either _________________ OR was a _________________ factor in the injury the innocent party suffered.
2) The _______________ actions of party that violated Sherman Act affected the _____________ activities, of the injured party, that were protected by _______________ laws.
antitrust; caused; substantial
unlawful; business; antirust
