Legal Approach and Antitrust law (4) Flashcards
What does Section 2 of the Sherman Act of 1980 state?
any person who monopolizes, or attempts to monopolize, or combines and conspires with another person to monopolize any part of the trade or commerce among several states or with foreign nations, shall be deemed guilty of a felony.
Is having a monopoly status alone considered illegal under the Sherman Act?
No, monopoly status alone is not illegal. The legality is determined based on the conduct of the firm and whether it engages in anticompetitive activities, such as predatory pricing, or practices that attempt to establish or maintain a monopoly through improper means.
What factors are considered by courts to determine if a monopoly is engaging in illegal practices?
- defining the relevant product and geographic market
- analysing the market share of the accused firm
- considering the ease of entry,
- availability of secondhand and new substitutes,
5.and whether the firm has the ability to raise prices.
The courts also assess the intent of the monopoly to maintain its position and may apply a hypothetical test to assess the impact on competition.
What is the “hypothetical test” used by courts in monopoly cases?
a question posed by courts: In a specific geographic market, can the accused firm raise the price without attracting competition? This test is used to determine if there is significant market power.
What constitutes a ‘refusal to deal’ in antitrust law and why is it considered an abuse of monopoly power?
A ‘refusal to deal’ occurs when a manufacturer refuses to sell to dealers for the purpose of establishing a monopoly power on all distribution channels. This is considered an abuse of monopoly power because it restricts competition and the ability of other firms to enter or compete in the market.
Why is defining the relevant product and geographic market important in antitrust cases?
Because it determines the scope of competition and the market power of the firm. It helps in assessing whether a firm can control prices or exclude competition, which are indicators of monopoly power.
What activities may cartels involve according to antitrust laws?
Price fixing, output controls, bid rigging, allocation of consumers, allocation of sales by product or territory, and establishment of trade practices or common sales agencies.
What does Section 1 of the Sherman Act 1890 prohibit?
every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.
How are cartels typically punished under antitrust law when found guilty of price fixing?
Firms that are found guilty of price fixing are subject to treble (triple) damage penalties, which are intended to be a significant deterrent against such anticompetitive practices.
What is the per se basis, and how does it relate to antitrust law and price fixing?
The per se basis means that certain conduct, like price fixing, is illegal regardless of its impact on the market or any justifications the firms may present. This is in contrast to the rule of reason, which considers the reasonableness of the conduct based on the context and its actual impact on competition.
What is the difference between the “per se” rule and the “rule of reason” in antitrust law?
The “per se” rule deems certain practices illegal without needing to show that they have an anticompetitive effect.
In contrast, the “rule of reason” requires the court to conduct a detailed analysis of the practice’s impact on competition before declaring it illegal.
Why might some price-fixing arrangements not be considered illegal under the rule of reason?
Because the prices might be deemed reasonable, taking into account administrative costs and variations in cost, and if they do not have an observable anticompetitive effect.
What is the significance of treble-damage penalties in antitrust law?
Treble-damage penalties are significant because they can potentially increase the market price above what it would be with just a market-price increase, as they are intended to provide a strong deterrent against illegal cartel activities like price fixing.
Why might a cartel survive section 1 of the Sherman Act with a good defense?
A cartel might survive section 1 of the Sherman Act with a good defence if it can argue that its price-fixing agreements do not have a perceptible anticompetitive effect or if the prices are set reasonably relative to the market and cost variations.
Why are cartels like OPEC and IATA notable in the context of American antitrust law?
OPEC and IATA are notable because they are international organizations and thus cannot be easily challenged for their visible price-fixing agreements under American antitrust law.
