26: Antitrust Law
- Page ID
- 11169
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)After reading this chapter, you should understand the following:
- The history and basic framework of antitrust laws on horizontal restraints of trade
- The distinction between vertical restraints of trade and horizontal restraints of trade
- The various exemptions from antitrust law that Congress has created
- Why monopolies pose a threat to competitive markets, and what kinds of monopolies are proscribed by the Sherman Act and the Clayton Act
This chapter will describe the history and current status of federal laws to safeguard the US market from anticompetitive practices, especially those of very large companies that may have a monopoly. Companies that have a monopoly in any market segment have the potential to exercise monopoly power in ways that are harmful to consumers and competitors. Economic theory assures us that for the most part, competition is good: that sound markets will offer buyers lots of choices and good information about products and services being sold and will present few barriers to entry for buyers and sellers. By encouraging more, rather than fewer, competitors in a given segment of the market, US antitrust law attempts to preserve consumer choice and to limit barriers to entry, yet it does allow some businesses to achieve considerable size and market share on the belief that size can create efficiencies and pass along the benefits to consumers.
- 26.1: History and Basic Framework of Antitrust Laws in the United States
- This page explores the history and framework of U.S. antitrust laws, focusing on the Sherman and Clayton Acts, which aim to maintain competition and prevent monopolies. It details enforcement mechanisms by the Department of Justice and the FTC, highlighting private suits, treble damages, and class actions as key tools for individuals to report violations.
- 26.2: Horizontal Restraints of Trade
- This page discusses antitrust laws regarding horizontal restraints of trade, focusing on competitor agreements that restrict competition, such as price-fixing and output control, in violation of the Sherman Act. Key cases illustrate the actionable nature of these violations, emphasizing that even informal agreements can lead to legal repercussions. The text also notes that while some coordinated efforts may be lawful, many practices are considered per se violations.
- 26.3: Vertical Restraints of Trade
- This page addresses vertical restraints of trade, emphasizing exclusive dealing and tying arrangements in relation to U.S. antitrust laws, notably the Sherman and Clayton Acts. It explains how these practices can hinder competition, with exclusive dealing preventing the purchase of competing products and tying arrangements enforcing the purchase of one product to access another.
- 26.4: Price Discrimination- The Robinson-Patman Act
- This page discusses the concept of secondary-line injury related to price discrimination, where varying prices charged by sellers to competing buyers can harm competitors. It focuses on the Robinson-Patman Act, which aims to protect competition and smaller players by making certain discriminatory pricing practices illegal. Legal cases illustrate that price discrimination is prohibited when it lessens competition.
- 26.5: Exemptions
- This page details various exemptions from US antitrust law for regulated industries, labor unions, insurance, and state actions. It notes that banking and communications may receive some protection under regulation, unions are allowed to organize without antitrust penalties, and the McCarran-Ferguson Act offers insurance companies immunity when states regulate them effectively.
- 26.6: Sherman Act, Section 2- Concentrations of Market Power
- This page examines monopoly power under the Sherman Act's Section 2, emphasizing that not all monopolies are illegal but that unlawful monopolistic practices harm competition. It highlights the definition of relevant markets, necessary market shares, and evidence of monopolization, referencing historical cases like Alcoa, IBM, and Kodak.
- 26.7: Acquisitions and Mergers under Section 7 of the Clayton Act
- This page outlines learning objectives on mergers and acquisitions (M&A), distinguishing between horizontal, vertical, and conglomerate mergers, while addressing legal implications under the Clayton Act. It covers antitrust laws, notification requirements by the Hart-Scott-Rodino Act, and significant legal cases illustrating anticompetitive effects.
- 26.8: Cases
- This page covers various antitrust cases including the Supreme Court's ruling against the National Society of Professional Engineers' ban on competitive bidding, emphasizing the importance of competition for market quality. It discusses State Oil's price fixing, the reconsideration of vertical price fixing's legality, and monopoly issues exemplified by cases against Alcoa and Kodak.
- 26.9: Summary and Exercises
- This page discusses four key US antitrust laws aimed at maintaining competition, enforced by various legal authorities. These laws address issues like monopolization and price discrimination, with courts applying a rule of reason for interpretations. Examples of potential violations include Panda Bear Inc.'s exclusive agreements, Elmer's refusal to license a patented product, National Widget Company's competitive redesign, and concerns over market concentration by Quality Graphics and WMTA.