Chapter 41 - Antitrust Law

Question 1

Purpose of Antitrust Laws

Answer 1

• Businesses can’t be too big to stifle competition.
• Rockefeller’s would set up trusts that became huge in 1800’s.
• If another oil company came in they’d get crushed.
• Prevent monopolies and encourage competition.

Question 2

Sherman Anti-Trust Act

Answer 2

• To prohibit unfair restraints on trade.

- 2 tests

Question 3

“Per Se” Test

Answer 3

• Some activities by their very nature are restraints on trade and are prohibited by law.
• Mainly Horizontal Restraints.

Question 4

“Rule of Reason” Test

Answer 4

• Not as severe as per se
• An activity that is too anticompetitive and not considered fair or reasonable business practices.
• Mainly Vertical Restraints.

Question 5

Horizontal Restraints: Price Fixing

Answer 5

• When 2 or more competitors get together and decide what price to charge.
• Illegal

Question 6

Horizontal Restrains: Division of Markets

Answer 6

• Competitors say you can have a certain geographic region.

Question 7

Horizontal Restraints: Boycotting

Answer 7

• 2 or more competitors agree to not purchase goods or services or sell goods or services from a particular supplier, competitor, etc.

Question 8

Vertical Restraints

Answer 8

• Mainly Rule of Reason
• Similar to horizontal restraints of price fixing, division of markets, and boycotting but it is BETWEEN MANUFACTURERS AND DISTRIBUTERS rather than competitors.
• Manufacturers can suggest, but not force a price to set for a product.

Question 9

American Needle v. NFL

Answer 9

• NFL being sued because they chose exclusive company to license material.
• Multiple companies could make NFL apparel.
• American Needle sued based on trade restraints.
• Supreme Court said summary judgement was not appropriate and they needed to go to trial.

Question 10

Monopolization

Answer 10

• Is prohibited.

- May be evidenced by predatory pricing.

Question 11

Clayton Act - Exclusive Dealing Contracts

Answer 11

• Entering into an agreement that a buyer will only buy from the suppliers.

Question 12

Clayton Act

Answer 12

• Prohibits anti-competitive activities to include “exclusive dealing contracts” and “tying” arrangements.

Question 13

Clayton Act - Tying Arrangements

Answer 13

• Looked at under the rule of reason test.

- When a business that makes more than one related product may try to sell both products in tandem.

Question 14

Illinois Tool Works v. Independent Ink

Answer 14

• ITW manufacture and market printing systems and they sell it to manufacturers who will agree to buy their ink exclusively from ITW.
• Supreme Court said that this tying arrangement is not a “per se” violation.
• “Rule of Reason” may apply.

Question 15

Price Discrimination

Answer 15

• If a business sells identical products to two different buyers at two different prices, could be discrimination.
• If products aren’t identical, it is not discrimination.
• To violate the Clayton Act, the products must be sold at different prices than just offered.