BLAWch43-2

• price discrimination
• tying contracts
• exclusive dealings
• mergers

• private parties -- civil suit
• DoJ and FTC -- civil suit

Goods

(NOT services etc)

• seller prohibits buyer from purchasing products from seller's competition
• allows seller the sole right to sell the product

• vertical agreement
• to be considered illegal, it has to be proven to hurt competition

rule of reason

• horizontal -- between firms that compete in the same market
• vertical -- company acquires one of its sellers
• conglomerate -- between unrelated firms (eg. foil + tv)

rule of reason -- how big is resulting firm's market share?

horizontal mergers: assumed illegal, but "quick look" rule of reason is applied

Herfindahl-Hirschman Index

• if a merger increases the acquiring firm's HHI by 50 to 100 points, the merger should be investigated
• if a merger increases the acquiring firm's HHI by more than 100 points, the merger is presumed to enhance market power

• market share of each firm
• degree of market concentration
• number of firms in the industry
• entry barriers to the industry
• strength of other competitors
• character and history of merging firms
• market trends and demand

• "failing company" merger
• "small company" merger

• transferring assets to most productive use
• extending retail product lines
• reducing overhead costs

illegal under Clayton Act

when a director of a public company, that has at least 10 million in capital, is also a director of another public company that has at least 10 million in capital

• amendment to Clayton Act
• prohibits buyers from inducing and sellers from granting price discrimination in interstate commerce
• price discrimination must substantially lessen competition or tend to create a monopoly to violate the act

seller charges different buyers different prices for the same goods (includes other costs like warranties, insurance, credit terms, delivery charges etc.)

• primary line injury (competitor of seller)
• secondary line injury (non-favored buyers)
• tertiary line injury (customers of non-favored buyers)

• cost justification -- seller shows cost reduction
• meeting competition -- "price match"
• functional discounts -- non-favored buyer did not take advantage of available discount

• 5-member FTC is empowered to conduct appropriate investigations and hearings
• supplement to Sherman and Clayton Act
• FTC to stop practices before harm to competition becomes too great
• cease and desist order is primary sanction
• "catch all" statute

file complaint with FTC

• labor
• agricultural associations and fisheries
• insurance
• most foreign trade
• professional baseball
• cooperative research and production (if temporary)
• joint efforts to obtain legislative or executive action (lobbying)

• foreign persons may sue US companies in US courts even if violation occurs outside of the US
• any conspiracy with substantial effect on US commerce, even if violation occurs outside of the US and a foreign government or person commits it