1 generally 1 a Goals of Antitrust 1

ANTITRUST 1

1)GENERALLY 1

a)Goals of Antitrust 1

b)Statutes 1

i)Sherman Antitrust Act 1

ii)Federal Trade Commission Act 1

2)ECONOMICS 1

a)Efficiency 1

b)Monopoly Price 3

c)Policy 3

MONOPOLY – SHERMAN ACT § 2 4

1)STATUTE 4

3)STEP 0: Elements of Monopoly (United States v. Grinnel Corp.) 4

4)STEP 1: Define Product Market (Alcoa) – “any part of trade or commerce” 4

a)Tests 4

5)STEP 2: Market Power 5

a)Direct Demonstration of Market Power 5

a)Entry Barriers 5

6)STEP 3: Conduct 6

a)Generally – Rule of Reason (Microsoft) 6

b)Refusal to Deal 6

c)Price Squeeze 7

d)Predatory Pricing 8

e)Cases – Predatory Pricing and Price Squeeze 8

f)Design Predation 10

g)Attempted Monopolization (Spectrum Sports) 11

h)Defenses to Monopoly 11

1)POLICY CONSIDERATIONS 12

7)CASES! 13

MERGERS 16

1)STATUTE 16

8)GENERALLY 16

9)STEP 1: Market Definition Tests – “any line of commerce” 16

a)Consider 17

10)STEP 2: Geographic Market Definition 17

11)STEP 3: Market Power 18

a)Market Concentration Proxy 18

b)Entry Barriers (Merger Guidelines § 9) 18

12)HORIZONTAL MERGERS 19

a)Empirical Evidence of Competitive Effects (Merger Guidelines) 19

b)Unilateral Effects (Merger Guidelines § 6) 19

c)Coordinated Effects (Merger Guidelines § 7) 19

d)Defenses 20

i)Pro-competitive Justifications 20

ii)Institutional Factors 20

iii)Efficiencies (Merger Guidelines § 10) 20

iv)Failure and Exiting Assets (Merger Guidelines § 11) 20

e)Remedies 20

f)Cases 21

13)VERTICAL MERGERS 22

a)Merger Guidelines 22

a)Problems – “Dead letter” 22

HORIZONTAL RESTRAINTS 24

1)STATUTE 24

14)ANALYSIS 24

a)Generally 24

b)Summary 24

i)Justifications resulting in quick look or rule of reason 24

i)Rule of Reason 24

ii)Rationales 25

c)Cases 25

15)CHARACTERIZATIONS 26

a)Generally 26

a)Horizontal price fixing 26

b)Horizontal market allocation 27

c)Boycotts – Concerted Refusal to Deal 27

16)JUSTIFICATIONS 28

a)Generally 28

17)ANALYSIS OF QUICK LOOK 28

18)JOINT ACTION 30

19)OLIGOPOLY PRICING 31

a)DOJ Memo 31

DISTRIBUTION RESTRAINTS 31

1)GENERALLY 31

a)Basic Distinction 31

b)Historical Development 32

1)MODERN VERTICAL RESTRAINTS STANDARDS 33

20)TYING AND EXCLUSIVE DEALING 35

a)Generally 35

b)Exclusive Dealing 35

c)Tying 36

ANTITRUST

1)GENERALLY

a)Goals of Antitrust

1. 
   Prevent concentration of economic power
   
2. 
   Lowering entry barriers
   
3. 
   Providing consumer choice
   
4. 
   Promote efficient economic behavior
   

b)Statutes

i)Sherman Antitrust Act

1. 
   §1 – “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal”
   
2. 
   §2 – “Every person who shall monopolize, or attempt to monopolize, or conspire with any other person or persons to monopolize any part of the trade or commerce among the several states, or with foreign nations…”
   

ii)Federal Trade Commission Act

1. 
   §5(a)(1) – “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful”
   
2. 
   §5(b) – commission can issue complaint with charges, as well as cease and desist order
   
1. 
   Clayton Act – Anyone harmed under antitrust law can sue and get 3x damages
   
   1. 
      §3 – Exclusive dealing and tying
      
   2. 
      §4a – Private rights of action
      
   3. 
      §7 – Mergers and acquisitions
      
2. 
   Enforcement – FTC/DOJ, state government, private individuals directly harmed
   

2)ECONOMICS

a)Efficiency

7. 
   Allocative Efficiency – Best allocation of resources – Producing best “set” of goods
   
8. 
   Productive Efficiency – Producing with lowest cost inputs – Cheaply as possible
   
9. 
   Innovative Efficiency – Optimizing rate that improved products/processes are discovered and diffused into the economy
   
   1. 
      Innovation lowers production cost/monopoly price, increases consumer surplus/deadweight
      
   2. 
      Δ_Welfare = Δ_Efficiency – Δ_{(Consumer Surplus + Deadweight)}
      

b)Monopoly Price

1. 
   Consumer Surplus – Value of a product to consumers that is above what is paid for it
   
2. 
   Deadweight – Value of goods monopolist doesn’t product that consumers want
   
   1. 
      Poor allocative efficiency
      
3. 
   MR = Marginal Revenue, MC = Marginal Cost, ATC = Average Total Cost
   

c)Policy

13. 
    Unchallenged power deadens initiative, discourages thrift and depresses energy
    
    1. 
       Monopoly is a narcotic and rivalry is a stimulant to innovation (Alcoa)
       
14. 
    Preference for a system of small producers
    
15. 
    Concerns about concentrations of power
    
16. 
    Allocative inefficiency – Restricts output (deadweight)
    
17. 
    Productively inefficient – Waste resources through rent seeking, use resources to maintain monopoly in socially wasteful manner
    
18. 
    Innovatively inefficient – Incentive is to manage innovation and spread it over time
    

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