Antitrust 1 Prof. E. Fox Fall 2004 1 I. Introduction to Antitrust Law 4 a. General Background 4

Competitor’s Collaboration under Sherman Act § 1: Cartels and other Arrangements

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Competitor’s Collaboration under Sherman Act § 1: Cartels and other Arrangements

  1. General Analysis for Cartels

  • §1 – prohibits contract, combination or conspiracy in restraint of trade – i.e., Cartels

  • Cartels – per se illegal, even though they are not always output limiting and price raising

  • Cartels usually exist where competitor conduct price-fixing (U.S.); market division (EU); allocation of quotas; allocation of customers; standard-setting conspiracies; naked boycotts; vertical minimum resale price maintenance (RPM) agreements

  • Naked vs. Ancillary Restraints

  • Naked restraints – object is to restrain trade among competitors

  • May have secondary purposes/intents – i.e., a public interest such as reduction of rate variability; often used as a shield for naked restraint

  • Implicit vs. explicit – former is difficult to prove

  • Characterization cases: whether the agreement is price-fixing or something else requires further study under the rule of reason; facts must be sufficient to garner the per se rule

  • Conduct is not prohibited unless it is output-limiting and price-raising!

  • Only pro-competitive effects can offset anticompetitive acts

  • Per Se Rule: applies when agreements are anticompetitive = output restrictive and price raising (BMI)

  • Rule of reason: structured inquiry

  • Analyze purpose; market power; and effect on price and output

  • Must determine whether the restraints are reasonable in light of their actual effects on the market and any pro-competitive justifications

  • π must show actual adverse effect on competition in relevant market

  • Δ can provide pro-competitive effect/justifications

  • π can rebut by showing that the same pro-competitive effects can be achieved by less restrictive means

  • Quick v. Longer looks: depends on how easy it is to characterize the observed behavior (i.e., strongly anticompetitive conduct or weak justifications); output limitations  full RoR (NCAA)

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