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

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Contemporary Law and Enforcement

  1. Modern U.S. Case Law

  • Hospital Corp. of America v. FTC (1987)

  • J. Posner – merger will lessen competition based on evaluation by FTC; earlier cases that found that concentration alone was bad, have been overruled in spirit

  • Ultimate issue is whether the challenged acquisition is likely to facilitate collusion  acquisition of a competitor has no economic significance in itself; concern is that it may enable acquiring firm to engage in cartelization

  • Indicia that make it more likely for firms to act more collaboratively rather than rivalrously:

  • FTC v. Staples (1997)

  • What is the market? – used a mode of delivery (office supply superstores)

  • Such a definition makes it narrow

  • Analyzed under Brown Shoe: practical indicia of functional interchangeability, cross elasticity, uniqueness, variable pricing, submarkets – loose criteria lacks predictability!

  • Cellophane: what are the reasonable alternatives (functional interchangeability)?

  • Guidelines: assuming hypothetical monopolist, what would happen if raised price by 5%?

  • What are the effects of the proposed merger?

  • HHIs and market share would be huge  prima facie case under PNB; but this is just a presumption; shifts burden to Δ to prove merger not anticompetitive

  • Price Effect – assume correct market, evidence presented in the case that the merger would lead to price increases of up to 15%; Δ did not rebut this inference

  • Likelihood, ease of entry? – hard or improbable, made case more difficult for Δ

  • Efficiencies? – evidence of efficiencies are unbelievable (manufactured for the FTC)

  • Heinz/Beechnut (D.C. Cir. 2000)

  • Defenses – lack of price competition b/t merging firms, lack of collusion scenario w/Gerber (industry giant); necessary to compete against Gerber; increase innovation; efficient

  • Effect of the merger?

  • Would be a merger to duopoly! – such a high concentration of the market requires extraordinary efficiencies which must be merger specific

  • Rejects all of Δ’s defenses, even that the merger is efficient and would save resources!

  • Opportunity for coordination – not clear that the merged company would coordinate w/Gerber; always had two brands competing in each outlet, would be the same post-merger

  • Δ must show structural market barriers to collusion to override the presumption

  • Price Increase – perhaps Heinz and Beechnut were competing on price; merger may reduce this competition and lead to raised prices; insufficient information presented on this point

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