Antitrust Flashcards
(26 cards)
Sherman Act § 1
Prohibits every contract, combination or conspiracy in unreasonable
restraint of trade.
Examples:
- Price fixing
- Market division
- Exclusive dealing
- Group boycotts
- Tying arrangements
Price fixing
Sherman Act 1
The setting of prices or terms of sale cooperatively by two or more businesses that do not involve sharing substantial risk in a common business enterprise
Market division
Sherman Act 1
Allocating product lines, customers, or territories between competitors
Exclusive dealing
Sherman Act 1
Requiring that a person deal exclusively with an enterprise so that competitors are foreclosed or otherwise disadvantaged in the marketplace
Group boycotts
Sherman Act 1
Competitors collectively refusing to deal, usually taking the form of denying a rival an input or something it needs to compete in the marketplace
Tying arrangements
A firm with market power selling one product on the condition that the buyer buy a second product from it
Sherman Act § 2
Prohibits monopolization and attempted monopolization
Two elements:
- The possession of monopoly power (defined as the power to control market prices or exclude competition)
- The willful acquisition or maintenance of that power (but not as a consequence of a superior product, business acumen, or historic accident)
-
Clayton Act § 7
Prohibits mergers & acquisitions whose effect
may be “substantially to lessen competition” or
“to tend to create a monopoly.
Testing legality of merger/acquisition:
- courts emphasize market share and concentration data
- Other factors to determine how likely it is the merged firm will exercise market power; horizontal mergers draw a lot of scrutiny, and verticle mergers draw less scrutiny.
Federal Trade Commission Act § 5
Prohibits:
- “Unfair methods of competition”
(including Sherman & Clayton Act violations) - Unfair or deceptive acts or practices
Defense for Sherman Act § 1
Challenged practice, on balance,
will promote competition (quality of care not relevant)
Market power
Ability to raise prices or lower quality w/o losing
business that will make change unprofitable
Market
Area w/i which firm(s) could profitably raise prices
(exercise mkt power)
If org doesn’t have market power, then:
org is likely not liable for antitrust violation
Per se violations
Agreement type so likely to be unreasonable that it’s an automatic violation
-Price fixing, market allocation & some group boycotts
Example: An agreement among multiple independent chiropractors in an area to charge a minimum amount for manual adjustments would be a per se violation of § 1.
Rule of Reason
If an agreement isn’t per se illegal, rule-of-reason analysis is used to determine whether the agreement unreasonably restrains trade.
Evidentiary study:
1) will practice likely have significant
anticompetitive effects in a market;
2) are there procompetitive effects
outweighing anticompetitive harm
EXAMPLE: Suppose a chiropractor sold her practice. As part of the sale, the selling chiropractor agreed not to compete in that area for three years. That agreement wasn’t per se illegal, but it could unreasonably restrain trade by preventing competition. Thus, the agreement would be evaluated under a rule-of-reason analysis to see whether it mostly harmed or helped competition.
Quick look
Identify violation if anticompetitive effect obvious
Are efforts to improve quality a defense in antitrust law?
NOPE.
Is terminating staff privileges an antitrust violation?
NOPE.
In re Michigan State Medical Society
Facts:
-MSMS Division of Negotiation organized boycott against BCBS
& solicited letters of withdrawal
-BCBSM abandoned reimbursement policies
-FTC brought enforcement action (FTC both prosecutor &
judge)
Issue:
If members of a medical group, society, or other organization undertake concerted activities with a common purpose to influence third-party reimbursement policies, will such actions be considered a restraint of trade in violation of § 1 of the Sherman Act?
Holding:
-Yes.
-No per se label, but violations found
-interference w/ doctors’ & payers’ right to compete
independently
-Resembles price fixing – doctors use exclusive bargaining
agent
___________________
It is clear that the MSMS and its members intended to go beyond the point of giving advice to BCBSM on its reimbursement policies when its collective bargaining division initiated a boycott of BCBSM and a letter-writing campaign.
“boycott” = characterized as a concerted refusal to deal with a particular customer or third-party.
Even though the MSMS and BCBSM are not in direct competition with each other, that fact does not preclude a finding that a boycott took place.
Patents
Do not violate antitrust law
Is keeping prices low for consumers a valid defense to antitrust claims?
NOPE.
PROVING ANTITRUST INJURY ENTAILS :
P SHOWING ILLEGAL DISPLACEMENT OF
COMPETITION, NOT JUST INJURY IN FACT.
PRICE COMPETITION DRIVEN BY:
HOSPITALS NEGOTIATING W/ PAYERS TO GET
INTO NETWORKS
Clayton Act 7 Hospital Mergers; P must prove:
- Relevant product market in which parties compete
- Relevant geographic market in which parties compete
- Market data showing significant market concentration & demonstrating merging parties have significant market share
