Chapter 16: Regulating Competition Flashcards
(15 cards)
Importance of antitrust laws
Applies to small and large businesses
If only one organization runs an entire industry, there is no incentive to create change bc there is no competition to beat out
Trust
fiduciary relationship concerning property in which one person as trustee holds legal title to the benefit of another person
Economic assumptions regarding market competition
Increased # of small competitors are better for overall development of marketplace
Price control in competitive marketplace cannot be under only a few companies or entities
Sherman Act
prohibits certain business practices that restrain trade and promote competition
outlaws contracts, combinations, or conspiracies that restrain interstate commerce and also prohibits monopolization
Proof of intent to monopolize is significant for sherman act
Two Principles in Antitrust Laws
Rule of Reason - test of reasonableness
Per se illegality - proof of activity = proof of violation
Sanctions for Sherman Act
Tripled damages
Property subject to seizure and forfeiture
Subject to fines/imprisonment
Exemptions to Sherman Act
Insurance companies
Farm cooperatives
Milk marketing
Shipping
Investment companies
Parker v brown doctrine (state action)
Labor unions - normal activities
Noerr-pennington doctrine
cases in which antitrust laws come into play
price fixing
- horizontal
- vertical
- indirect
Territorial agreements
concerted activities
National Cooperation act
Enforcement efforts focused on international cartels w/ 90% of criminal fines imposed relate to international cartels since 1997
With respect to int’l cases: Multinational companies must monitor how different countries operate with respect to antitrust laws
Cayton Act
Provided more specificity as to the type of business practices that were illegally uncompetitive
More specific sherman act - amended
Outlawed practices include
Substantially lessening competition and
creates monopoly
Excluded labor unions, allowed private individuals to obtain injunctions
eased burden of proof
Robinson Patman Amendment of 1936
Eliminates idea that a large business can get a great deal because they have more purchasing power
tackles price discrimination
exceptions to price discrimination for large business bulk purchases
Good faith transactions
Pricing due to changing conditions
Cost justification
Good faith meeting of competition
Arrangements under Clayton Act
Tying contract - full line forcing
Reciprocal dealing
Exclusive dealing
Requirement contracts
Types of mergers and acquisitions
Horizontal - A + B = AB
- Combining of two businesses in same business and industry
Vertical
- Brings together one company and a customer
- Two companies at different levels of supply chain combine operations
Conglomerate
- Two companies merge that neither compete or are customers of each other
Federal Trade Commission Act
The Act empowers the FTC to prevent unfair methods of competition and unfair or deceptive acts or practices in commerce
