Chapter 24: Antitrust Law and Promoting Competition Flashcards
(29 cards)
Antitrust Laws
Protect trade and commerce from unlawful restraints of trade and anticompetitive practices.
Restraints of trade
agreements between firms that reduce competitiveness in the marketplace.
Sherman Antitrust Act (Sherman Act)
Act to Protect trade and commerce against unlawful restraints on trade and monopolies.
Major Provisions of Sherman Act:
Provisions for a Trust (Sec. 1)–
1. Every _______________, combination in the form of a ____________ or otherwise, or _______________, in restraint of _____________ or _____________ among the several States, or with ____________ nations, is hereby declared to be ______________ [and is a _______________ punishable by _____________ and/or ___________________].
Provisions for a Monopoly (Sec. 2)–
2. Every person who shall ______________, or _____________ to ________________, or combine or ________________ with any other person or persons, to ________________ any part of the __________ or _______________ among the several States, or with _____________ nations, shall be deemed guilty of a ______________ [and is similarly punishable].
- contract; trust; conspiracy; trade; commerce; foreign; illegal; felony; fine; imprisonment
- monopolize; attempt; monopolize; conspire; monopolize; trade; commerce; foreign; felony
Monopoly
Market in which there is a single seller, or a limited number of sellers.
Section 1 Violation Requirements:
1) _____________ between ____ or more parties that…
2) ______________ restrains ________________, and…
3) affects ________________ __________________.
Agreement; 2; unreasonably; competition; interstate commerce
Section 2 Violation Requirements:
1) The ______________ of _____________ power in the relevant ___________, and…
2) the willful ______________ or ________________ of that power, as distinguished from _____________ or _______________ as a consequence of a _______________ product, business ______________, or historic ____________.
possession; monopoly; market; acquisition; maintenance; growth; development; superior; acumen; accident
“per se” Latin Meaning
“on its face”
Per Se Violation
restraint on trade that is so blatantly/substantially anticompetitive, that it is inherently (per se) illegal.
Rule of Reason (Test)
test whether or not an anticompetitive restraint on trade is a reasonable restraint on trade.
Why was the Rule of Reason Developed?
If the test wasn’t made, practically any trade restraint (agreement) between businesses/firms would violate the Sherman Act.
Price-Fixing Agreement
- Per se violation of Section 1 of Sherman Act (blatantly/substantially anticompetitive).
- Agreement between firms to fix prices of goods at certain level.
Group Boycott
- Per se violation of Section 1 of Sherman Act
- Two or more sellers refuse to work with firm or business
Market Divisions
- Per se violation of Sec.1 of the Sherman Act for competitors (firms) in the same market to divide customers and territories.
Explain TV Market Divisions Example:
Let’s say you have 3 different firms selling separate Television brands.
They each come together in concerted action and make an agreement for Business 1 to sell his TV’s in x (state), Business 2 sell his TV’s in y (State), and Business 3 in z (state)
This illegal trust makes it so that the tv businesses don’t have to compete against each other (no one has to lower prices, to get greater consumer attention etc…)
Trade Associations:
Trade associations may engage in _____________ activities including _____________ information, representing the members’ ____________ interest before govt. bodies, and setting ________________ standards to govern the ________________ the business’s are in.
Using the rule of reason, if a court finds that the _______________ of a trade association ______________ trade, but this restraint _______________ the ___________ and the ________________, then it is considered a _________________ __________________ on trade.
joint; exchanging; business; regulatory; industry; practices; restrains; benefits; public; association; reasonable restraint
_____________ restraints on trade and commerce take place on the ____________ (just _______) level of _______________ (production of goods / products). ________________ restraints, however take place at ______________ different levels of __________________.
Horizontal; same; one; operation; Vertical; many; operation
Vertical Restraint
A restraint of trade, made by agreement of firms, at different levels of manufacturing and distribution process.
Resale Price Maintenance Agreement
agreement between retailer and manufacturer that specifies what the retail price (store price) of a good must be.
Predatory Pricing
One firm tries to drive it’s competitors out of the market by pricing their goods at prices SUBSTANTIALLY below the normal costs.
Monopolization:
1) The willful _____________ of ____________ __________ of the _____________ _____________…
2) The willful ________________ and ______________ of that ______________, separate from _____________ and ________________, as a consequence of ______________ product, business ________________, and historic ______________.
possession; monopoly power; relevant market; acquisition; maintenance; power; growth; development; superior; acumen; historic accident
Clayton Act (1914)
An act is illegal only if it serves to substantially reduce competition or creates a monopoly power.
Price Discrimination:
when a seller charges competing prices to different buyers for identical goods/services.
Requirements for Price Discrimination:
1) The seller must be engaged in interstate commerce.
2) The goods have to be of similar grade / quality.
3) The good has to have been purchased by two or more purchases.
