The first question to ask is always whether the offense is collusive or exclusionary? United States v. Andreas (7th Cir. 2000)
ADM was a new entrant to a lysein cartel including a handful of other manufacturers worldwide, including Ajinomoto. They artificially inflated the price of lysein significantly by restricting output. The cartel policed the agreement through secret meetings in the guise of trade association meetings with fake agendas (and were only caught to do a whistle-blower—see the movie, “The Informant”).
Since there were few alternatives for lysein (a food additive for animal feed), animal feed manufactures had an inelastic (downward-sloping) demand curve. An inelastic (downward-sloping) demand curve is direct evidence of market power.
ADM’s counterarguments included:
The price-increase was not an exercise of market power, but rather a reaction to increased cost of inputs and a labor strike.
ADM needed to finance its investment in the lysein plant (which had high initial costs) by charging more than the marginal cost (competitive price) of lysein.
Cooperation between the members of the cartel allowed lower costs, such as reduced costs of shipping – an efficiency argument.
Social benefits, such as reduced pollution and conservation of natural resources also justified the cartel’s actions.
Market division is the same as price-fixing.
JTC Petroleum (7th Cir. 1999)
JTC was an asphalt applicator rejected by a supplier because a cartel of asphalt applicators (who rigged bids in local government contracts) paid supra-competitive prices to the supplier in order to discipline JTC. This does not necessarily even require the producer to collude, merely demand the same price that other applicators are offering to pay.
Since JTC is a rival and a cartel raising prices would be generally benefit JTC as well, JTC must tell a story of both harm to competition and harm to JTC.
Posner suggests that JTC is a maverick and a threat to the cartel, because it can undercut the cartels bid-rigging strategy. However, the cartel can prevent JTC by denying it access to asphalt producers.
Technically this is a market division case, because that is the rule Posner invokes and the cartel rigs bids by dividing the areas into exclusive zones and competitive zones.
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. (1977)
A bowling manufacturer bought up a series of bowling alleys that were about to go bankrupt and a competing bowling alley chain sued, alleging that acquired centers caused damage by keeping prices down. The court found that this actually increased competition, since the acquired centers would have dropped out of the market, removing a competitor and increasing the market power of Pueblo.
A suit brought under the antitrust statutes requires antitrust injury. The injury must result from the kind of actions that the statues contemplate, such as reducing competition. You cannot bring an antitrust suit to protect extra profits gained from market power.
Watershed case that requires a clear theory of anticompetitive harm.