Antitrust nyu spring 2010 – Jonathan Baker Table of Contents



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Antitrust

NYU Spring 2010Jonathan Baker


Table of Contents


I. Introduction to Antitrust Law 3

a. Evaluating Antitrust Rules 4

II. Agreements Among Rivals 4

i. Introducing Reasonableness 4

ii. Price Fixing 5

A. Traditional Per Se 7

1. Horizontal Price Fixing 7

ii. Market Division 8

iii. Collusive Group Boycotts 9

b. Traditional Rule of Reason 10

1. Evaluating Competition 12

c. Structured Rule of Reason 12

1. Single Entity Cases: 12

ii. Polygram and Structure 13

III. Tacit Collusion 18

A. Cartel Problems 18

1. Game Theory 18

ii. Reaching Consensus 18

iii. Deterring Cheating 19

iv. Case Studies 19

v. Information Sharing 20

b. Inferring Agreement 21

1. Invitations to Collude 22

IV. Vertical Agreements 25

1. Non-Price Restrictions 25

ii. Resale Price Maintenance pre-Leegin 27

iii. Modern Vertical Restraints and Leegin 28

V. Horizontal Mergers 29

A. Structural Presumption 30

b. Market Definition and Market Concentration 32

1. Market Definition 32

ii. Determining Market Concentration 33

c. Establishing Market Power Economically 35

d. Coordinated Competitive Effects 35

1. Maverick Theory 36

e. Entry 36

f. Unilateral Competitive Effects 37

g. Efficiencies 38

VI. Monopolies 39

A. Monopolization and Attempt to Monopolize 39

b. Non-Price Exclusionary Conduct 41

1. After Alcoa 41

ii. Duty to Collaborate 42

iii. Microsoft 42

c. Predatory Pricing 44

d. Attempts at Unification 46

1. Bundling 46

ii. Resolving the Tension  47

VII. Concerted Exclusionary Conduct 48

A. Exclusionary Group Boycotts 48

b. Tying 50

c. Exclusive Dealing 52

VIII. Vertical Mergers 54

IX. Antitrust, Innovation and Intellectual Property 55

X. Cases: 58



I.Introduction to Antitrust Law


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.

  • People with potential standing to sue included:

      • Enforcement agencies (FTC and DOJ)


      • State attorney generals

      • Consumers, i.e. bowlers, likely through a class action

 

Antitrust injury - injury that flows from the action that makes the Δ's actions unlawful; injury of the type that the antitrust law was designed to prevent.




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