BLAW 205: Antitrust Law and Promoting Competition Study Notes

Course Title: BLAW 205: The Legal and Ethical Environment of Business
Instructor: Professor Cole Agar
Topic: Class 28 - Antitrust Law
Source Material Attribution: Portions of the presentation are adapted from Cengage PowerPoints accompanying the text The Legal Environment Today: Building Skills You Will Need Tomorrow, 11th Edition by Miller (© $2026$ Cengage Learning, Inc.).
Copyright Notice: All rights reserved. Materials may not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Antitrust Definition: A body of laws designed to promote competition and prevent unfair business practices.
Key Prohibitions: - Agreements that restrain trade. - Abusive conduct by dominant firms. - Mergers and acquisitions that may substantially lessen competition.
Overarching Goals: - Protecting consumers. - Ensuring the maintenance of fair markets. - Encouraging innovation among businesses. - Reducing prices for the end-user.
Federal Trade Commission Act ( $1914$ ): - Created the Federal Trade Commission (FTC), an independent agency. - Grants the FTC authority to prevent unfair competition and unfair or deceptive trade practices.

Market Dominance: By around $1900$ , Standard Oil controlled approximately $90\%$ of the US oil market.
John D. Rockefeller: The owner of Standard Oil and recognized as one of the richest men who had ever lived.
Monopolistic Tactics: - Predatory Pricing: Standard Oil would break into new US markets by offering prices so low that competitors could not match them. Once competitors failed, Standard Oil would buy them out. - Railroad Leverage: Due to its size, the company demanded lower rates from railroads. They even forced railroads to pay them if the railroad carried oil for a competitor.
Market Impact: The US oil market and US consumers suffered because no other oil company could effectively compete.
Standard Oil Co. of New Jersey v. United States, US Supreme Court ( $1911$ ): - The Court found that Standard Oil was illegally monopolizing the oil market. - The company was ruled guilty of violating the Sherman Antitrust Act. - Remedy: The Court forced Standard Oil to break up into $34$ separate, independent oil companies.

General Purpose: The Act criminalizes certain activities that restrain trade.
Section 1: Restraint of Trade: - Verbatim Definition: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." - Application: Involves $2$ or more companies. - Prohibited Actions: Illegal agreements such as price fixing or bid rigging.
Section 2: Monopolization: - Verbatim Definition: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony." - Application: Could apply to just $1$ large company. - Prohibited Actions: Abusing a dominant position in the market.

Purpose: Created to strengthen antitrust law by clarifying and regulating issues the Sherman Act did not explicitly address. It focuses on acts that may reduce competition before they become harmful.
Section 2 - Price Discrimination: Prohibits sellers from charging different prices to competing buyers if the effect may lessen competition.
Section 3 - Exclusionary Practices: Bans specific supply or purchase conditions (e.g., requiring a buyer to buy exclusively from one seller) when they may substantially lessen competition.
Section 7 - Mergers and Acquisitions: Prohibits mergers or acquisitions that may significantly reduce market competition or create a monopoly.
Section 8 - Interlocking Directorates: Prevents the same individual from serving on the boards of competing corporations to avoid coordinated behavior.

Case Study: Netflix and Warner Bros Discovery: - Netflix made an offer of $72 \text{ Billion}$ to buyout Warner Bros Discovery. - Warner Bros Discovery Assets: Owns the Harry Potter franchise, the Game of Thrones franchise, HBO Max, and more.
Recent Market Share Data (October 3, $2025$ , via evoca.tv): - Amazon Prime Video: $22\%$ - Netflix: $21\%$ - Disney+: $13\%$ - Max: $12\%$ - Hulu: $11\%$ - Paramount+: $9\%$ - Apple TV+: $7\%$ - Peacock: $4\%$ - Other: $1\%$
Market Snapshot: Nielsen "The Gauge" (May $2025$ ): - Total TV and Streaming Viewing Share: - Streaming: $44.8\%$ - Cable: $24.1\%$ - Broadcast: $20.1\%$ - Other: $11.0\%$ - Specific Streaming Platforms Share: - YouTube: $12.5\%$ - Netflix: $7.5\%$ - Disney (includes Disney+, ESPN+, and Hulu SVOD): $5.0\%$ - Amazon Prime Video: $3.5\%$ - Roku Channel: $2.5\%$ - Paramount (includes Paramount+ and Pluto): $2.2\%$ - Tubi: $2.2\%$ - Warner/Discovery (includes Discovery+ and Max): $1.5\%$ - Peacock: $1.4\%$ - Other Streaming: $6.5\%$

Discussion Points regarding the Netflix/Warner Bros Discovery Scenario: - Do you think Netflix users might benefit from Game of Thrones being available on Netflix? - Do you think HBO stops feeling the pressure to make blockbuster shows like Game of Thrones if they are no longer competing with Netflix? - Do you think consumers of online TV shows and movies would benefit or suffer from this buyout?
Analysis of Market Power: - "What's the Relevant Market?" (Considering streaming platforms versus total TV time).
Recent Developments (February 27, $2026$ ): - Headline: "Paramount to buy Warner Bros Discovery in $110 \text{ Billion}$ deal as Netflix bows out of race." - Reporting: Karl Badohal, Jaspreet Singh, and Harshita Mary Varghese for Reuters. - Question: "Are we less worried about Paramount buying Warner Bros Discovery?" (Contrast to the tidligere Netflix bid).