Antitrust_Final_Exam_Review_

US v. Alcoa

• Overview: The government argued that Alcoa’s control over raw materials constituted a monopoly, which posed issues of competition.

  • Key Issue: Whether Alcoa's dominant position violated Section 2 (prohibiting monopolization) of the Sherman Act.

  • Court Decision: Ruled against Alcoa, stating that merely possessing monopoly power is not illegal, but using it to exclude competitors is a violation.

  • Intent vs. Effect: No intent to monopolize is necessary to prove a violation; the effect of reducing competition suffices.

  • Efficiency Debate: Raised questions about penalizing companies for achieving dominance through superior efficiency.

  • Two-Part Test for Monopolies:

    1. Firm must have relevant market power.

    2. Firm must exercise that power within the market.

  • No Fault Monopoly: Alcoa's monopoly was legally achieved but harmful, as it limited market entry by meeting future demand ahead of competitors.

Hand’s Two-Part Test

• Assessment of Monopolization:

  • Market Power: Identify the relevant market and assess if the firm has power within it.

  • Exclusionary Conduct: Were actions taken to prevent competition? Examples include exclusive contracts and vertical integration.

US v. Hutcherson & Von’s Grocery Store

• Case Details:

  • Von's Grocery controlled 7% of the LA grocery market after a merger.

  • Key Question: Did the merger reduce competition or create a monopoly?

  • Supreme Court Ruling: Held that the merger violated antitrust laws due to increased market concentration and reduced competition, establishing a strict interpretation of the Clayton Act.

  • Incipient Antitrust: Emphasizes preventing anti-competitive effects before they harm the market.

Philadelphia National Bank

• Merger Suit: The DOJ filed suit under Section 7 of the Clayton Act, attempting to block the merger between PNB and Girard.

  • Court Ruling: Blocked the merger due to presumption of illegality in concentrated markets.

  • Market Concentration: When a merger increases market concentration, it is presumed illegal unless strong evidence indicates otherwise.

Economic Theory in Antitrust

• Bain’s Structuralism Theory: The structure of the market dictates conduct and performance.

  • High Market Concentration: Typically leads to higher profit margins and increases barriers for new entrants.

  • Government Advocacy: Low barriers to entry are crucial for market competition.

Powell Memo to US Chamber of Commerce (USCC)

• Context: Designed to counter anti-business sentiment in the U.S.

  • Core Message: Corporations should engage more in legal fields to defend free market principles, advocating for policies favoring large businesses.

Shift Towards Chicago School of Thought (CST)

• Consumer Welfare Focus: Policies should prioritize maximizing consumer welfare over protecting small businesses; practices benefiting consumers should not be labeled anti-competitive.

  • Mergers Scrutinized: Less strict unless proven harmful to consumer welfare (CW).

  • Bork’s Position: Size is not inherently harmful, and evaluating practices should focus on their impact rather than fairness.

  • Easterbrook’s Approach: Advocated for a more restrained antitrust stance, focusing on clear evidence of anti-competitive conduct.

NCAA v. Regents

• Context: Demonstrated the need for contextual analysis in restraints on trade.

  • Consumer Welfare Goal: NCAA’s practices suppressed output and affected consumer welfare, resulting in condemnation.

  • Market Power Definition: Determining relevant market helps establish competitive scope.

Market Dynamics and Challenges

• Dynamic Markets: Fast-evolving markets like technology complicate definitions of relevant market and market power.

  • Multi-Sided Markets: Complicates traditional definitions; platforms like Google operate with interconnected markets.

  • Globalization Effects: Geographic definitions are difficult as competition crosses national borders.

NCAA v. Alston

• Court Rulings: NCAA is not exempt from antitrust law, even non-profits must adhere to Section 1 of the Sherman Act.

  • Competitive Effects Focus: Emphasizes focusing on actual competitive effects over historical justifications for restrictive practices.

Brunswick Case

• Competition Protection: Emphasizes protecting competition as a process rather than individual competitors.

  • Antitrust Injury: Plaintiffs need to show harm stems from reduced competition, not just individual business injuries.

Predatory Pricing and Areeda-Turner Test

• Predatory Pricing (PP): Selling below cost with intent to drive out competition; entails defining sub-cost pricing and assessing probability of recoupment.

Aspen Skiing Case

• Monopolistic Actions: Termination of joint ticket agreement by Aspen Skiing was seen as exclusionary conduct that harmed competition.

  • Essential Facilities Doctrine: Withholding access that is necessary for competition can be anticompetitive.

Legal Framework for Monopolistic Practices

• Monopolists: Must demonstrate legit purpose for conduct, avoiding actions that simply protect dominance.

  • Brooke Group v. Tobacco: Established stringent thresholds for proving predatory pricing based on cost structure and the likelihood of recoupment.

Ohio v. American Express

• Court Ruling: Amex's practices largely justified under consumer welfare arguments despite allegations of anti-competitive behavior.

  • Two-Sided Market Dynamics: Firms must show harm across both market sides.

Current Market Power Issues

• Google’s Alleged Practices: Accused of implementing exclusive agreements that maintain its dominant search position.

  • Apple v. Epic Games: Discussion around essential facilities and the effectiveness of narrow market definitions in assessing monopolistic behavior.

  • FTC v. Amazon: Accusations of foreclosure tactics and hindering competition in the online marketplace.

Market Definition Importance

• Significance of Market Definition: Defining the relevant market accurately is crucial for understanding competitive dynamics and determining if conduct harms competition.