BSN 107

1. ESSENTIALS OF THE LEGAL
ENVIRONMENT TODAY, 5E
ROGER LEROY MILLER
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2. CHAPTER 19
ANTITRUST LAW AND
PROMOTING COMPETITION
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3. LEARNING OBJECTIVES
1. What is a monopoly? What is market
power? How do these concepts
relate to each other?
2. What anticompetitive activities are
prohibited by Section 1 of the
Sherman Act?
3. What type of activity is prohibited by
Section 2 of the Sherman Act?
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4. LEARNING OBJECTIVES (CONT’D)
4. What are the four major provisions of
the Clayton Act, and what types of
activities do these provisions prohibit?
5. What agencies of the federal
government enforce the federal
antitrust laws?
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5. INTRODUCTION
• Laws regulating economic
competition in the United States
• Embodied almost entirely in
• Sherman Antitrust Act
• Clayton Act
• Federal Trade Commission Act
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6. THE SHERMAN ANTITRUST ACT
• Major Provisions of the Sherman Act
• Sections 1 and 2 contain the main
provisions
• Differences between Section 1 and
Section 2
• Section 1 – concerned with finding an
agreement leading to restraint of trade
• Section 2 – structure of a monopoly that
exists in the marketplace
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7. THE SHERMAN ANTITRUST ACT
• Monopoly – a market in which there is a
single seller or a very limited number of
sellers
• Monopoly power – the ability of a
monopoly to dictate what takes place in a
given market
• Market power – the power of a firm to
control the market price of its product;
monopoly has greatest degree of market
power
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LO-1

8. EXHIBIT 19.1
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9. THE SHERMAN ANTITRUST ACT
• Jurisdictional Requirements
• Only applies to restraints that have a
substantial impact on interstate
commerce.
• Also extends to U.S. nationals abroad
engaged in activities that have an effect
on U.S. foreign commerce.
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10. SECTION 1 OF THE SHERMAN ACT
• Section 1 prohibits horizontal and
vertical restraints.
• Per Se Violations versus the Rule of
Reason
• Per se violations are blatant and
substantially anticompetitive.
• Why the rule of reason was developed
• Factors courts consider under the rule of
reason
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11. SECTION 1 OF THE SHERMAN ACT
•Horizontal Restraints
• Restrains competition between rival firms
competing in same market
• Price fixing
• Group boycotts
• Horizontal market division
• Trade associations
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12. SECTION 1 OF THE SHERMAN ACT
• Vertical Restraints
• Restraint of trade created by agreement
between firms at different levels in
manufacturing and distribution process
• Territorial or customer restrictions
• Resale price maintenance agreements
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13. SECTION 2 OF THE SHERMAN ACT
• Monopolization and attempts to
monopolize
• Monopolization
• Monopoly power
• Relevant market
• Relevant product market
• Relevant geographic market
• The intent requirement
• Unilateral refusals to deal
LO-3
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14. SECTION 2 OF THE SHERMAN ACT
• Attempts to Monopolize
• Proof of
1. Anticompetitive conduct
2. Specific intent to exclude competitors and garner
monopoly power
3. A “dangerous” probability of success in achieving
monopoly power
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15. THE CLAYTON ACT
• 1914 Clayton Act passed: Sections 2, 3,
7, 8
• Section 2—Price Discrimination
• Requirements
• Seller must be engaged in interstate commerce, goods
must be of like grade and quality, goods must have been
sold to two or more purchasers
• Defenses
• Several statutory defenses to liability for price
discrimination
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16. THE CLAYTON ACT
• Section 3—Exclusionary Practices
• Sellers or lessors cannot condition the sale
or lease of goods on the buyer’s or lessee’s
promise not to use or deal in the goods of
the seller’s competitor.
• Exclusive-dealing contracts
• Tying arrangements
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17. THE CLAYTON ACT
• Section 7—Mergers
• A person or business cannot hold stock
and/or assets in another entity “where the
effect…may be to substantially lessen
competition.”
• Horizontal mergers
• Vertical mergers
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18. THE CLAYTON ACT
• Section 8—Interlocking Directorates
• The practice of having individuals serve as
directors on the boards of 2+ competing
companies simultaneously.
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19. ENFORCEMENT AND EXEMPTIONS
• U.S. Department of Justice (DOJ)
• Federal Trade Commission (FTC)
• Enforcement by Federal Agencies
• Only DOJ can prosecute Sherman Act
violations
• Violations of Clayton Act are not crimes
but can be enforced by DOJ or FTC
through civil proceedings
LO-5
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20. ENFORCEMENT AND EXEMPTIONS
• Enforcement by Private Parties
• Can sue for treble damages
• Under Sherman Act must prove
1. The antitrust violation either caused or was a substantial
factor in causing the injury that was suffered.
2. The unlawful actions of the accused party affected
business activities of the plaintiff that were protected
by the antitrust laws.
• Exemptions from Antitrust Laws
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21. EXHIBIT 19.2
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22. U.S. ANTITRUST LAWS IN THE
GLOBAL CONTEXT
• The Extraterritorial Application of U.S.
Antitrust Laws
• Section 1 of Sherman Act
• Violation may occur outside United States
• Foreign persons including governments
can be sued for violation of U.S. antitrust
laws
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23. U.S. ANTITRUST LAWS IN THE
GLOBAL CONTEXT
• The Application of Foreign Antitrust
Laws
• EU has stepped up enforcement actions
against antitrust violators
• Other nations have laws that promote
competition and prohibit trade restraints.
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