Antitrust Law: The Sherman Act - Assignment Example

Name Tutor Course Date Antitrust law Qn. I. Under section two of the Sherman act, any person or group of people monopolizing or attempting to monopolize or conspiring to monopolize any trade are guilty of a felony and thus liable for conviction. Howard and the members of the roller-bit industry conspired in an attempt to monopolize the roller bit industry. The price changes in the industry for the past seven years were always initiated by Howard while the other four companies following suit implying that there might have been a conspiracy between the firms to monopolize the industry. This can be considered as a form of price fixing or market sharing which is prohibited by the Sherman act. Article 81 (1) EC prohibits monopolistic firms or firms which have assumed a dominant position in a specific industry from abusing such a position. Howard was evidently abusing the position it had assumed in the industry by always initiating a price change (Cseres 291). Howard and the members of the roller-bit industry can successfully be sued under the Sherman Act for collaborating to lower prices to force new comers out of the business in the roller-bit industry. Under the EC law, cartels are illegalized by Article 811 EC. The competitive law bans anyone or any firm engaging in an economic activity to act in a manner that prevents competition in the industry. The firms should thus be sued for all manner of practice whether verbal or written to reduce prices to the production cost with the aiming of promoting monopoly in the industry by forcing new comers out of business. Howard and other members of the roller-bit industry were thus operating as cartels which are prohibited by the Sherman act. Since their practice was not beneficial to the end users then it is outlawed. Howard can also be sued for limiting production in the roller-bit industry. They did this by suing other firms that attempted to produce cone shaped bits in the industry. It was unfair to other firms considering that Howard officials did not examine the bits in questions as evidence by the more than two occasions (Cseres 291). This was an attempt to fully monopolize the roller-bit industry since they did hindered new comers in the industry by suing them and forcing a purchase of their patents. In addition, Howard and the member companies produced sub-standard bits which found use in other industries which required shallower holes. Its patent consisted of bits for use in areas requiring deeper holes and thus was subject to contention. Howard actions can be considered as an attempt to monopolize the industry by hindering production and therefore the firm was guilty of felony. By suing other firms that attempted to produce experimental models of cone shaped bits, Howard was taking advantage of its dominant position in the roller-bit industry to prevent the entry of new comers into the industry. Howard sold cutting equipments to oil and drilling companies on conditions of re-purchase in the event that the vendee decides to sell his equipment shows that Howard had intentions of monopolizing the industry. This can be described as an attempt by a firm in dominant position to hinder growth and development in the industry which is a violation of Section 2 of the Sherman Act. The company can however defend itself by claiming that it performs researches to discover defects in the manufacture of bits. The firm will however be successfully sued for violating the Sherman Act (Cseres 292). Qn. II. When Dyco’s production and distribution expenses are not significantly different from those of X, Y and Z, the market would be described as dominant. The market is highly competitive when Dyco sales are to be handled via a vast number of independent jobbers and distributors of the agricultural products. In this case the market can not be described as a monopoly. The sale of Orange 100 via agricultural channels which are very sensitive to its own price changes or changes to prices of X, Y, or Z and the sale of to relatively fewer buyers in the photographic industry makes Dyco only a dominant firm in the industry and not a monopoly because it is evident that competition exists especially in the agricultural field. A firm is described as dominant if it is assessed whether it appreciably behaves independently to its competitors, customers and finally the clients or consumers. Dyco evidently behaves differently from the competitors by concentrating on the relatively less competitive photographic industry rather than the agricultural sector. The photographic industry is unresponsive to price changes while the agricultural channels are responsive and sensitive to both own price changes and changes in the prices of X, Y or Z (Cseres 293). Although Dyco has not discovered any way of making its product unfit for photographic use without necessarily destroying the usefulness of the products in the agricultural market, it distribution style is different from that of its competitors. Dyco would however violate the antitrust laws if it directly or indirectly imposes unfair purchases or unfair trading conditions to its clients. Under EU law very huge market shares raise a presumption that a given company is dominant. From the above description, Dyco has a dominant position because it has a market share of 39.7% and is thus dominant in the industry. Where a firm abuses the consumers or its position as the dominant figure in that particular industry, it would be difficult to determine at which point the company’s pricing becomes exploitative. A dominant firm is likely to take advantage of the position to the detriment of customers by charging high prices or practicing price discrimination. Firms can also use the position to hinder growth and development in the industry by fixing prices such that the competitors or new comer are driven out of the market (Cseres 293). The analysis of the market would be different if Dyco’s production costs per unit of colouring potency were relatively lower than those of X, Y, and Z. in this case Dyco would be more of monopoly rather than exhibiting dominance. The firm would be at a better position to compete in the industry as compared to the competitors since its distribution and production costs were lower than other firms. In the case where the firm experiences competition, it does not have monopoly power since the industry is highly competitive. When Dyco’s production and distribution costs are lower than those of the competitors, it will have some monopoly power especially when it concentrates in the photographic film industry (Cseres 291). Qn. III. The Sherman Act prohibits an agreement or conspiracy between firms in a particular industry which unreasonably restrains competition or affects the trade in that particular industry. Section two of the Act also banns the possession of monopolistic power in a specific market and willingly maintaining the power to inhibit growth or development in the industry due to superiority in the quality of product produced, business insight or historic accident. Sweet Co. agreed to pay a $ 250 million fine due to violation of the antitrust laws and thus a sure proof that it had conspired with the other four main firms in the artificial sweetener production industry. This gave the other private parties grounds to sue the firm. The charges filed by the various parties must however be categorised appropriately for the firm to be found guilty. The parties must also proof that Sweet Co really violated the facts. The Drink Manufacturers and other manufacturers of soda pop and juices sued Sweet Co. in the federal court for violating section 1 of the Sherman Act. Since the manufacturers accounted for 75% of the Sweet Co.’s sales, this suit was highly significant to the firm. The manufacturers however had to proof that the violations were ‘violations “per se”’. These violations should meet the firm characterization of Section one which requires that there must have been agreements, conspiracy or trust to control competition or trade. If the drink manufacturers file the charges under the violation “per se”, the violations will not require any further inquiry into the effect of Sweet Co.’s actions on the industry or its intentions of acting in such a manner (Cseres 292). These violations will thus be found to have a harmful effect on competition or might even totally eliminate competition in the industry. Competition will be restricted while decreasing output in the industry. This will have the effect of monopolizing the industry and thus fixing prices as deemed advantageous to the firm in question. Per se rule will be applied if the firms will prove that Sweet Co. behaved in such a manner and claim compensation on the basis of unfair pricing of the products from Sweet Co. other parties such as consumers of sweet Stuff products can follow the same line to substantiate their claims and can be compensated for over pricing by Sweet Co. The suits can also be assessed under the violations of the rule of reason. This is basically carried out on the basis of circumstance test in which the effects of the actions of Sweet Co. will be analysed by considering their effect of market competition in general (Rogers & Andersen 22). To determine whether Section 1 of Sherman Act was violated, the courts are required to assess facts that are unique to Sweet Co., the history of the violations and reasons of acting in such a manner. This is done to investigate the extent of the actions to the competition in the industry. Such actions by Sweet Co. will only violate section 1 if they are found to unreasonably control the market or trade in the industry. If the parties can prove that the actions affected competition and consequently pricing in the industry, then the ruling will be in their favour (Pitofsky, Goldschmid & Wood 70). Qn. IV. Section I violation of the Sherman Act is composed of an agreement which unreasonably controls competition and affects trade of a particular commodity in the industry. The three local refiners violated the section by liaising or collaborating to fix the prices at which they were to pay the farmers for their Beets. This agreement was possibly an attempt to monopolize the industry since the farmers had no possible applicable means of marketing their Beets at that moment (Areeda &Turner 43). By conspiring to buy the beets at a particular price, the local refiners were definitely aiming at controlling the prices by ultimately eliminating competition amongst them. By analysing their action on a violation per se perspective, the refiners’ actions met the strict features of Section 1 of the act. The agreement and conspiracy will definitely control the trade of the beets because the farmers had to submit to their agreement having no other viable means of selling their produce. This perspective does not require further inquiry into the actions as it obvious that the actions of the refiners will definitely control the trade by restricting prices and ultimately the level of production. Their action will eliminate competition or restrict the competition to a great deal with the effect of reduction in production levels. The refiners will thus be found to have violated the antitrust laws and will be guilty and liable for a fine. The conspiracy or the agreement of the local refiners to sell their product, that is, sugar, is not a violation of the Section 2 of the Sherman Act. Their action will not affect the competition in the trade since it involves other refiners as well (Cseres 292). Analysing the agreement on a violation of the rule of reason reveals that the action will neither promote nor suppress market competition in the sugar industry. It was unlikely that the motive of their action was to monopolize the sugar industry. This was rather difficult considering that other firms were also involved. The reasons for deciding on such a course of action, the history of the refiners and their unique features do not suggest any suspicions for attempting to monopolize the sugar industry. Their actions will not have a significant effect on the competition of sugar in the industry and will not be found to have unreasonably restrained the marketing of sugar. This action will therefore not be found a violation of the Sherman Act and therefore the refiners will not be liable for a fine. The farmers’ action on the other hand is not a violation of the Sherman Act. Their action was basically to protect themselves from the monopoly that the refiners were possibly creating. The act of negotiating the prices with the three local refiners was in no way an attempt to monopolize the beet industry, eliminate or reduce competition. It was rather an act of preventing price fixing by the refiners. From the violation of the rule of reason point of view, the action does not have a devastating future consequence on the competition. It is thus not a violation of Section 1 as it does not unreasonably control trade. The government is thus likely to succeed in suing the refiners for conspiring to fix the prices of beets (Pitofsky, Goldschmid & Wood 75). Qn. V. Lever’s action of forcing advertisers to purchase an identical space in the Tide as that purchased in the Lever is a violation of the antitrust laws. The antitrust law which is body of laws bans anti-competitive actions such as monopoly and unfair business practices. The laws have been formulated to promote competition in the market place. The laws make illegal particular actions that harm businesses consumers or both or those that basically violate the norms of ethical behaviour. Lever thus violated the antitrust laws by harming the advertisers who are basically their customers. By forcing the advertisers to purchase advertising space that they possibly do not require, Lever was infringing the standards of ethical behaviour. This is a violation of section 2 of Sherman Act. This section has two elements: the possession of a monopolistic power in a particular market and the wilful attainment and maintenance of that power to hinder growth and/or development in a particular field due to superiority in quality of product or product in general or business acumen (Cseres 292). Lever obviously exhibits the two elements and its action is definitely taking the advantage of possession monopoly to make profits. It has a monopolistic element in that it is the only morning paper while it has a 50% share of the evening distribution. This section is aimed at preventing firms such as Lever who are dominant in a particular trade from abusing that position to harm the consumers. Any person or firm in such a position is also prohibited by Article 82 EC from reasonably affecting the market. The Article prevents or prohibits firms such as Lever from directly or indirectly carrying out unfair procurement or fixing prices or unfair trade (Cseres 292). By forcing advertisers to buy an advertising space that they might not be willing to purchase is a violation of antitrust laws. Similarly, the act also limits production in the advertisement industry since an advertiser might be willing to place an advert in the Time but might not afford the cost as a result of a forced advert in the Tide. This is because most of the advertisers are likely to place advertisements in the Lever which is the only morning paper. Lever and Tide violate the Article by placing Time at a competitive disadvantage. They deny Time a chance of placing adverts for some advertisers who might not afford extra costs after purchasing space in both Lever and Tide. Lever and Tide also violate section 1 of the Sherman Act by unreasonably controlling competition in the market. The conspiracy between Tide and Lever though owned by the same person to impose purchases on advertisers is literally an attempt to monopolize the newspaper advertisement sector. From both a violation per se perspective and violation of the rule of reason, the action of lever is a violation of Sherman act. The practice by Lever shows that they have an intention of controlling the market which is a direct effect of their activity. This action will definitely reduce competition or make the competitors far much disadvantaged. The act will tend to decrease the output of the other firms such as Time in the newspaper advertisement. A plaintiff only needs to prove that the Lever actually acted in the alleged manner and the court will rule in their favour. An assessment of the status or circumstances also reveals that the future consequences of the action are detrimental to both the competition of the industry as well as harmful to the customers. The history of restraining the trade and the justifications behind it are enough reasons to rule that Lever unreasonably restrained trade (Cseres 292). Work cited Areeda, Phillip & Turner F. Donald. Antitrust law: An analysis of antitrust principles and their application, Volume 3, New York: Aspen Law & Business, 1999. Cseres, Katalin. Competition law and consumer protection. New York: Kluwer Law International, 2005. Monti, Giorgio. EC Competition Law. Cambridge: Cambridge University Press, 2007. Pitofsky, Goldschmid & Wood, Trade Regulation, 5th edition, Foundation Press: University Casebook Series, 2003. Rogers, C. Paul & Andersen R. William. Antitrust Law: Policy and Practice. NY. LexisNexis Matthew Bender, 2000. Read More