The USA Antitrust Law - Assignment Example

Running Head: USA ANTITRUST LAW USA Antitrust Law Course Tutor Date USA Antitrust Law Question 1 Antitrust law is a combination of competition laws that prohibits some practices perceived to harm businesses or consumers or both, or in general to breach standards of ethical behavior. Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unequivocally negative effect. In the U.S antitrust law; the Sherman Act addresses single-firm conduct by providing a remedy against "[e]very person who shall monopolize, or attempt to monopolize...any part of the trade or commerce among the several States." This prohibition does not condemn domination per se but only monopoly that has been acquired or maintained through illegal behavior (Lopatka, 2009). While the prevention against multi-firm anticompetitive goes against agreements in the moderation of trade, it is not enough to show that an agreement in some practical way restrains trade. Under U.S. law, at least, the scope of the prohibition is limited to those agreements where the restraint of trade is difficult to deal with: NATLA has reached an agreement that may in one way or another be deemed unreasonable. This very aspect of binding, and restraining, is of their very essence. The factual test of validity is if the restraint imposed is such as simply controls and possibly thereby promotes competition or if it is such as might repress or even harm competition. NATLA’s restraint can suppress or destroy competition. It collects and disseminates information on prices, services, and other issues of interest to its members, and operates a joint fuel purchasing program on behalf of its members. It requires all members to offer the trucks of the other members timely and proficient repair service, but it does not regulate the price of the service. Certain activities are often subject to antitrust scrutiny. One of them is geographic market allocation. This is generally an agreement between competitors to avoid competition in each other’s geographic regions (Lopatka, 2009). NATLA rules forbid each member/franchisee to affiliate with any other full-service truck-leasing enterprise or association. Typically, authorized locations are placed more than 25 miles apart. NATLA members can open a business outlet at an unlawful locality using a dissimilar name, but trucks leased under that name would not be get reciprocal service; and even though the members were willing to abandon that advantage, it still could not open an outlet under license from another full-service truck-leasing enterprise without violating NATLA rules and risking expulsion. The general effect of NATLA’s rules is to rigorously restrict over-the-road letting competition between its members. The restraint imposed by NATLA is such that it suppresses or may even destroy competition. The overall effect of the 25 mile distance is to ensure that competitors do not to compete in each other’s geographic regions. Each NATLA member operates under a franchise from NATLA that designates the particular location at which it may conduct business as a “National franchisee”—and it specifically forbids each member from doing business as a National franchisee at any other location. Another activity that may be subject to scrutiny is price fixing. Price fixing is an agreement between business competitors selling the same product or service regarding its pricing. NATLA collects and disseminates information on prices, services, and other issues of interest to its members, and operates a joint fuel purchasing program on behalf of its members. However, it does not regulate the price of the service (Lopatka, 2009). Other agreements that can have affect competition are usually examined through a balancing test, where validity is dependant on the general outcome of the agreement. Collecting and disseminating information on prices, services, and other issues of interest to its members, and operates a joint fuel purchasing program on behalf of its members has an impact on competition among its members. These non-affiliation restrictions may be considered harmful to competition and are generally proscribed outright by the antitrust laws. This type of monopoly should be broken up. There is an aspect of coercion; that is the persistent, exclusive control of a vitally needed resource, good, or service such that the 150 members including MTL is at the mercy of the controller, in this case NATLA. It collects and disseminates information on prices, services, and other issues of interest to its members, and operates a joint fuel purchasing program on behalf of its members. Every breach of the antitrust laws is a blow to the entrepreneurship system envisaged by Congress. In endorsing these laws, Congress had several means of penalizing violators. For instance, it could have needed those who breach antitrust law to recompense federal, state, and local governments for the projected damage to their relevant economies resulting from the violations. One was permitted to take legal action to recover three times their real damages every time they were harmed within their business through breaching of an antitrust law (Lopatka, 2009). The term unlawful per se implies that the act is essentially against the law. Therefore, an act is unlawful devoid of extrinsic proof of any surrounding conditions like knowledge shortage or other defenses. Acts are illegalized per se by case law, statute or the constitution. Courts seeking to apply the per se rule must: I. Carefully scrutinize market situation. II. Show that the practice is not "one designed to 'increase economic efficiency and render markets more, rather than less, competitive'". III. Show "the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output". In conclusion, NATLA has reached an agreement that should be deemed per se illegal under Section 1 of the Sherman Act (Lopatka, 2009). Question 2 A) Section 2 violation has two elements; The possession of monopoly power in the relevant market and The determined acquirement or upholding of that power as distinguished from development as a result of a superior product, business acumen or historical accident. Therefore, Section 2 addresses the end results that are anticompetitive. Dyco has not found out a way that would not have a negative impact on any of Orange 100’s products. This means that any action it takes will affect the market of both products from Orange 100. In this case Dyco will have committed the above crime. Irrational exclusionary practices that serve to ascertain or form monopoly power can as a result be against the law. Antitrust laws in decree criminalize any person or companies engaged in making a business flourish, while in violations of their individual expectations (Reynolds, 2007). B) Dyco has had pricing problems since distribution to orange growers, which typically accounts for about 80% of Dyco’s sales, must be handled through a vast number of independent jobbers and distributors of agricultural chemicals, and is highly competitive. Dyco has discovered that sales of Orange 100 through agricultural channels are very sensitive to its own price changes, or changes in the prices of X, Y, or Z, while sales to the relatively few buyers in the photographic industry are almost completely unresponsive to price changes (Reynolds, 2007). It may be argued that the very existence of antitrust laws discourages businessmen from some actions that might be socially useful out of fear that their business actions will be determined illegal and consequently done away with by government. In his article entitled Antitrust, Alan Greenspan says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever calculate the price that all of us have paid for that Act which, by inducing less efficient use of capital, has kept our standard of living lesser than would otherwise have been likely." Those, just like Greenspan, who oppose antitrust, tend not to support competition as an end in itself but for its results i.e., low prices. If Dyco’s production costs per unit of coloring potency were substantially lower than those of X, Y and Z the analysis would not be different. C) There are two major types of monopolies: de jure monopolies, meaning those protected from competition via government actions, and de facto monopolies, meaning those not protected by regulation from competition and are merely the only supplier of a good or service. One problem some alleged with the Sherman Act was that it was not exclusively comprehensible regarding the barred practices, and this made the businessmen to be unaware of what they were permitted to do (Reynolds, 2007). Equally, administration antitrust authorities were not sure what business practices they could challenge. In the words of critic Isabel Paterson; "As freak legislation, the antitrust laws stand alone. Nobody knows what it is they forbid." However, in either case, Dyco has no monopoly power. There is usually a distinction between coercive and innocent monopoly. The issue here is the method taken by Dyco so as to dominate the market. Section 2 of Sherman Act is not meant to punish business that came into being on merit or out of their sheer hard work but those that resulted from misconduct or irrational means. Dyco has discovered no way of making its product unfit for photographic use without also destroying its usefulness in the agricultural market. Therefore, it will be through misconduct that Dyco will have monopoly (Reynolds, 2007). Monopolization and tried monopolization are offenses that can be committed by an entity firm, even when there is no agreement with any other company. Unreasonable exclusionary practices whose purpose is to set up or form monopoly power can consequently be against the law. Dyco does not fall within any of the two categories. It is not de jure monopolies, meaning those that are secluded from competition via government actions, or, de facto monopolies, which aren’t sheltered by law from competition and are purely the single supplier of a good or service. Dyco is not the only supplier to orange growers since Orange 100, X, Y and Z equally do. Equally, its actions are not protected from competition by the government (Reynolds, 2007). Question 3 The customers claim that Sweet Co. violated Section 1 of the Sherman Act which handles Conspiracies to restrain trade. To prove this, the customers need to prove this offense; it is on average obligatory to ascertain the ‘relevant product and geographic market” in order to restrain trade. Generally speaking, a restraint trade is a predatory practice carried out by co-conspirator with an aim of sabotaging competition on the merits within a given market so that after that they can impose higher prices without fearing being undersold by a rival. Sweet company has been delivering value to the customers and the customer’s cases are as s result of viewing the company as being a monopoly. Sweet Co. will employ two classic defenses: Defense 1: being a monopolist is legal Sweet Co. has achieved market dominance by using superior skills, foresight as well as industry. Companies that gain market share through being innovative and delivering value to the customers should be rewarded (Meese, 2004). To triumph over this argument, antirust authorities will be required to establish some of the particular actions that Sweet Co. has taken to ‘restrain trade”, obtaining the market share by tampering with the competition and nor through illustrating superior skill among other things. Sweet Co. with then reply with: Defense 2: Additionally, Sweet Co. is not a monopolist In order to establish a monopolist, it is necessary to first identify a market. Commentators normally classify Sweet Co. as enjoying 75% of the market share. However, Sweet Co. thinks that market definition is too narrow. For instance, in case advertising is analyzed, the share of Sweet Co is microscopic, less than 25%. Therefore, Sweet Co. will argue that it is not even a monopolist. In case those two arguments are not enough to draw away further antitrust scrutiny, Sweet Co has one more solid defense. Defense 3: the Company persistently faces new competition. Even if it is not a monopolist currently, there is no warranty that will last. This argument puts emphasis on the dynamic nature of competition. In case new companies enter the market, and actually are entering the market, them any monopoly power might be temporary. Faced with new competitors, leading companies should go on innovating if they want to remain at the top in the market. In a nutshell, pressure from new competitors might hinder a dominant firm from exploiting any transitory market power (Meese, 2004). Therefore, the alleged claims are neither prompted nor even applicable to the anti-competitive practices at matter. The claimants should therefore illustrate the commercial practices of Sweet Co. harm competition on merits. Characteristically, the claimants should prove that Sweet Co. has fixed or pre-arranged its ostensible competition or that it has devised practices that unfairly exempt burden rival competitors within the applicable market. According to the rule of reason, the customers should be able to show that the practices they are challenging resulted in increased prices and the ample case law that interprets this statute. Even though there are particular types of trade restraints deemed per se violations, and proving of per se violation of section 1 of the Sherman Act does not require proving of the applicable market or any anti-competitive result caused by the challenged behavior. It is enough to prove that the challenged conduct comprises of the conduct that is forbidden per se. the per se offenses consist of horizontal price fixing, bid-rigging horizontal market allocation as well as horizontal group boycotts (Meese, 2004). However, in this case, Sweet Co never committed any horizontal price fixing among other per se allegation. The claims the customers are accusing Sweet Co. of are resale price maintenance which is not illegal according to per se laws. The court will find that the customers do not have standing to bring the claims. Therefore, the claimants do have a standing and are not entitled to seek injunctive relief from Sweet Co (Sidak, 2006). Question 4 Super propane and GBK are both multi-firms since they are involved in various business undertakings. According to Sherman Act, the conduct of the multi-firms is handled through prohibition of each contract, amalgamation within the form of trust or otherwise, or conspiracy, within control of trade or commerce. Conduct is normally covered in this scope of prohibition in case there is an evidence of some form of agreement or concerted action. In this case, the two companies Super and GBK have a form of agreement which involves their combination in order for them to reduce their operating and joint production costs among other advantages. All these actions according to the companies will allow them to in cooperation bid for long term contracts within Tazland and also in numerous neighboring countries. This agreement will automatically give the other rivalry companies unfair competition through this anticompetitive conduct since this gives the other companies no room to compete fairly. As a result, this multi-firm anticompetitive restrains trade (Albert 2002). “All agreements regarding trade, all regulations of trade, restrain. The valid test of legality is if the restraint imposed is such as purely controls and maybe in so doing promotes competition or if it is such as might repress or even obliterate competition”. The agreement between the two companies has a very high probability of repressing trade and doing away with the competition completely since the two companies are among the key competitors of propane in the State of Tazland and when these two companies join they will acquire more than half of total propane sales and this will in a major way affect the other competitors (Albert 2002). According to Antitrust law, both Super and GBK will have committed an antitrust offense by forming the merger. This is because two competitors within a given market are not supposed to merge together, acquire one another or have any union of their businesses in case through the combination such companies get hold of total monopoly power or an overly dominant position that is perceived harmful to the consumers and other competitors as well. In this case, Super and GBK are competitors in the same market and hence they are not supposed to join in their business undertakings. Furthermore, the joining of these companies will obviously obtain a dominant position in the market and this dominant position will in the long run destroy the competition with the other rivalry companies. Still, at times a proposed union is permitted but only in case the union operations dissociate from particular assets or operations so as to do away with anti-competitive outcomes that may otherwise emerge as a result of the union. These two companies are not dissociating from any assets or activities and hence the companies namely, Super and GBK are not in any way avoiding anti-competitive consequence that can result from the combination of the companies (Albert 2002). Clayton Act imposes limitations on proposed mergers and also complements the Sherman Act, prohibiting some types of commercial; practices that extremely suppress competition on merits. Moreover, the Clayton Act permits the courts to enjoin anti-competitive conduct before it essentially harms the consumers or the other competitors. The merger of Super and GBK clearly goes against Clayton Act and hence the reason this merger is being challenged (Albert 2002). Apparently, the merging of these two companies is a conspiracy that will definitely restrain trade. Additionally, it is against the law for two or more companies to act in agreement in order to restraint trade within a given line of commerce: this is what both Super and GBK are trying to do in the line of propane market. The relevant product here is Propane and the geographic market is Tazland whereby these companies are trying to combine in order to restrain trade. Generally speaking, Super and GBK intend to restrain trade within propane market by sabotaging “competition merits” so that afterwards the companies can enforce oppressive terms of trade without fearing being undersold by other competitors. Specifically, their joining will absolutely render the other competing companies ineffective when bidding for long term contacts (Steven, 2004). Finally, it is a breach of antitrust law for two or more companies to act jointly with an aim of sabotaging competition on the merits. In this case, it is obvious that Super and GBK are breaching the antitrust law since the main aim of combining is to gain larger market and hence impair competition form the other competing propane companies. The proposed merger between Super and GBK basically threatens to reduce competition unacceptably within a properly defined market (propane market which has five key marketers) (Albert 2002). Question 5 Memorandum in Support a Complete Investigation in Durab, Allthere, and Batteron having violated antitrust laws Introduction There are several facts that need to be looked into in detail; three of the battery manufacturing companies all increase their prices equally. Would it be in order to deduce that they are in fact conspiring? Conspiracies to restrain trade It is illegal for two or more firms to act in performance to pin down trade in a certain line of business. It is not by coincidence that Durab, Allthere, and Batteron have all increased their prices after the emergence of Canman and Nisobat. In fact Nisobat brand name is well-regarded by consumers in general, and many of the firm’s other products are sold through the same retailers that handle batteries. It appears that the three companies are facing a threat from the emergence of Canman and Nisobat. To prove such an offense, it is necessary to establish the "relevant product and geographic market" in which two or more firms have formed a "contract, combination or conspiracy" in order to restrain trade. The conspiracy need merely be an implied understanding. The CEO of Durab when asked how much he thought prices should rise; he replied “10-12%.” During January, the same reporter interviewed the CEO of Batteron and asked her about the Durab CEO’s statement. She replied that she thought a 10% across-the-board price increase would be appropriate, except for size D batteries, which should go up 15%. On January 25, Durab announced that effective February 1, the wholesale price of batteries would rise by 10%, except that the price of size D batteries would increase by 12%. Two days later, on January 26, Batteron and Allthere announced similar wholesale price increases (10% for most batteries, 12% for size D), which were to be effected immediately. On February 1, Durab increased its wholesale price in accordance with its announcement. It is there fore immaterial to argue that the CEO of Allthere did not give a statement (John, 2005). Generally, a restraint of trade is a practice undertaken by conspirators so as to sabotage "competition on the merits" in a given market, so that afterwards they can impose higher prices or other oppressive terms of trade without fear of being undersold by a rival. This is what basically happened in this case. Durab, Batteron and Allthere conspired to sabotage Nisobat and Canman so that they could afterwards impose higher prices without fear of being undersold (Walker, 2005). Such kind of trade restraints is deemed per se violation. To establish a per se breach of Section 1 of the Sherman Act, it is not essential to prove the applicable market or any anti-competitive outcome resulting from the challenged conduct. The conduct by the three companies is one that is proscribed per se. One of the per se offenses include horizontal price-fixing (John, 2005). It is against the antitrust law to utilize anti-competitive or predatory practices to get hold of monopoly power within a market, or to make use of such tactics to increase monopoly power, or to misuse monopoly power within one market in order to achieve a monopoly in another market. It is also a breach of antitrust law for two or more companies to join with an aim of sabotaging competition on the merits or take part in any of the per se offenses. Durab, Batteron and Allthere act together to preserve their monopoly power through predatory/anti-competitive means thus are in violation of antitrust law (John, 2005). The above facts would warrant persuasion of a complete investigation of this conduct as an antitrust violation. Arguments However, there are several details that need to be considered. There is no objection to the fact that Durab, Batteron and Allthere are the main small battery firms in the country. These firms account for approximately 90% of U.S. sales of small batteries. Consequently the various consumer groups in conjunction with Nisobat and Canman might be objecting to the business practices of their more successful rivals. They then brings an antitrust complains about the matter to the Justice Department. A civil antitrust case may be brought or a criminal proceeding might be initiated. The court, having been so summoned, will decide whether or not there has been an antitrust violation. This will be by applying the general formulas of the statutes to the alleged collusion. Whether or not the practice is inappropriate becomes known only after the court’s ruling (Pitofsky, Goldschmid & Wood, 2010). This is an argument that is in objection to the pursuing of a complete investigation. Concluding Statement Ingredients in such a case need to be adequately stated. It is impossible to emphasize enough how imperative it is to pay close attention to every item of communication sent or received by the CEOs of Durab, Batteron and Allthere or their respective representatives. So as to complete my evaluation I will need every copy of their possible communication, the addressor and to whom it was addressed. These are important so as to know whom to ask what. References Albert N. (2002). United States v. Microsoft: Remedy or Malady? New York: Sage. John L. (2005). Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion. New York: Supreme Court. Meese, A. (2004). Monopoly Bundling In Cyberspace: How Many Products Does Microsoft Sell? Antitrust Bulletins. Vol. 1/5. Lopatka, J. (2009). The Microsoft Case: Antitrust, High Technology, and Consumer Welfare. Chicago: University of Chicago Press.  Pitofsky, Goldschmid & Wood. (2010). Trade Regulation, 6th edition. New York: University Casebook Series, Foundation Press Reynolds, B. (2007). The Microsoft Antitrust Appeal. Ville: Hudson Institute. Steven, S. (2004). Preserving Monopoly: Economic Analysis, Legal Standards, and the Microsoft Case, 7 Geo. Columbia: Macmillan. Sidak, G. (2006). Antitrust Divestiture in Network Industries. Chicago: University of Chicago. Walker, M. (2005). A guide to US antitrust law. London: Sweet & Maxwell. Read More