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Antitrust Law and Unfair Trade Practices
379
they cannot recover.
Indirect Price Discrimination – Indirect price discrimination provides better prices to favored
customers through favorable credit terms, freight charges, or other, less obvious ways.
Defenses to Price Discrimination – There are three defenses to actions brought under this act.
manufacture, sale, or delivery.
Changing Conditions – Changing conditions in the market for or marketability of the
Federal Trade Commission Act
Exemptions from Antitrust Laws
There are some exceptions from antitrust laws.
Implied Exemptions – The federal courts have implied several exemptions from antitrust laws.
Examples of implied exemptions include professional baseball and airlines.
State Action Exemptions – State action exemptions have been extended to businesses that must
comply with state laws.
State Antitrust Laws
intrastate commerce.
Global Law: European Union Antitrust Law
In recent decades, EU enforcement of antitrust laws has been more stringent than the enforcement
of antitrust laws in the United States. For example, the EU antitrust authorities have blocked
mergers of multinational corporations that the U.S. antitrust authorities did not challenge. The EU
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V. Key Terms and Concepts
enforces federal antitrust laws.
Act of monopolizing—A required act for there to be a violation of Section 2 of the
Antitrust injury—To recover damages under Section 4 of the Clayton Act, plaintiffs must
Antitrust laws—A series of laws enacted to limit anticompetitive behavior in almost all
Section 2 of the Sherman Act.
Backward vertical merger—A vertical merger in which the customer acquires the
supplier.
Bureau of Competition of the FTC—Federal administrative agency which may enforce
antitrust laws.
Celler-Kefauver Act—It widened the scope of Section 7 to include asset acquisitions.
goods.
Civil damages—In the case of violation of federal antitrust laws, government may seek
civil damages.
Clayton Act—A federal statute, enacted in 1914, that regulates mergers and prohibits
certain exclusive dealing arrangements.
Colgate doctrine—A unilateral refusal to deal is not a violation of Section 1 because there
between firms in totally unrelated businesses.
Conscious parallelism—A doctrine which states that if two or more firms act the same
but no concerted action is shown, there is no violation of Section 1 of the Sherman Act.
Consent decree—Antitrust defendants often opt to settle government-brought antitrust
actions by entering a plea of nolo contendere in a criminal action or a consent decree in a
government civil action.
of the product.
Direct price discrimination—Price discrimination in which (1) the defendant sold
commodities of like grade and quality, (2) to two or more purchasers at different prices at
approximately the same time, and (3) the plaintiff suffered injury because of the price
discrimination.
Antitrust Law and Unfair Trade Practices
381
Federal Trade Commission Act (FTC Act)—A federal statute, enacted in 1914, that
prohibits unfair methods of competition.
Foreclosing competition—Foreclosing competitors from either selling goods or services
to or buying them from the merged firm.
Forward vertical merger—A vertical merger in which the suppler acquires the customer.
civil treble-damages action.
Group boycott—When two or more competitors at one level of distribution agree not to
deal with others at another level of distribution.
Hart-Scott-Rodino Antitrust Improvement Act—Requires certain firms to notify the FTC
and the Justice Department in advance of a proposed merger. Unless the government
challenges the proposed merger within 30 days, the merger may proceed.
business and geographical market.
Horizontal restraint of trade—A restraint of trade that occurs when two or more
competitors at the same level of distribution enter into a contract, combination, or
conspiracy to restrain trade.
Implied exemptions—Exemptions from antitrust laws that are implied by the federal
courts.
or industry.
Line of commerce—Includes products or services that consumers use as a substitute. If
an increase in the price of one product or service leads consumers to purchase another
product or service, the two products are substitutes for each other.
Market extension merger—A merger between two companies in similar fields whose
sales do not overlap.
to meet a competitor’s price.
Minimum resale price—Setting minimum resale prices is a per se violation of Section 1
of the Sherman Act as an unreasonable restraint of trade.
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Sherman Act if their anticompetitive effects outweigh their procompetitive effects.
Per se rule—A rule that is applicable to those restraints of trade considered inherently
anticompetitive. Once this determination is made, the court will not permit any defenses
or justifications to save it.
Predatory pricing—Pricing below average or marginal cost.
this perception can be enjoined under Section 7.
Potential reciprocity theory—A theory that says if Company A, which supplies materials
to Company B, merges with Company C (which in turn gets its supplies from Company
B), the newly merged company can coerce Company B into dealing exclusively with it.
Price-fixing—Occurs where competitors in the same line of business agree to set the
the offenders.
Probability of a substantial lessening of competition—If there is a probability that a
merger will substantially lessen competition or create a monopoly, the court may prevent
the merger under Section 7 of the Clayton Act.
Product market extension merger—A merger between sellers of similar products.
Relevant geographical market—A relevant market that is defined as the area in which the
defendant has monopoly power.
Relevant product or service market—A relevant market that includes substitute products
or services that are reasonably interchangeable with the defendant’s products or services.
Resale price maintenance—A per se violation of Section 1 of the Sherman Act; occurs
when a party at one level of distribution enters into an agreement with a party at another
level to adhere to a price schedule that either sets or stabilizes prices.
Robinson-Patman Act.
Rule of reason—A rule that holds that only unreasonable restraints of trade violate
Section 1 of the Sherman Act. The court must examine the pro- and anticompetitive
effects of the challenged restraint.
Antitrust Law and Unfair Trade Practices
383
conspiracies to monopolize trade.
Section 2(a) of the Robinson-Patman Act—Prohibits direct and indirect price
discrimination by sellers of a commodity of a like grade and quality where the effect of
such discrimination may be to substantially lessen competition or to tend to create a
monopoly in any line of commerce.
Section 2(b) of the Robinson-Patman Act—A defense that provides that a seller may
goods.
Section 4 of the Clayton Act—A section which provides that anyone injured in his or her
business or property by the defendant’s violation of any federal antitrust law (except the
Federal Trade Commission Act) may bring a private civil action and recover from the
defendant treble damages plus reasonable costs and attorneys’ fees.
Section 5 of the Federal Trade Commission Act—A section that prohibits unfair methods
a private plaintiff to obtain an injunction against anticompetitive behavior that violates
antitrust laws.
Section of the country—A division of the country that is based on the relevant
geographical market; the geographical area that will feel the direct and immediate effects
of the merger.
company.
Standard Oil Company of New Jersey v. U.S.—Landmark case adopting the rule of
reason standard for analyzing Section 1 cases.
Tying arrangement—A restraint of trade where a seller refuses to sell one product to a
customer unless the customer agrees to purchase a second product from the seller.
Unfair advantage theory—A theory that holds that a merger may not give the acquiring
firm an unfair advantage over its competitors in finance, marketing, or expertise.
prohibits “unfair methods of competition.”
Unfair or deceptive acts or practices—Prohibited under Section 5 of the FTC Act passed
in 1914.
Unilateral refusal to deal—A unilateral choice by one party not to deal with another
party. This does not violate Section 1 of the Sherman Act because there is not concerted
action.
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which violate the rule of reason.
Vertical merger—A merger that integrates the operations of a supplier and a customer.
