CHAPTER 26: ANTITRUST LAW 21
whole or in part.
4-75-207 Destruction of competition by price discrimination prohibited.
any, in the grade, quality, or quantity and in the actual cost of transportation from the point of production, if a
(b) The inhibition of this section against locality discrimination shall include any scheme of special rebates,
collateral contracts, or any device of any nature whereby such discrimination is, in substance or fact, effected
in violation of the spirit and intent of this subchapter.
(c) This subchapter shall not be construed to prohibit the meeting in good faith of a competitive rate, or to
prevent a reasonable classification of service by public utilities for the purpose of establishing rates.
the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not
where the payment or allowance tends to destroy competition, is an unfair trade practice.
(b) Any person, firm, partnership, corporation, or association resorting to such trade practice shall be
deemed guilty of a misdemeanor and on conviction shall be subject to the penalties set out in § 4–75-204.
4-75-209 Sale at less than cost or with intent to injure competitors.
purpose of injuring competitors and destroying competition.
(2) Any person or entity so doing shall be guilty of a misdemeanor, and on conviction shall be subject to the
penalties set out in § 4–75-204 for any such act.
the conduct of the business and must include without limitation the following items of expense: labor, which
includes salaries of executives and officers, rent, interest on borrowed capital, depreciation, selling cost,
whole or in part.
maintenance of equipment, delivery cost, credit losses, all types of licenses, taxes, insurance, and
advertising.
(c) In establishing the cost of a given article or product to the distributor and vendor, the invoice cost of the
article or product purchased at a forced, bankrupt, closeout sale, or other sale outside of the ordinary
channels of trade may not be used as a basis for justifying a price lower than one based upon the
replacement cost as of date of the sale of the article or product replaced through the ordinary channels of
trade, unless:
(1) The article or product is kept separate from goods purchased in the ordinary channels of trade; and
(2) The article or product is advertised and sold as merchandise purchased at a forced, bankrupt, or closeout
sale, or by means other than through the ordinary channels of trade, and the advertising states the
conditions under which the goods were so purchased, and the quantity of the merchandise to be sold or
offered for sale.
(d) In any injunction proceeding or in the prosecution of any person as officer, director, or agent, it shall be
sufficient to allege and prove the unlawful intent of the person, firm, or corporation for whom or which he
acts.
(e) Where a particular trade or industry of which the person, firm, or corporation complained against is a
member has an established cost survey for the locality and vicinity in which the offense is committed, the
cost survey shall be deemed competent evidence to be used in proving the costs of the person, firm, or
corporation complained against within the provisions of this subchapter.
(f) The provisions of this section shall not apply to any sale made:
(1) In closing out in good faith the owner’s stock or any part thereof for the purpose of discontinuing his trade
in the stock or commodity, and, in the case of the sale of seasonal goods or to the bona fide sale of
perishable goods, to prevent loss to the vendor by spoilage or depreciation, if notice is given to the public
thereof;
(2) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof;
(3) By an officer acting under the orders of any court;
(4) In an endeavor made in good faith to meet the legal prices of a competitor as herein defined selling the
same article or product, or service or output of a service trade, in the same locality or trade area.
(g) Any person, firm, or corporation who performs work upon, renovates, alters, or improves any personal
property belonging to another person, firm, or corporation shall be construed to be a vendor within the
meaning of this subchapter.
4-75-210 Liability of directors, officers, agents, etc. — Proof of unlawful intent.
(a) Any person who, either as director, officer, or agent of any firm or corporation or as agent of any person
violating the provisions of this subchapter, assists or aids, directly or indirectly, in the violation shall be
responsible therefore equally with the person, firm, or corporation for whom or which he acts.
(b) In the prosecution of any person as officer, director, or agent, it shall be sufficient to allege and prove the
unlawful intent of the person, firm, or corporation for whom or which he acts.
whole or in part.
4-75-211 Remedies — Witnesses and documents — Immunity.
(a) Any person, firm, private corporation, or municipal or other public corporation, or trade association, may
maintain an action to enjoin a continuance of any act or acts in violation of this subchapter and, if injured
thereby, for the recovery of damages.
(b)(1) If, in such action, the court shall find that the defendant is violating or has violated any of the provisions
of this subchapter, it shall enjoin the defendant from a continuance thereof.
(2) It shall not be necessary that actual damages to the plaintiff be alleged or proved.
(3) In addition to injunctive relief, the plaintiff in the action shall be entitled to recover from the defendant
three (3) times the amount of the actual damages, if any, sustained.
(c)(1) Any defendant in an action brought under the provisions of this section or any witness desired by the
state may be required to testify under the provisions of §§ 16–43-211 and 16-43–701.
(2) In addition, the books and records of any such defendant may be brought into court and introduced, by
reference, into evidence.
(3) However, no information so obtained may be used against the defendant as a basis for a misdemeanor
prosecution under the provisions of §§ 4-75-204 and 4-75-207–4-75-210.
(d) The remedies prescribed in this subchapter are cumulative and in addition to the remedies prescribed in
the Public Utilities Act, § 23-1-101 et seq., for discrimination by public utilities. If any conflict shall arise
between this subchapter and the Public Utilities Act, § 23-1-101 et seq., the latter shall prevail.
B. SECTION 3—EXCLUSIONARY PRACTICES
Sellers or lessors cannot sell or lease on condition that the buyer or lessee not use or deal in goods of
the seller or lessor’s competitor.
1. Exclusive-Dealing Contracts
An exclusive-dealing contract, like other anticompetitive agreements, is prohibited if it substantially
Once held illegal per se, such arrangements are now more likely to be subject to a rule–or-reason
analysis.
ADDITIONAL BACKGROUND—
Market Concentration
In determining market concentration, the Federal Trade Commission and U.S. Department of Justice
employ what is known as the Herfindahl-Hirschman Index (HHI). The HHI is computed by summing the
whole or in part.
squares of each of the percentage market shares of firms in the relevant market. For example, if there are
four firms with shares of 30 percent, 30 percent, 20 percent, and 20 percent, respectively, then the HHI
equals 2,600 (302 + 302 + 202 = 202 = 2,600).
If the pre-merger HHI is less than 1,000, then the market is not concentrated, and the merger will not
likely be challenged. If the pre-merger HHI is between 1,000 and 1,800, the industry is moderately
concentrated, and the merger will be challenged only if it increases the HHI by 100 points or more. If the HHI
is greater than 1,800, the market is highly concentrated.
In a highly concentrated market, a merger that produces an increase in the HHI between 50 and 100
points raises significant competitive concerns. Mergers that produce an increase in the HHI of more than 100
points in a highly concentrated market are deemed likely to enhance market power.
C. SECTION 7—MERGERS
1. Horizontal Mergers
Whether a merger between competitors is legal depends first on the market share of the new
entity—anything with a resulting significant share will be presumed illegal. An entity is also analyzed
on the basis of three other factors—
• The concentration in the relevant product market.
• The market’s history of tending toward concentration.
• Market concentration.
• Barriers to entry into the market.
• The apparent intent of the merging parties.
ADDITIONAL BACKGROUND—
The Spark-Plug Market
In the 1960s, spark plug manufacturers sold spark plugs to automobile manufacturers for about six cents
per plug, even when their costs were about eighteen cents per plug. The spark plug manufacturers recouped
their losses in the aftermarket. An automobile required, during its useful life, about five replacement sets of
plugs. By custom and practice, mechanics usually replaced plugs with others of the brand that the
manufacturer had installed.
At the time, Ford Motor Co., Chrysler Corp., and General Motors Corp. (GMC) produced 90 percent of
U.S. automobiles. Champion (50 percent), GMC (30 percent), and Autolite (15 percent) dominated the spark–
plug market. Ford bought Autolite. Six years later, Champion’s share of the market was about 33 percent. The
United States filed a suit against Ford in a federal district court, claiming that its Autolite acquisition violated
Section 7. The court ordered Ford to divest itself of Autolite. Ford appealed.
whole or in part.
CHAPTER 26: ANTITRUST LAW 27
whole or in part.
tubing for U.S. customers. These allegations were sufficient to support the court’s exercise of jurisdiction over
the Finnish company.
………………….………….………………………………..………………………..……………………………………..
Notes and Questions
Are foreign firms protected from illegal competition by U.S. firms? Yes. Persons in foreign nations
are subject to U.S. antitrust laws, as well as protected by those laws from illegal anticompetitive acts
committed by U.S. citizens.
Are U.S. firms subject to foreign antitrust laws? Explain. Yes. U.S. firms may be subject to foreign
antitrust laws, such as the European Union’s more restrictive laws, and those of many other nations—
including countries in Asia and Latin America—if the firms’ conduct has a substantial effect on those entities’
commerce.
ANSWER TO “THE LEGAL ENVIRONMENT DIMENSION”
QUESTION IN CASE 26.3
When this case proceeds, should the district court apply the rule of reason? Why or why not? The
district court should not apply the rule of reason because Carrier’s complaint alleges that competitors fixed
prices and divided up customers. Both forms of horizontal restrains are per se violations of Section 1 of the
Sherman Act.
ANSWER TO “WHAT IF THE FACTS WERE DIFFERENT?”
QUESTION IN CASE 26.3
Suppose that Carrier had engaged in anticompetitive conduct that affected Outokumpu. Discuss
fully whether the foreign firm would be protected from illegal competition by the U.S. firm. Yes. U.S.
antitrust laws protect businesses and persons in foreign nations from illegal anticompetitive acts committed by
firms and individual citizens in the United States. Of course, foreign firms and persons may also be subject to
the prohibitions and prescriptions of U.S. antitrust laws.
B. THE APPLICATION OF FOREIGN ANTITRUST LAWS
U.S. firms may be subject to foreign antitrust laws if the firms’ conduct has a substantial effect on those
28 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
maintenance of equipment, delivery cost, credit losses, all types of licenses, taxes, insurance, and
advertising.
(c) In establishing the cost of a given article or product to the distributor and vendor, the invoice cost of the
article or product purchased at a forced, bankrupt, closeout sale, or other sale outside of the ordinary
channels of trade may not be used as a basis for justifying a price lower than one based upon the
replacement cost as of date of the sale of the article or product replaced through the ordinary channels of
trade, unless:
(1) The article or product is kept separate from goods purchased in the ordinary channels of trade; and
(2) The article or product is advertised and sold as merchandise purchased at a forced, bankrupt, or closeout
sale, or by means other than through the ordinary channels of trade, and the advertising states the
conditions under which the goods were so purchased, and the quantity of the merchandise to be sold or
offered for sale.
(d) In any injunction proceeding or in the prosecution of any person as officer, director, or agent, it shall be
sufficient to allege and prove the unlawful intent of the person, firm, or corporation for whom or which he
acts.
(e) Where a particular trade or industry of which the person, firm, or corporation complained against is a
member has an established cost survey for the locality and vicinity in which the offense is committed, the
cost survey shall be deemed competent evidence to be used in proving the costs of the person, firm, or
corporation complained against within the provisions of this subchapter.
(f) The provisions of this section shall not apply to any sale made:
(1) In closing out in good faith the owner’s stock or any part thereof for the purpose of discontinuing his trade
in the stock or commodity, and, in the case of the sale of seasonal goods or to the bona fide sale of
perishable goods, to prevent loss to the vendor by spoilage or depreciation, if notice is given to the public
thereof;
(2) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof;
(3) By an officer acting under the orders of any court;
(4) In an endeavor made in good faith to meet the legal prices of a competitor as herein defined selling the
same article or product, or service or output of a service trade, in the same locality or trade area.
(g) Any person, firm, or corporation who performs work upon, renovates, alters, or improves any personal
property belonging to another person, firm, or corporation shall be construed to be a vendor within the
meaning of this subchapter.
4-75-210 Liability of directors, officers, agents, etc. — Proof of unlawful intent.
(a) Any person who, either as director, officer, or agent of any firm or corporation or as agent of any person
violating the provisions of this subchapter, assists or aids, directly or indirectly, in the violation shall be
responsible therefore equally with the person, firm, or corporation for whom or which he acts.
(b) In the prosecution of any person as officer, director, or agent, it shall be sufficient to allege and prove the
unlawful intent of the person, firm, or corporation for whom or which he acts.
whole or in part.
4-75-211 Remedies — Witnesses and documents — Immunity.
(a) Any person, firm, private corporation, or municipal or other public corporation, or trade association, may
maintain an action to enjoin a continuance of any act or acts in violation of this subchapter and, if injured
thereby, for the recovery of damages.
(b)(1) If, in such action, the court shall find that the defendant is violating or has violated any of the provisions
of this subchapter, it shall enjoin the defendant from a continuance thereof.
(2) It shall not be necessary that actual damages to the plaintiff be alleged or proved.
(3) In addition to injunctive relief, the plaintiff in the action shall be entitled to recover from the defendant
three (3) times the amount of the actual damages, if any, sustained.
(c)(1) Any defendant in an action brought under the provisions of this section or any witness desired by the
state may be required to testify under the provisions of §§ 16–43-211 and 16-43–701.
(2) In addition, the books and records of any such defendant may be brought into court and introduced, by
reference, into evidence.
(3) However, no information so obtained may be used against the defendant as a basis for a misdemeanor
prosecution under the provisions of §§ 4-75-204 and 4-75-207–4-75-210.
(d) The remedies prescribed in this subchapter are cumulative and in addition to the remedies prescribed in
the Public Utilities Act, § 23-1-101 et seq., for discrimination by public utilities. If any conflict shall arise
between this subchapter and the Public Utilities Act, § 23-1-101 et seq., the latter shall prevail.
B. SECTION 3—EXCLUSIONARY PRACTICES
Sellers or lessors cannot sell or lease on condition that the buyer or lessee not use or deal in goods of
the seller or lessor’s competitor.
1. Exclusive-Dealing Contracts
An exclusive-dealing contract, like other anticompetitive agreements, is prohibited if it substantially
Once held illegal per se, such arrangements are now more likely to be subject to a rule–or-reason
analysis.
ADDITIONAL BACKGROUND—
Market Concentration
In determining market concentration, the Federal Trade Commission and U.S. Department of Justice
employ what is known as the Herfindahl-Hirschman Index (HHI). The HHI is computed by summing the
whole or in part.
squares of each of the percentage market shares of firms in the relevant market. For example, if there are
four firms with shares of 30 percent, 30 percent, 20 percent, and 20 percent, respectively, then the HHI
equals 2,600 (302 + 302 + 202 = 202 = 2,600).
If the pre-merger HHI is less than 1,000, then the market is not concentrated, and the merger will not
likely be challenged. If the pre-merger HHI is between 1,000 and 1,800, the industry is moderately
concentrated, and the merger will be challenged only if it increases the HHI by 100 points or more. If the HHI
is greater than 1,800, the market is highly concentrated.
In a highly concentrated market, a merger that produces an increase in the HHI between 50 and 100
points raises significant competitive concerns. Mergers that produce an increase in the HHI of more than 100
points in a highly concentrated market are deemed likely to enhance market power.
C. SECTION 7—MERGERS
1. Horizontal Mergers
Whether a merger between competitors is legal depends first on the market share of the new
entity—anything with a resulting significant share will be presumed illegal. An entity is also analyzed
on the basis of three other factors—
• The concentration in the relevant product market.
• The market’s history of tending toward concentration.
• Market concentration.
• Barriers to entry into the market.
• The apparent intent of the merging parties.
ADDITIONAL BACKGROUND—
The Spark-Plug Market
In the 1960s, spark plug manufacturers sold spark plugs to automobile manufacturers for about six cents
per plug, even when their costs were about eighteen cents per plug. The spark plug manufacturers recouped
their losses in the aftermarket. An automobile required, during its useful life, about five replacement sets of
plugs. By custom and practice, mechanics usually replaced plugs with others of the brand that the
manufacturer had installed.
At the time, Ford Motor Co., Chrysler Corp., and General Motors Corp. (GMC) produced 90 percent of
U.S. automobiles. Champion (50 percent), GMC (30 percent), and Autolite (15 percent) dominated the spark–
plug market. Ford bought Autolite. Six years later, Champion’s share of the market was about 33 percent. The
United States filed a suit against Ford in a federal district court, claiming that its Autolite acquisition violated
Section 7. The court ordered Ford to divest itself of Autolite. Ford appealed.
whole or in part.
CHAPTER 26: ANTITRUST LAW 27
whole or in part.
tubing for U.S. customers. These allegations were sufficient to support the court’s exercise of jurisdiction over
the Finnish company.
………………….………….………………………………..………………………..……………………………………..
Notes and Questions
Are foreign firms protected from illegal competition by U.S. firms? Yes. Persons in foreign nations
are subject to U.S. antitrust laws, as well as protected by those laws from illegal anticompetitive acts
committed by U.S. citizens.
Are U.S. firms subject to foreign antitrust laws? Explain. Yes. U.S. firms may be subject to foreign
antitrust laws, such as the European Union’s more restrictive laws, and those of many other nations—
including countries in Asia and Latin America—if the firms’ conduct has a substantial effect on those entities’
commerce.
ANSWER TO “THE LEGAL ENVIRONMENT DIMENSION”
QUESTION IN CASE 26.3
When this case proceeds, should the district court apply the rule of reason? Why or why not? The
district court should not apply the rule of reason because Carrier’s complaint alleges that competitors fixed
prices and divided up customers. Both forms of horizontal restrains are per se violations of Section 1 of the
Sherman Act.
ANSWER TO “WHAT IF THE FACTS WERE DIFFERENT?”
QUESTION IN CASE 26.3
Suppose that Carrier had engaged in anticompetitive conduct that affected Outokumpu. Discuss
fully whether the foreign firm would be protected from illegal competition by the U.S. firm. Yes. U.S.
antitrust laws protect businesses and persons in foreign nations from illegal anticompetitive acts committed by
firms and individual citizens in the United States. Of course, foreign firms and persons may also be subject to
the prohibitions and prescriptions of U.S. antitrust laws.
B. THE APPLICATION OF FOREIGN ANTITRUST LAWS
U.S. firms may be subject to foreign antitrust laws if the firms’ conduct has a substantial effect on those
28 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS