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in whole or in part.
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 26.1—LEGAL REASONING QUESTIONS (PAGE 504)
1A. Should the Court have applied the doctrine of stare decisis to hold that minimum
antitrust law has been away from the application of such per se rules.
2A. What factors might the courts consider in applying the rule of reason to minimum
resale price maintenance agreements? The Court acknowledged that “[r]esale price
maintenance, it is true, does have economic dangers.” As factors to consider in applying the rule
interbrand competition? In the Leegin case, the United States Supreme Court explained that
without such agreements “the retail services that enhance interbrand competition might be
underprovided. This is because discounting retailers can free ride on retailers who furnish
services and then capture some of the increased demand those services generate. Consumers
might learn, for example, about the benefits of a manufacturer's product from a retailer that
in whole or in part.
CHAPTER 26: ANTITRUST LAW 3
in whole or in part.
monopoly power and an intent to monopolize to succeed. If there had been numerous
competitors, the court would have been hard pressed to agree that DuPont’s actions had
created or attempted to create a monopoly in the para-aramid fiber market. There would have
been insufficient evidence that the firm had monopoly power such that it could control prices or
restrict output.
CASE 26.3—QUESTION (PAGE 514)
THE LEGAL ENVIRONMENT DIMENSION
When this case proceeds, should the district court apply the rule of reason? Why or why
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.
vertical restraint. Since the vertical restraint that Verisign complains of involves restrictions on
services that Verisign can offer (customer restrictions) and the setting of prices at which Verisign
can sell its services (resale price maintenance agreement), ICANN’s action should be judged
under the rule of reason.
3A. Leadership
If ICANN’s leadership was chosen by those with a commercial interest in the Internet, the
directors might represent commercial interests with significant market power and restrain trade
in violation of the Sherman Act.
4 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
ICANN’s best defense is to assert that a standardized set of registry services is efficient and has
the effect of promoting competition rather than suppressing it. Under the rule of reason, as long
as an agreement is merely regulatory and does not unreasonably restrain trade, it should not be
considered illegal.
increased competition to such a degree that few, if any, sellers of most products can maintain
prices that are significantly higher than prices offered by other sellers anywhere in the
country. The Internet has brought to the average consumer full information on prices,
availability, and facts about most products—and at the speed of light. Also, anticompetitive
behavior is readily denounced in blogs, Web sites, tweets, and social networking sites.
Wealth of Nations, Adam Smith pointed out that whenever producers or sellers get together,
they inevitably conspire to raise prices.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
prices and output. If a firm has sufficient market power to control prices and exclude
competition, that firm has monopoly power. Monopoly power in itself is not a violation of Section
2 of the Sherman Act. The offense also requires an intent to acquire or maintain that power
through anticompetitive means.
in whole or in part.
in whole or in part.
in whole or in part.
To recover, however, Spa Steel will also need to prove that Dayton Superior charged Spa
Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Supreme Court of the United States, 2007.
551 U.S. 877,
127 S.Ct. 2705,
168 L.Ed.2d 623.
overturn and what rule did the Court create to replace this rejected precedent? Prior to this
case, the common law rule was that a minimum resale price maintenance agreement was a per
se violation of the antitrust laws. The Court overturned the precedent and held that such
agreements should be analyzed according to the rule of reason.
(c) Applying the Rule of Law: What reasons did the Court give to justify its change
effect between vertical and horizontal agreements.” Minimum price resale maintenance
agreements can stimulate competition in some cases, the Court explained, and they may have
anticompetitive effects in other cases. Because the application of a per se rule would “proscribe
a significant amount of procompetitive conduct, these agreements appear ill suited for per se
condemnation.”
minimum resale price maintenance agreements, which were now to be analyzed under the rule
of reason, and remanded the case “for proceedings consistent with this opinion.”
8 UNIT SIX: GOVERNMENT REGULATION
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
26–8A. A QUESTION OF ETHICS—Section 1 of the Sherman Act
(a) In his appeal, Rose contended in part that the price-fixing and market-allocating
conspiracy among the competitors had expired before he had become the president of DuCoa,
citing the increase in competitive activity among the companies at the time that he assumed the
presidency. The U.S. Court of Appeals fro the Fifth Circuit affirmed the lower court’s sentence.
The appellate court pointed out that “Rose determined whether DuCoa would be part of the
conspiracy once he knew of the agreement to fix prices and allocate customers.” Based on the
testimony of other participants in the crimes, the court reasoned that if Rose had refused to
conspiracy. In fact, he asserted, the others had been involved in the conspiracy long before he
became the president of DuCoa and they had recruited him. The court acknowledged that Rose
was correct as far as his contentions went. But the court reasoned further that “he spoke for
DuCoa . . . , exercised supervisory control over [its officers], and made decisions for DuCoa.
The district court did not clearly err by . . . apply[ing] the . . . manager enhancement.”
Rose’s activities—and the conduct of the other participating individuals and companies—
might also be viewed as unethical based on that behavior’s effect on chorine chloride’s
customers. The conspiracy to fix the price of, and allocate the customers for, the vitamin may
have stabilized the market for its makers, but the conspiracy made the product more costly for
those customers to buy. The conspiratorial deception foisted on the customers by the
however, was a contention that he had not joined any conspiracy until February 1998. The
appellate court found “no evidence that Rose knowingly joined or participated in the conspiracy
. . . until the end of September 1997 at the earliest.” This contrasted with the lower court’s
finding that Rose had joined the conspiracy in August 1997. Because this finding may have
affected Rose’s sentence, the appellate court affirmed his conviction, but vacated his sentence
in whole or in part.
in whole or in part.
CHAPTER 26: ANTITRUST LAW 3
in whole or in part.
monopoly power and an intent to monopolize to succeed. If there had been numerous
competitors, the court would have been hard pressed to agree that DuPont’s actions had
created or attempted to create a monopoly in the para-aramid fiber market. There would have
been insufficient evidence that the firm had monopoly power such that it could control prices or
restrict output.
CASE 26.3—QUESTION (PAGE 514)
THE LEGAL ENVIRONMENT DIMENSION
When this case proceeds, should the district court apply the rule of reason? Why or why
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.
vertical restraint. Since the vertical restraint that Verisign complains of involves restrictions on
services that Verisign can offer (customer restrictions) and the setting of prices at which Verisign
can sell its services (resale price maintenance agreement), ICANN’s action should be judged
under the rule of reason.
3A. Leadership
If ICANN’s leadership was chosen by those with a commercial interest in the Internet, the
directors might represent commercial interests with significant market power and restrain trade
in violation of the Sherman Act.
4 UNIT SIX: GOVERNMENT REGULATION
in whole or in part.
ICANN’s best defense is to assert that a standardized set of registry services is efficient and has
the effect of promoting competition rather than suppressing it. Under the rule of reason, as long
as an agreement is merely regulatory and does not unreasonably restrain trade, it should not be
considered illegal.
increased competition to such a degree that few, if any, sellers of most products can maintain
prices that are significantly higher than prices offered by other sellers anywhere in the
country. The Internet has brought to the average consumer full information on prices,
availability, and facts about most products—and at the speed of light. Also, anticompetitive
behavior is readily denounced in blogs, Web sites, tweets, and social networking sites.
Wealth of Nations, Adam Smith pointed out that whenever producers or sellers get together,
they inevitably conspire to raise prices.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
prices and output. If a firm has sufficient market power to control prices and exclude
competition, that firm has monopoly power. Monopoly power in itself is not a violation of Section
2 of the Sherman Act. The offense also requires an intent to acquire or maintain that power
through anticompetitive means.
in whole or in part.
in whole or in part.
in whole or in part.
To recover, however, Spa Steel will also need to prove that Dayton Superior charged Spa
Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Supreme Court of the United States, 2007.
551 U.S. 877,
127 S.Ct. 2705,
168 L.Ed.2d 623.
overturn and what rule did the Court create to replace this rejected precedent? Prior to this
case, the common law rule was that a minimum resale price maintenance agreement was a per
se violation of the antitrust laws. The Court overturned the precedent and held that such
agreements should be analyzed according to the rule of reason.
(c) Applying the Rule of Law: What reasons did the Court give to justify its change
effect between vertical and horizontal agreements.” Minimum price resale maintenance
agreements can stimulate competition in some cases, the Court explained, and they may have
anticompetitive effects in other cases. Because the application of a per se rule would “proscribe
a significant amount of procompetitive conduct, these agreements appear ill suited for per se
condemnation.”
minimum resale price maintenance agreements, which were now to be analyzed under the rule
of reason, and remanded the case “for proceedings consistent with this opinion.”
8 UNIT SIX: GOVERNMENT REGULATION
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
26–8A. A QUESTION OF ETHICS—Section 1 of the Sherman Act
(a) In his appeal, Rose contended in part that the price-fixing and market-allocating
conspiracy among the competitors had expired before he had become the president of DuCoa,
citing the increase in competitive activity among the companies at the time that he assumed the
presidency. The U.S. Court of Appeals fro the Fifth Circuit affirmed the lower court’s sentence.
The appellate court pointed out that “Rose determined whether DuCoa would be part of the
conspiracy once he knew of the agreement to fix prices and allocate customers.” Based on the
testimony of other participants in the crimes, the court reasoned that if Rose had refused to
conspiracy. In fact, he asserted, the others had been involved in the conspiracy long before he
became the president of DuCoa and they had recruited him. The court acknowledged that Rose
was correct as far as his contentions went. But the court reasoned further that “he spoke for
DuCoa . . . , exercised supervisory control over [its officers], and made decisions for DuCoa.
The district court did not clearly err by . . . apply[ing] the . . . manager enhancement.”
Rose’s activities—and the conduct of the other participating individuals and companies—
might also be viewed as unethical based on that behavior’s effect on chorine chloride’s
customers. The conspiracy to fix the price of, and allocate the customers for, the vitamin may
have stabilized the market for its makers, but the conspiracy made the product more costly for
those customers to buy. The conspiratorial deception foisted on the customers by the
however, was a contention that he had not joined any conspiracy until February 1998. The
appellate court found “no evidence that Rose knowingly joined or participated in the conspiracy
. . . until the end of September 1997 at the earliest.” This contrasted with the lower court’s
finding that Rose had joined the conspiracy in August 1997. Because this finding may have
affected Rose’s sentence, the appellate court affirmed his conviction, but vacated his sentence
in whole or in part.
