106 MODULE 22 FEDERAL SECURITIES ACTS AND ANTITRUST LAW

EXAMPLE: There are several hotels in a town. Business drops and all but one close. The remaining
hotel has taken no action to get the others to close. Although the remaining hotel has a monopoly it was
thrust upon the hotel and is therefore not illegal.
3 .. Sanctions (not mutually exclusive, both civil and governmental prosecution available)
a. Injunctions, forced divisions, forced divestiture (by individuals, corporations, or government)
(1) Government may seize pr?perty shipped in interstate commerce and violating party forfeits it
. b. Criminal penalties (by government)

c. Treble damages (by individuals and corporations)

(1) Thatis, actual damages (e.g., loss of profits, multiplied by three)
(2) Plus attorney fees and court costs

(3) Instituted to encourage private parties to enforce the antitrust laws

I. Clayton Act of 1914
1. Supplemented the Sherman Act to prohibit a corporation from acquiring the stock ofa competing

corporation (merger) where the effect might substantially lessen competition or tend to create a mo-
nopoly

a. Acquisitions tending to create a monopoly are

violations
(1) No actual monopoly need be created

(2) To cope with monopolistic trends in their incipiency

(3) Applies where there is a reasonable likelihood the merger or acquisition will substantially
lessen competition
(4) As under the Sherman Act, use the percentage of market (product and geographic) test
b. Amendment of 1950 added the prohibition of the acquisition of assets of another corporation
where the effect might lessen competition

(1) Thus both asset and stock acquisitions are covered

(2) Includes vertical mergers (sellers-buyers) and conglomerate mergers (e.g., not in same indus-
try) as well as horizontal mergers (competitors)
EXAMPLE: A shoe manufacturer buys out one of its retailers. This is a vertical merger.
EXAMPLE: A shoe retailer buys out another shoe retailer. This is a horizontal merger.
EXAMPLE: A pen manufacturer buys out a clothing retailer. This is a conglomerate merger.

c. Suit may be brought both before or after completion of the

merger
(1) For example, preliminary injunction to prevent violation
(2) For example, forced divestiture any time after completion of a merger if competitor threatened
d. Under "failing company doctrine," a merger that is anticompetitive may be allowed if
(1) The acquired company is failing; and

(2) There is no other willing purchaser whose acquisition of the company would reduce competi-
tion less

2. Besides mergers, the Clayton Act prohibits the following arrangements if they substantially
lessen
competition

a. Price discrimination between different purchasers

(1) Allowed if seller saved actual costs by sale to that buyer
. (2) Allowed to temporarily meet competition

b. Interlocking directorates
 (1) Applies toa director sitting on boards of two or more competing corporations that are "large"
(a) Dollar threshold to be "large corporation" adjusted yearly by FTC

c. Tying arrangements
(1) Occurs where seller forces buyer to take one or more other products as a condition to acquir-
ing the desired product