Antitrust Law Check List

1. Simple Horizontal Restraints

a. Price fixing is Per Se Illegal
b. Horizontal Allocation Agreements are Per Se Illegal
c. Concerted refusals to deal (Boycotts) are Per se Illegal
a. Group Boycotts can be considered refusals to deal if by businesses or insurance
companies, and then may be analyzed under the rule of reason. (FTC v. Indiana
Federation of Dentists & Northwest Wholesale if policy reasons exists)
d. Everything Else analyze basically under the Rule of Reason
a. Including Joint Ventures
b. Including blanket licenses/agreements

2. Oligopoly and Facilitating Practices. (Proving a Conspiracy)

a. Elements of successful oligopoly:
a. The firms must be able to reach a consensus on the price
b. Firms must be able to observe and compare each other’s prices
c. “cheating” must be detectable and punishable
d. they must collectively enjoy market power
e. Factors affecting the potential gains from successful coordination, express or
tacit:
i. Larger firms may be compelled to choose monopoly profits with declining
market shares or to sacrifice such profits by setting their price at a level
that is not profitable enough to encourage significant expansion by fringe
firms.
ii. When the collective market power of the coordinating oligopolists is
relatively low, their price coordination will cause relatively little harm to
the economy.
iii. Perfectly competitive firms in equilibrium will not charge more than
marginal costs and cannot earn more than the cost of capital.
f. Accordingly, noncompetitive performance could be indicated by prices
greater than marginal cost or by profits greater than the cost of capital.
b. Complications:
a. When firms rely on interdependent behavior, they often must signal their views
indirectly, so there is additional room for misunderstanding, which can lead to
competitive pricing
b. More firms, harder it is to have interdependent behavior
c. Divergent interests of firms… each firm seeks the largest possible difference
between aggregate revenues and aggregate costs
d. Available channels of verbal and nonverbal communication
e. Price comparability of products
c. Indications of Express Collusion:
a. Motivation and acts against self interest

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 i. Some courts suggest that proof of a motivation for common action
supports an inference of conspiracy from parallel behavior
ii. There generally must exist both a motive to act in concert and some reason
why such action might not occur absent sufficient coordinate among
rivals.
b. High prices or profits
c. A variety of practices that facilitate the coordination such as meetings,
information exchanges, or formulas that make it easier for oligopolists to predict
the likely behavior of their rivals.
i. Meetings obviously involve a collective decision to meet.
d. Structure of the Market
i. Concentration
e. Information Exchanges
f. Statements of party colluding
g. Pricing
h. If the question of an agreement isn’t finalized, the market power size will make
the court more suspicious
d. Facilitating Practices
a. Some practices seem to serve no utility, only risk anticompetitive outcome.
b. “Price is too critical, too sensitive a control to allow it to be used even in an
informal manner to restrain competition”
c. The inferences are irresistible that the exchange of price information has had an
anticompetitive effect in the industry, chilling the vigor of price competition.
d. Base point pricing typically allowed.

3. Restraint Through Government

a. Noerr Immunity
a. Activity intended
i. Legitimate democratic influence. You can pack the house.
b. to influence the government
i. “quasi-legislative” bodies will not count.
c. Can’t be a Sham however
i. Sham Lawsuits must be Objectively baseless and
ii. Subjectively an intent to interfere directly with business of the competitor.

4. Monopoly
Violation Requires Monopoly PLUS Exclusionary Conduct!
a. Market Power
a. Ask: is it profitable for the firm to raise prices above the competitive level by a
significant level?
i. Would the price increases result in too many lost customers to be a viable
strategy for a profit-maximizing firm?
ii. Infer power from structure, conduct, performance, buyer responsiveness to
substitutes, margins, competitors, supply substitution, and entry.
b. The Monopolization Test (U.S. Grinnell)
a. The possession of monopoly power in the relevant market and

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 b. The willful acquisition or maintenance of that power as distinguished from
growth or development as a consequence of a superior product, business acumen,
or historical accident.
c. Predatory Pricing
a. Prices complained of are below an appropriate measure of X’s costs
i. Ideal measure of costs would be marginal costs
b. Probability of recouping its investment must also be met

5. Vertical Restraints
a. Vertical price restraints are to be judged by the rule of reason
b. Refusal to deal also allowed (U.S. v Colgate)
a. Can share information about why you want to refuse to deal (Parke Davis)
i. Can’t go too far (Monsanto) revealing sharing information going too close
to a conspiracy among retailers.
c. Tying Arrangements
a. Per Se Unlawful. 4 elements:
i. The tying and the tied goods are two separate products
ii. The defendant has market power in the tying product market
iii. The defendant affords consumers no choice but to purchase the tied
product from it
iv. The tying arrangement forecloses a substantial volume of commerce
b. (Note: Chicago school of thought says dual monopoly theory is debunked
probably)
c. Rule of reason governs the legality of tying arrangements involving platform
software products (U.S. v Microsoft)
d. Exclusive Dealing
a. The competition foreclosed by the contract between the buyer (saying they won’t
buy from anyone but the seller) must be found to constitute a substantial share of
the relevant market.
i. Opportunities to enter must be significantly limited.
e. Bundled Discounts and Loyalty Discounts
a. Analyze like Tying

6. Mergers
a. Horizontal Mergers
a. Define The Market under consideration
b. Mergers reviewed in accordance with the Merger Guidelines & to avoid
incipiency of large monopolies
c. Whether the merger will lead to price increases
d. Calculate the firm’s market share and aggregate them into an HHI for the market
e. The government is extremely unlikely to challenge any merger between two
general acute-care hospitals where one of the hospitals has fewer than 100
licensed beds and an average daily census below 40 patients.
b. Vertical Mergers
Vertical Merger under 1984 Government Guidelines
a. Entry Barrier Concerns

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 i. The degree of vertical integration between the two markets must be so
extensive that entrants to one market (the primary market) also would
have to enter the other market (the secondary market) simultaneously.
ii. Requirement of entry at the secondary level must make entry at the
primary level significantly more difficult and less likely to occur.
iii. The structure and other characteristics of the primary market must be
otherwise so conducive to non-competitive performance that the increased
difficulty of entry is likely to affect its performance.
1. Challenge is unlikely unless the HHI exceeds 1800
2. Safe harbor under 1800
b. Vertical mergers and Facilitating Collusion
i. Might challenge if HHI exceeds 1800 and “a large percentage of the
upstream product would be sold through vertically-integrated retail outlets
after the merger”
c. Conglomerate Mergers
a. Analyze how it could affect barriers to entry
Conglomerate Mergers Under 1984 Government Guidelines
b. Department is unlikely to challenge unless overall concentration of the firm’s
market is above 1800 HHI
c. When a firm is likely to come in, treat them more like a typical competitor. And
then, treat them more like a horizontal merger.
d. Likely that similar firms may/may not enter
i. Government must analyze

7. International View of Antitrust Law

1. Comparison of European and American Antitrust Law
2. The Political Economy of International Antitrust Harmonization