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Unformatted text preview: Chapter 20: Antitrust 1) In The Beginning a) Sherman Act i) To prevent extreme concentrations of economic power, Congress passed the Sherman Act in 1890 ii) One of the first national laws designed to regulate competition, and termed the antitrust legislation because it was aimed at the Standard Oil Trust and other similar organizations. b) Chicago School i) Has competition been harmed? should be focus of courts ii) in the beginning of 1960s-70s, a group of influential economists and lawyers at the University of Chicago began to argue that the goal of antitrust enforcement should be efficiency . (1) Let a company grow as large as it likes provided its growth is based on a superior product or lower costs, not ruthless tactics. Insist on a clean fight, but dont handicap large successful companies to help weaker competitors. iii) Post-Chicago School (1) Competition alone may not be enough to protect consumers. An industry with a large number of competitors may foster collusion, not competition 2) Overview of Antitrust Laws a) The major provisions of the antitrust laws are: i) Section 1 of the Sherman Act prohibits all agreements in restraint of trade ii) Section 2 of the Sherman Act bans monopolization-the wrongful acquisition of a monopoly iii) The Clayton Act prohibits anti competitive mergers, tying arrangements and exclusive dealing agreements iv) The Robinson Patman Act bans price discrimination that reduces competition b) In 1914, Congress passed the Clayton Act in part because the courts were not enforcing the Sherman Act as strictly as intended. The Clayton Act was meant to clarify the earlier statute. c) The Robinson Patman Act of 1936 is an amendment to the Clayton Act d) Violators of antitrust laws are divided into two categories: per se and rule of reason i) Per Se violations are automatic, and cannot defend themselves, subject to criminal and civic penalties. Typically the target of Justice Department criminal sanctions ii) Rule of Reason violations are illegal only if they an anticompetitive impact e) Justice Department and Federal Trade Commission (FTC) can enforce antitrust laws, but only Justice Department can bring criminal proceedings. The FTC is limited to civil injunctions and other administrative remedies. In addition, anyone injured by an antitrust violation can sue for damagesa successful plaintiff can recover treble (triple) damages from the defendant f) In developing a competitive strategy, managers consider two different approaches:...
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- Spring '08