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Lecture 12 - Where Are We Last lecture Collusion This...

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1 Where Are We? Last lecture – Collusion • This lecture This lecture – Introduction to antitrust laws – Microsoft Why Do We Care About Antitrust? Big money is involved . . … and jail Roche vitamin division global fines = $1 billion. ADM executives sentenced to prison A ti t t i i t t t f Anti-trust issues are an important part of running a business. Not just big business. About 90% of antitrust cases in the U.S. are between companies. Sherman Act: Price Fixing – Monopolization Outline of Major U.S. Antitrust Laws Clayton Act (Robinson-Patman) Price Discrimination Vertical Restraints Merger Guidelines FTC Act Unfair Business Practices
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2 Price Fixing Explicit price fixing is something you absolutely can’t do in the U.S. • Same with functional equivalents of price fixing Same with functional equivalents of price fixing, e.g., Customer or market allocation Bid rigging What about, implicit price coordination, i.e. tacit collusion? Recent Examples of Price Fixing NASDAQ 1/4 point phenomenon US Airline reservation systems Ivy League Schools ADM and lysine markets Lots of bid rigging cases Per se vs . Rule of Reason Explicit price fixing is “per se” illegal Many other actions, e.g. monopolization, are judged according to a “rule of reason” – Is there a compelling business justification for the practice, or is it for the expressed purpose of decreasing competition?
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