Lecture 12

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

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1 Where Are We? • Last lecture – Collusion • This lectur 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 At tt 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 •F TC
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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 •M any 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
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3 Monopolization - I • Note: It is not illegal to be a monopoly. What can be deemed illegal is when a firm willfully takes actions for the expressed purpose of acquiring or sustaining monopoly status. •E x am p l
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Lecture 12 - Where Are We? Last lecture Collusion This...

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