Ch20-SG - Promoting Competition WHATTHIS CHAPTERISA BOUT...

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Chapter 20: Promoting Competition W HAT   THIS  C HAPTER  I S  A BOUT This chapter  outlines aspects of the major antitrust  statutes, including  the Sherman  Act and  the Clayton  Act.  Keep in mind  that the basis of the antitrust  laws is a desire to foster competition  (to result in lower prices and  so on)   by limiting restraints on trade (agreements that have the effect of reducing  competition). C HAPTER  O UTLINE I. THE SHERMAN ANTITRUST ACT Enacted  in 1890, the Sherman  Act is one of the government’s most powerful weapons  to maintain  a competi - tive economy. A. M AJOR  P ROVISIONS   OF   THE  S HERMAN  A CT Section  1 requires  two  or more  persons;  cases often  concern  agreements  (written  or oral) that  have  a  wrongful  purpose  and  lead  to a restraint  of trade.  Section  2 cases  deal  with  monopolies  that  already   exist. B. J URISDICTIONAL  R EQUIREMENTS The Sherman  Act applies to restraints  that  substantially  affect interstate  commerce. The act also covers  activities by nationals that have an effect on U.S. foreign commerce. II. SECTION 1 OF THE SHERMAN ACT A. P ER  S E  V IOLATIONS   VERSUS   THE  R ULE   OF  R EASON Some  trade  restraints  are  deemed   per se   violations.  Others  are  subject  to  analysis  under  the  rule  of  reason. 1. Per Se  Violations Agreements that are blatantly anticompetitive are illegal  per se . 2. Rule of Reason A court  considers  the purpose  of an agreement, the power  of the parties, the effect of the action  on   trade, and  in some  cases, whether  there are less restrictive alternatives  to achieve the same  goals. If  the competitive benefits outweigh  the anticompetitive effects, the agreement  is held lawful. B. H ORIZONTAL  R ESTRAINTS Agreements that restrain competition between  rivals in the same market. 1. Price Fixing Any agreement  among  competitors to fix prices is a  per se  violation. 2. Group Boycotts An agreement  by two or more sellers to refuse to deal with  a particular person  or firm is a  per se  vio- lation, if it is intended  to eliminate competition or prevent  entry into a given market. 3. Horizontal Market Division   159
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160 UNIT 5: THE REGULATORY ENVIRONMENT An agreement  between  competitors to divide up  territories or customers is a  per   se  violation. 
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CHAPTER 20: PROMOTING COMPETITION 161 4. Trade Associations Businesses within  the same  industry  or profession  organized  to pursue  common  interests. The rule  of reason is applied.  C. V ERTICAL  R ESTRAINTS A vertical restraint  is a restraint  of trade  that results from an agreement  between  firms at different levels  in the manufactur ing and  distribution  process. 1.
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This note was uploaded on 12/20/2010 for the course BUS 100 taught by Professor Staff during the Fall '09 term at CSU Dominguez Hills.

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Ch20-SG - Promoting Competition WHATTHIS CHAPTERISA BOUT...

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