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Chapter 13 - Legl 2700 Chapter 13 Anti-t rust Laws T r ust...

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Legl 2700 Chapter 13 04/06/09 Anti-trust Laws Trust- is a fiduciary relationship concerning property in which one person, known as a trustee , holds legal title to property for the benefit of another, known as the beneficiary . In the last part of the 19 th century, business people used trusts to gain monopolistic control of several industries. The trust device allowed all or at least a majority of the stock of several companies to be transferred to a trustee, who was then in a position to control the operations and policymaking of all the companies (also divided the market and established price levels. Which essentially started to destroy the free market, or as the Sherman Act would put it “to restrain trade” Antitrust Laws - used to describe all laws that intend to promote and regulate competition and make our competitive economic system Sherman Act (1890) - Encouraged a competitive system that allows easy entry and withdrawal from the marketplace in consistent with individual freedom and economic opportunity (however the act was general and often ambiguous) Prohibited 2 types of anticompetitive business behavior: 1) Contracts, combinations, and conspiracies in restraint of trade or commerce 2) Monopolies and attempts to monopolize Clayton Act (1914) - An amendment to the Sherman Act to clarify its provisions. It declares that certain enumerated practices in interstate commerce are illegal that were not clear violations under the Sherman Act Federal Trade Commission Act (1914) - created the Federal Trade Commission (FTC), and independent administrative agency charged with keeping competition free and fair. It enforced the Clayton Act and also prohibited unfair methods of competition and unfair or deceptive acts or practices Basic concepts of the Sherman Act 1) Restraint of Trade -Monopolies, combinations (results from conduct), and contracts (verbal or written agreements) that impede free competition (Section 1 of Sherman Act) 1
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Legl 2700 Chapter 13 04/06/09 Anti-trust Laws Price Fixing - the most common contract in restraint of trade is an agreement among competitors to charge the same price for their products instead of allowing prices to be set by the operations of a free trade Example : The simultaneous price increase by 3 major cigarette producers at a time of declining sale Sherman Act cases must satisfy an interstate commerce element. The facts must show that an allegedly illegal activity was wither in interstate commerce or had a substantial effect on interstate commerce. The facts need not prove a change in the volume of interstate commerce but only that the activity had a substantial and adverse or not insubstantial effect on interstate commerce 2) Monopoly - (Section 2 of Sherman Act) If monopoly power is “thrust upon” a firm or if it exists because of a patent of franchise, there is no violation if the firm does not engage in conduct that has the effect or purpose of protecting, enforcing, or extending the monopoly power.
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