BASIC ANTITRUST LAW OUTLINE
Steven L. Brannock
Brannock & Humphries
Goals of the Antitrust Laws
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Promote competition and protect consumers by prohibiting collusion and other
anticompetitive behaviors
Lower prices and increase output
Penalties
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Fines up to $100 million for a corporation and up to $1 million for an individual
Disgorgement of illegally obtained profits
Jail sentences up to 10 years
Private damages suits to recover treble damages and attorneys’ fees
Defending against antitrust suits is expensive and disruptive
Enforce ment
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Department of Justice
Federal Trade Commission
State Attorneys’ General
Competition Agencies in Canada, Mexico, Europe, and other foreign countries
Basic Prohibitions
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Agreements by two or more competitors in restraint of trade
Monopolization
Mergers and acquisitions that may substantially lessen competition
Price Discrimination
Agreements in Restraint of Trade -- Conduct that is “Per Se” or Automatically Illegal
Courts have declared some agreements to be automatically or “per se” illegal regardless
of the competitive justifications offered by the defendants. Such per se illegal
misconduct includes:
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Price fixing
Bid rigging
Territorial allocation
Production or output restrictions
Allocation of customers or territories
Group boycotts
Agreements in Restraint of Trade -- Rule of Reason
All other agreements are reviewed under the rule of reason. In other words, the court
weighs the pro-competitive benefits against the specific anticompetitive impact and
determines whether the agreement is, on balance, an unreasonable restraint. Agreements
reviewed under the rule of reason include:
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Exclusive dealing
Reciprocal dealing
Joint ventures
Tying arrangements
Exchange of information among competitors
Monopolization
A corporation with significant market power may not engage in predatory conduct aimed
at driving competitors from the market. A monopolist may not engage in:
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Predatory pricing
Refusals to deal
Leveraging power in one market to create power in another market
Mergers and Consolidation
The government (and occasionally a competitor) can seek an injunction to prevent a
merger or acquisition that may substantially lessen competition.
Price Discrimination (The Robinson-Patman Act)
The Robinson-Patman Act prohibits systematic price discrimination favoring one
competitor over another when the result is an injury to competition. Interstate commerce
must be impacted for the Act to apply, which essentially means that at least one sale must
cross a state line. The Act prohibits:
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Price discrimination favoring one customer over another.
Predatory pricing (a dominant seller offers a lower price in one territory to drive a
competitor out of business)
Discriminatory promotional discounts or allowances
Price is defined as the bottom line net price including all discounts, rebates or allowances
Price Discrimination Defenses
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Meeting competition in good faith
Discounts based on actual cost savings
Volume discounts reasonably available to all customers
Exchange of Information Among Competitors
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It is generally legal to exchange historical factual information
It is generally illegal to exchange information of current or recent pricing or terms
(including credit terms)
Do not discuss intended actions
Do not discuss forward- looking prices, terms, or output
Antitrust Laws and Credit Groups
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Participation in credit groups is perfectly legal
Counsel or other third parties should be present during account discussions among
competitors
At meetings of competitors, keep meeting minutes, prepare agendas, and stick to agendas
Do not engage in discussion on terms, including credit terms, in meetings or in informal
gatherings
Confine discussions to historical and factual information concerning credit experience
Do not reach any agreement on terms
Do not reach any agreement on whether to deal with a particular customer
Do not discuss intended actions