 “Market
power” is the power of
company to control the market
for its product.

The law does allow for market
monopolies when a patent is issued.
During the “monopoly” the patent
owner is protected from competition
in the market to manufacture and
sell its patented product or service.
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 Market
power per se is not
“bad.”
 What
is bad or illegal is how the
market power is acquired and
what firms do once they have that
power.
 Antitrust laws regulate the market
power of companies to promote
competition.
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 Competitive
Behavior.
 Goals of Antitrust Law.
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 Socially
beneficial business
activity involves cooperation
and competition.
 Public Policy and Contracts.
 The
law presumes freedom of
contract, except when a contract is
contrary to public policy, like price
fixing and restraint of trade. 
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 Public Policy and Contracts.
 Economic Efficiency: public policy
encourages competition and
freedom of contract.
 Restraints of Trade. Some
agreements may reduce
competition and may be illegal
under the common law. 
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 Interference
 Restraint (or
with Free Trade.
antitrust law) is the
means the government uses to
promote competition and choice in
the market place.
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 Trend Towards Monopoly.
 In the late 1800’s, companies
like
Standard Oil (Rockefeller) became
“trusts” which began to control the
entire market.
 The common law was impotent to
deal with the industrial age.
 Thus Congress dealt with expansion
with “anti-trust” legislation. 
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 Congress
responded with the
following federal statutes:
 Interstate
Commerce Act of 1887
and the Sherman Act of 1890.
 The Clayton Act.
 The Federal Trade Commission
Act, authorized to prevent and
correct unfair trade practices.
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 The


Sherman Act:
Section 1. Requires two or more
persons, as a person cannot contract,
combine, or conspire alone. Concerned
with finding an agreement.
Section 2. Applies both to an individual
person and to several people, because it
refers to every person. Deals with the
structure of monopolies in the
marketplace.
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 The


Sherman Act:
Restraint of trade is any agreement
between firms that has the effect of
reducing competition in the
marketplace.
Jurisdictional Requirements: only
applies to restraints that have a
significant impact on interstate
commerce.
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 In
contrast to the Sherman Act,
the Clayton Act deals with very
specific practices:
 Price
Discrimination: When sellers
charge different buyers different
prices for the same goods.
 Exclusionary Practices: no
exclusive-dealing or “tie-in” sales
agreements.
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 Corporate
Mergers: forbidden if
it substantially lessens
competition.
 Interlocking Directorates:
director on company “X” sitting
on board of company “Y” of
competing companies is
forbidden.
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 The
FTC’ sole substantive area
is “unfair methods of
competition” or “deceptive acts
or practices” affecting
commerce.
 The FTC Act is a “catchall.”
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 Agency Actions.
 The DOJ enforces
the Sherman
Act.
 DOJ or FTC can ask the courts to
impose various remedies, including
divestiture.
 FTC has sole authority to enforce
violations of Section 5 of the FTC
Act.
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 Under
the Clayton Act a
private party can sue for
treble damages (3 times the
damages she has suffered)
plus attorney’s fees.
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 Under
the Sherman Act, the
Plaintiff must show:
 Defendant’s
antitrust violations
directly or indirectly caused
injury; and
 Defendant’s actions affected
protected interests of the
Plaintiff.
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 Treble Damages.
 Private plaintiffs may
recover
up to three times damages for
violations.
 In price-fixing arrangements,
defendants are jointly and
severally liable.
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 Exemptions from Antitrust.
 CASE 27.1 Clarett v. National
Football League (2004). Why
did the plaintiff claim the
eligibility rules were an
unreasonable restraint of
trade?
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 Extraterritorial
Application of
U.S. Antitrust Laws.
 Any
foreign business conspiracy
that has a substantial effect on
U.S. commerce is within reach of
the Sherman Act.
 U.S. jurisdiction is automatically
invoked when a per se violation
occurs.
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 Application
of Foreign
Antitrust Laws. U.S. firms may
be subject to antitrust laws of
other nations if the firm has a
substantial effect.
 European
 Increased
Union Enforcement.
Enforcement in Asia and
Latin America.
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 Section
2 of the Sherman
Antitrust Act deals with:
Monopolization or attempts to
monopolize; and
 Predatory pricing which is an attempt
by a firm to drive its competitor from
the market by selling its product at
prices substantially below the normal
costs of production.

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 The
U.S. Supreme Court has
defined “monopolization” as:
the possession of monopoly
power; and the willful
acquisition and maintenance of
the power. 
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 Monopoly Power:
 Refers to control of
a specific
market by a single entity.
 But a firm may be monopolistic
even though it is not the only
entity.
 May be proved by direct and
indirect evidence.
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 Relevant
Product Market.
 CASE
27.2 Newcal Industries,
Inc. v. IKON Office Solutions
(2008). What factors did the court
consider in finding a relevant
market existed?
 Relevant
Geographic Market.
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 Intent
Requirement:
Anticompetitive behavior must
be “willful acquisition of power.”
 Intent may be inferred from
evidence that the firm had
monopoly power and engaged in
anticompetitive behavior.

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 Unilateral
Refusals to Deal.
Joint refusals to deal (group
boycotts) are given close scrutiny.
 Unilateral refusals to deal violate the
Sherman Act if: the firm refusing to
deal has (or is likely to acquire)
monopoly power, AND the refusal is
likely to have an anticompetitive
effect on a particular market.

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
Acts intended to exclude
competitors and garner
monopoly power, and had a
“dangerous” probability of
success.

CASE 27.3 Weyerhaeuser Co. v.
Ross-Simmons Hardwood Lumber
Co. (2007). What does predatory
pricing have to do with this case?
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