BUSI 3311: Legal Environment of Business
ANTITRUST LAWS
Names:
Noura AlSubaie -200901747
Hanan AlSubaie -201000231
Section: 202
Dr. Mahmood O.E. Hamad
22/12/2012
INTRODUCTION :
There is no shadow of doubt that monopolies and other anticompetitive practices
mean concentrations of economic power in the hands of limited groups. Most
economists think that all these practices have negative effects on both individuals and
the public. Anticompetitive practices may lead to price controls and decreased
individual initiative. These negative results in turn lead to stagnation of markets and
economic growth depression. Because of these law violations during the late 1800s
that monopolies dominated America's free market economy, Congress issued the
Sherman Antitrust Act in 1890 in order to face anticompetitive practices and decrease
market control on individual corporations. Antitrust laws are designed to keep free
competition in the marketplace. Competition forces corporations to lower prices and
produce better commodities for consumers. Without these antitrust laws in place,
businesses could make monopolies that can drive market prices. However, there is a
question on whether or not these antitrust laws could hinder successful businesses
from progress. To determine that, it helps to look at some antitrust laws examples,
such as Kodak.
Kodak's Case :
About as much as 96% of the film industry and camera market has been controlled by
Kodak in the United States. Through the years, Kodak was subject to many antitrust
suits and claims filed by both private and federal parties. In 1912 and in 1954, the U.S
Government issued two consent decrees. As a result, Kodak agreed not to sell privatelabel film. In one lawsuit in 1921, it was forbidden for Kodak to sell any private-label
film under their label. With the emergence of color film, Kodak was the only producer
and seller of colored film. Kodak added a fee for delivery. Thus, it was considered as
a violation of the Sherman Act, Kodak licensed the color finishing process to other
companies.
The Eastman Kodak got sued in an antitrust trial in the Supreme Court since it tries to
put obstacles that restrict the ability of manufacturers. It has been accused to control
the markets for the parts and servicing of the products they make. In 1987, eighteen
companies which sell replacement parts and services filed a suit against Kodak. The
court members refused the claims of Kodak by a vote of 6 to 3. These
companiesbelong to independent service organizations and they claimed that Kodak
tried to impose restrictions on them so as to force them out of business. This is
considered as a monopoly practice. Kodak was accused of committing two violations
of the Sherman Antitrust Act. The first violation was unlawfully making a relation
between the sale of service for Kodak machines with the sale of parts. The second
violation was trying to control the market for service. It is noteworthy to mention that
the Federal District Court in San Francisco refused the suit against the Kodak.
However, the United States Court of Appeals for the Ninth Circuit changed that
decision.
In 1995, the trial of Kodak started and sixty – three witnesses attended giving twenty
– seven testimonies. The claims of the companies against Kodak presented to the jury
that Kodak had many monopoly practices concerning its high – volume copier and
micrographic equipment. The jury deliberated for thirteen and returned a unanimous
guilty verdict.TheSupreme Court ruled against Kodak by Justice HarryA. Blackmun.
According to Kodak's theory, it did not exercise monopoly in the parts and service
markets in the lack of market power in sales of the basic equipment. It considered this
practice since it is the original producer and the only manufacturer of the film
industry. Moreover, it asked the Court to change the law that prevents it from its
simplest rights. Service business cannot be considered a monopoly since there is
competition in the sales and manufacture of the machines. In case of accepting
Kodak's legal theory, large corporations like Kodak would be protected from antitrust
liability for getting rid of competitors out of the markets for replacement parts and
service.
While the ruling today was not the final word in the case -- Kodak might still prevail
before a jury -- it was significant regarding important points of antitrust law and for
rejecting several of Kodak's defenses.
Justice Blackmun declared his opinion when he met Kodak that their economic theory
is defective analysis lacking by saying
"Presumably, the theory's corollary is to the effect that low service prices lead to a
dramatic increase in equipment sales, the record indicated that rather than try to lower
prices for service, Kodak has in fact raised service prices by driving out the
independent companies, and "there is no evidence or assertion that Kodak equipment
sales have dropped"
Kodak was fined $ 25 million in damages, trebled to $ 72 million. On February 15,
1996 the district court issued a ten year injunction that required Kodak to sell parts to
ISOs at nondiscriminatory prices. Kodak appealed to the Ninth Circuit Court of
Appeals with three interesting points. These three points focused on the right of
Kodak to sell its patented parts and no other companies have the right to sell its
products. The Ninth Circuit of the court refused all the three arguments by Kodak.
To sum up, it is recommended for governments to impose laws that prevent monopoly
practices. Moreover, large corporations have all the rights of selling their patents.
Thus, the case of Kodak is like a struggle or conflict between two rights.
REFERENCES :
1- Greenhouse, L (1997)"Kodak Dealt a Setback In Antitrust Case Ruling" The New
York Times
(http://www.nytimes.com/1992/06/09/business/kodak-dealt-a-setback-in-antitrustcase-ruling.html)
2- Kowka, H, " The Antitrust Revolution" Oxford University
Press(http://www.law.berkeley.edu/faculty/rubinfeldd/Profile/publications/Kodak.pdf)