U.S. Antitrust Policy:
Cartels, Consumer Welfare and
International Convergence
University of La Rochelle
27 Janvier, 2006
John S. Martin
Fulbright Visiting Lecturer
University of Toulouse
[email protected]
Purpose of U.S. Competition Law?
• Social/Political: [M]ost men are the servants of corporations . . . . By
tyranny, as we now fight it, we mean control of the law, of legislation
and adjudication, by . . . special bodies of capital and those who
organize their use. (Woodrow Wilson (1914))
• Small business: “local control over industry and the protection of
small business.” Accept “higher costs and prices [that] might result from
. . . maintenance of fragmented industries and markets.” (Brown Shoe
(1962))
• Indecision: “I do not believe the debate over the purposes of antitrust
laws has been settled yet.” Rothery Van Lines (1986))
• Consumer welfare: prevent the acquisition or exercise of ‘market
power’” (Kovacic (2002))
Economic terms
• Market power -- ability to raise prices above
competitive levels
• Consequences of market power
– Wealth transfer
– Allocative efficiency loss
• Output reduction
• Deadweight loss
• “Not high profits but a quiet life”
Monopoly profits:
incentive to compete
• “the successful competitor, having been urged to
compete, must not be turned upon when he wins”
(Alcoa 1945)
• “The opportunity to charge monopoly prices--at
least for a short period--is what attracts "business
acumen" in the first place” (Trinko 2004)
When does the harm of market
power outweigh its incentive
benefits?
• Collusion with no benefit
– Cartel
– Other conduct
• Horizontal merger
– If it creates market power without offsetting
efficiencies
• Dominant position
– If it is achieved through anticompetitive conduct
• Sherman Act Section 1: “Every contract,
combination . . . or conspiracy, in restraint of
trade”
• Clayton Act: Merger whose effect is to
“substantially lessen competition or tend to create
a monopoly”
• Sherman Act Section 2: “Every person who shall
monopolize, or attempt to monopolize, or
combine or conspire with any other person or
persons, to monopolize”
Naked vs. Ancillary Collusion
• Naked: Cartels, market allocation,
agreement not to compete
• Ancillary: Joint venture
– “Cooperation is the basis of productivity. It is
necessary for people to cooperate in some
respects before they may compete in others, and
cooperation facilitates efficient production.”
(Polk Brothers)
EU/US Debates
• GE/Honeywell
• Microsoft
• Merger Guidelines Revisions (SLC v. SIEC)
• Civil Actions