The Sherman Antitrust Act (1890)
Section 1. Trusts, etc., in restraint of trade illegal; penalty
Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. Every
person who shall make any contract or engage in any combination or
conspiracy hereby declared to be illegal shall be deemed guilty of
a felony, and, on conviction thereof, shall be punished by fine
not exceeding $10,000,000 if a corporation, or, if any other
person, $350,000, or by imprisonment not exceeding three years,
or by both said punishments, in the discretion of the court.
Question – Explain what the Sherman Act makes illegal. Do you see
any potential problems with the law.
E.C. Knight Company v. United States (1895)
The American Sugar Refining Company (E.C. Knight Company), a corporation existing under
the laws of the State of New Jersey, acquired, through the purchase of stock in four
Philadelphia refineries, control over 98% of the sugar refining industry - a practical
monopoly of the business.
Question – Was the E.C. Knight Company in violation of the Sherman Act?
Explain.
Danbury Hatters Case (Loewe v. Lawlor – 1915)
The "Hat City" of Danbury made news in 1902 when hat manufacturer, Dietrich Loewe,
refused to recognize the hatters’ union. Most of his employees went on strike, lured by the promise of higher union wages.
Loewe resumed work with a scab crew, and the striking workers organized a boycott. The boycott was carried to other
states wherever Loewe’s hats were sold. Loewe sued the union claiming that their boycott violated the Sherman AntiTrust Act.
Was Loewe right? Did the union violate the Sherman Anti-Trust Act? Explain.
READ THE ARTICLE BELOW. Do you think what Intel did should be illegal? Explain. Do you think what
they did is illegal under the Sherman Anti-trust Act? Exlain.
November 5, 2009
State Accuses Intel in an Antitrust Suit
By ASHLEE VANCE
In 2005, Michael S. Dell’s namesake company was getting pounded. His competitors were selling personal
computers and servers built on cheap, popular and powerful chips from Advanced Micro Devices, while Mr.
Dell had stuck loyally with slower chips from Intel.
In an e-mail note to Intel’s chief executive, Paul S. Otellini, Mr. Dell threatened to switch to A.M.D. “I am tired
of losing business,” Mr. Dell wrote. “We are losing the hearts, minds and wallets of our best customers.”
Mr. Otellini reminded Mr. Dell that Intel had paid Dell more than $1 billion in the last year. “This was judged
by your team to be more than sufficient to compensate for the competitive issues,” he wrote. Dell delayed
buying A.M.D. chips, and Mr. Otellini said in a later e-mail message to a colleague that Dell was “the best friend
money can buy.”
Such payments to PC makers, along with other aggressive business tactics, are at the heart of the antirust
lawsuit filed against Intel on Wednesday by New York’s attorney general, Andrew M. Cuomo. Mr. Cuomo’s case
— the first antitrust charges against the company in the United States in more than a decade — follows similar
actions by regulators in Europe and Asia.
According to Mr. Cuomo’s lawsuit, Intel, the world’s largest chip maker, has for years used large rebates and
co-marketing arrangements to talk Dell and other manufacturers into sticking with its products rather than
increasing their business with A.M.D., a much smaller chip maker.
As the supplier of about 80 percent of the central chips that power PCs and servers, Intel had monopoly power,
which it abused, according to Mr. Cuomo. “Intel has used illegal threats, coercion, fines and bullying to
preserve its stranglehold on the market,” he said at a news conference Wednesday. “We intend to stop them.”
An Intel spokesman, Chuck Mulloy, said the company had done nothing wrong. “Neither consumers, who have
consistently benefited from lower prices and increased innovation, nor justice are being served by the decision
to file a case now,” he said.
Under federal antitrust law, states have the power to bring charges independently of the federal government.
The F.T.C. and other states may file similar cases, much as in the government’s antitrust case against Microsoft
a decade ago.
The major complaints surrounding Intel concern its use of rebates and marketing dollars to keep customers.
The New York suit argues that Intel executives threatened to take away such incentives from customers if they
did more business with A.M.D.
In addition, the lawsuit contends that if businesses were close to buying A.M.D.-based computers from a
company like H.P. or Dell, Intel would jump in to help the computer makers sell Intel-based machines at a
large discount.
Over all, the hardware makers often became dependent on Intel’s incentives to keep their computer businesses
profitable, making them reluctant to make a meaningful shift to A.M.D., the lawsuit said.