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Hz'al Restraint: Sherman (S) Act § 1

S Act § 1

  1. No Agmt 2 Restrict Trade in Interstate / For. Commerce

    1. Only 4 interstate commerce

    2. Need 2 / more people 4 K, combo, / conspiracy

  2. Combo Can B Hz'al / Vertical

Hz'al Restraint

  1. BLR #1: Only Unrsbl Restraint of Trade Prohibited by S Act

    1. Rsblness of Restraint Judged by Effect on Competition

    2. Unrsbl Restraint @ C/L, Unrsbl Restraint Under S Act

    3. Valid Restraints of Trade @ C/L

      1. Sell busi. & req. seller not 2 compete w/in rsbl terr. & X

      2. Ask retiring partn. not 2 compete

      3. Pending partn. where prom. not 2 deal w/others

      4. Buyer of prop. not use same prop. in competition

      5. Ee not compete w/er

      6. Mere ancillary restraint 2 valid busi. purpose ok under C/L

    4. Rule of Rsn 2 Det. Unrsbl Restraint & Applic.

      1. What R the parties doing?

      2. Why R they doing it?

      3. Whose trade restrained?

      4. Is it per se illegal?

        1. If so, illegal

        2. If not per se illegal then

          1. Balance benefits of competition 2 harms

          2. If beneficial, see if any less restrictive way 2 benefit competition exists

    5. Per Se Unrsbl / Illegal Restraints

      1. Types of conduct

        1. BLR #2: Hz'al price (P) fixing by proving agmt + purpose in most cases

          1. Infer purpose from agmt

          2. Not need overt act, mkt pwr / sh., / effect

          3. May need 2 show effect by priv. P's

          4. Unlawful b/c no eff. gain from price fixing 2 sell 2 consumers

          5. Could B done by buyers / sellers

          6. Can't set max price

        2. BLR #3: Hz'al agmt 2 div. customers by terr. / classif.

      2. Reqt's 4 Per Se Rules

        1. Def'able conduct w/extreme clarity

        2. Gen'ly bad conduct & when it's good, not that great

        3. Hard 2 sep. good from bad cases

      3. Disadv's 2 Per Se Rules

        1. Prob. of charact's

      4. Lawful Price Fixing / Rule of Rsn Defense

        1. Price Fixing 4 Cost Saving Integ.

          1. Eff. created & passed 2 consumers, then ok

          2. Price fixing is ancillary 2 eff. as benefit 2 competition as valid busi. purpose

          3. Creation of new Prod.

          4. Restraint can't B broader than nec. / can still go 2 another source

        2. Price Fixing Helps Competition / Mkt

    6. Sneak a Peak / Quick Look 2 Det. Illegality

      1. Applic.

        1. See if rule of rsn can prove justific.

        2. If not, per se illegal instead of full analysis

        3. If so, full trial under rule of rsn

      2. Types of Justific.

        1. Only allow competitive improvement justific.

  2. Agmt / Conspiracy

    1. Circ'al Evid. Used Gen'ly

    2. Similar Pricing by Competitors

      1. Consc. Parallelism

        1. Each competitor was faced w/same busi. demand

        2. Each knows that others got the demand

        3. Each knows if react same way, all will profit

        4. All act same way

      2. Oligopoly Pricing

        1. Only few sellers w/in the mkt of fungible prod.

        2. Pricing interdep. w/other competitor's prices

        3. Prob. b/c of mkt concentration, not conduct of competitors

    3. Conscious Parallelism & Conspiracy

      1. Indep. Dec. Making Sit.

        1. Consc. parallelism alone will not compel finding conspiracy

        2. Now, consc. parallelism alone won't even allow P 2 get 2 jury

      2. Interdep. Dec. Making Sit.

        1. Consc. parallelism alone can get 2 jury but not likely 2 win

        2. Should also show plus factors 2 prove conspiracy

          1. Indication of express collusion

          2. Motivation 4 common axn & acts against self int.

          3. Poor econ. perf. in an ind.

  3. Facilitating Pract.'s

    1. Def.

      1. Facilitating conduct that results / takes place of collaboration

    2. Common Themes

      1. D's sh. info

      2. Trade Ass'ns setting regulations 4 profession

    3. D's Can't Sh. Price Info

      1. Seller can match competitor's offer w/o calling each other up

      2. Get price info from buyer, not competitor

    4. What Trade Ass'n Can't Do

      1. Future prod. estimations

      2. Having freq. mtngs, e.g. wk'ly

      3. Inform on current price changes / future pricing

      4. Subj.'ing members 2 audit & policing

    5. What Trade Ass'n Can Do

      1. Dist. info 2 all / pub., not just members

      2. Less freq. mtngs

      3. Proposed new govt'al safety stand.

      4. Proposed ind. wide stand.

      5. Effect of new changes in law on ind.

  4. Group Boycott / Concerted Refusals 2 Deal

    1. BLR #4: Classic Group Boycott Per Se Illegal

      1. Agmt among competitors 2 inj. somebody on own level of mkt by coercion / duress on people on dif. level

      2. Illegal by §1 of S Act, § 3 of Clayton (C) Act, & § 5 of FTC Act

      3. No self help allowed

    2. Cartel Type of Boycott

      1. Agmt among competitors 2 inj. somebody on dif. level

      2. If agmt is price, similar credit terms, / hz'al div. of terr. / customer, then per se illegal

      3. If agmt is something else, rule of rsn

      4. Motives 4 boycotting / refusing 2 deal

        1. Get rid of free-ride @ retail level by mfgr. level

        2. Elim. discounters 2 polic actual price fixing by mfgr. level

    3. Boycotts Other Than Classic Boycott

      1. Refuse 2 deal w/competitor @ own level 2 hurt somebody @ own level

      2. Use rule of rsn

    4. Essential Facility Doc.

      1. Essential facility if group of competitors / monopolist control facility essential 2 compete successfully +

      2. Can't B duplicated @ rsbl cost +

      3. Has excess capacity

      4. Then must make it avail. @ nondiscrim. / fair rate

    5. AP Doc.

      1. Group of competitors / monopolist control facility

      2. Not essential but is subst'l competitive adv.

      3. Then if adm. new members, must do so on nondiscrim. basis

    6. Boycott of Member & D/P

      1. Need state axn / govt mandate 2 consid. D/P issue in boycotts

      2. If per se viol., then no D/P would save

      3. If not per se viol., then lack of D/P

        1. Not convert it 2 per se viol.

        2. Could create unrsbl'ness 4 something that could've been justified under rule of rsn

    7. Stand. Setting 4 Ind.: Rule of Rsn

      1. Fair proced. & fair stand. 4 all

      2. Testing of prod. should B fair & X'ly

      3. No boycott feature 2 stand. setting feature

  5. Govt / State Axn

    1. State Axn Immunity

      1. S Act not apply 2 state axn

      2. S Act not used against govt corruption

    2. Delegations by State & Immunity

      1. Delegate 2 priv. cit.

        1. Clear state auth. / policy replaces competition w/state reg. +

        2. State controls & supervises priv. cit. carrying out state policy

      2. Delegate 2 gov'ing auth.

        1. Need clear state policy replacing competition +

        2. City / municipal must act w/in scope of delegated pwr

    3. Lobbying Activity & Jud'al / Adm. Activity Immunity

      1. S Act not apply 2 lobbying 2 leg. but can apply 4 lobbying 2 priv. ass'n

      2. Can have lies in lobbying & still immune

      3. Cannot have lies / frivolous claims 4 jud'al / adm. activity 4 immunity

    4. Noerr's Sham Exception 2 Lobbying Immunity

      1. If approach 2 leg. is mere sham 2 cov. up competitor's attempt 2 damage dir'ly

    5. Sham Exception 2 Jud'al Activity Immunity

      1. Reqts 4 exception against jud'al immunity

        1. Obj'ly frivolous lawsuits

          1. No p/c / rsbl belief could win litig. /

          2. No rsbl litig. could've thought could win

        2. Subj. evil intent 2 restrain competition

          1. Incr.'ing rival's cost by process of litig., not end result

    6. Boycotting Govt

      1. No S Act viol. if nonecon. rsn

        1. Not get dir. econ. benefit so credible nonecon. motive

        2. Not competitor, supplier / customer

        3. State act as sov., not as buyer / supplier


This material is copyrighted by the author. Use of the material for profit is expressly prohibited without the written permission from the author.

Ms. Haeji Hong

May 12, 1998

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