Monopolization/Attempt 2 Monopolize: S Act § 2
& Mergers: C Act § 7
S Act § 2
- Crime Against Monopoly
- Axns 2 Monopolize /
- Attempt 2 Monopolize /
- Combo / Conspire 2 Monopolize
- BLR #11: Elements of Monopolization
- D poss. monopoly pwr +
- Use mkt sh. / pwr as surrogate meas. of monopoly
- Mkt incl's geog. & substitute prod.
- Gen'ly 90% if monopoly , 30% isn't & 60%
- Need excl. conduct / wilful acq. / maint. of
monopoly pwr except 4
- Growth / massive econ. of scale needed
- Superior prod. / busi. acumen of winning competitive
- Historic accident
- Ex's of Excl. Conduct
- Foregoing current profit 2 get higher profit
as monopolist by running competitor out of busi.
- Deny essential facility 2 entrench busi.
- Current Rsbl Busi. Pract. as Defense
- Could defend by showing indep. justific. of axn
perceived as excl. pract.
- Attempt 2 Monopolize
- BLR #12: Elements
- Specif. intent 2 monopolize +
- Predatory / anticompetitive conduct +
- Dang. probability that D will achieve monopoly
- Def. of Merger
- Busi. Entity Gets All / Part of Other Busi. Entity
- Applicable Stt's
- S Act § 2 on Monopolization
- S Act § 1 on Restraint of Trade By Agmt
- Clayton (C) Act § 7 on Mergers
- Effects on Competition
- Disadv's 2 Competition by Merging
- Elim. competitor
- Elim. potential competitor
- Forecl. competitor from an outlet 2 dist.
- Can create entry barrier
C Act § 7
- Passed After Stand. Oil Case in 1914
- End of WWII Brought Incr. in Mergers
- In 1950, § 7 Amended 2 End Mergers
- Orig'al § 7
- Cov'ed only stock acq.
- Cov'ed only hz'al trxn's
- Trxn's on Merging
- Buying stock
- Buying all / any part of asset such as
- Real estate
- Excl. patent license
- Jt. venture
- Can B all kinds of busi. entity
- Types of Trxns
- Vertical /
- Merger May Subst'ly Lessen Competition
- Means probably
- Intended as incipiency stt. 2 catch mergers before
bad enough 2 viol. S Act
- Cong'al Intent
- Left 4 Ct. 2 Dec.
- Def. of mkts / subst'l lessening of competition
- Case by case analysis analogous 2 rule of rsn,
not per se rule
- Recog. Some Mergers Benefit Competition
- Two small co's get together
- Healthy corp. merge w/failing corp.
- Vertical Merger
- Elim. costs
- Eff. so good 2 consumers
- Sit's When Should B Concerned
- All R vertically integ'ed so entry barrier 2
potential entrant b/c
- Entry @ 2nd level would B hard +
- Mkt is concentrated @ either level
- Dang. when vertical integ. facilitate
- Make & police actual hz'al price / mkt div.
- Facilitate oligopoly pricing / div. of customers
- Hz'al Merger
- Presume Hz'al Merger Illegal If
- Merger parties have high combined sh's in mkt
- Only need small # like 7.5%
- Merger causes sizeable incr. in concentration
- Only need small # like 1.1%
- Shift Burden 2 Merger Partn's If Presumption
- Merger partn's need 2 show merger not likely
2 subst'ly lessen competition
- Heavy burden
- Hz'al Merger Guidelines
- Hart Scott Rodino Pre-Merger Notific. Act
- Req's sig. merger 2 B discl'ed 2 govt 30 days
- Co's worth $100 mill. & $10 mill. or more
- Trxn is 15% / $15 mill. of stock / asset
- If merger likely 2 B challenged, negotiate w/DOJ
& FTC after file notific.
- Analysis 2 B Used by DOJ & FTC
- Effect on mkt concentration / degree of incr.
- Herfindahl -Hirshman Index (HHI) takes all co's
in mkt, fig. out mkt sh., sq. each sh., & then add up
- Unconcentrated if HHI under 1k so merger gen'ly
- Moderate concentration if HHI 1k-1800 so challenge
if incr. HHI by 100 pts / more
- High concentration if HHI over 1800 so challenge
if incr. HHI by 50 pts / more
- Possible bad effects from merger
- Incr. chances of hz'al collusion by actual agmt
/ act as oligopolist
- Merger enable 1 actor 2 behave anticompetitively
- Entry barriers
- If potential entrant can enter mkt, merger might
- Possible eff.
- Econ. of scale from merger & only from merger
- Can't B fictitious
- Failing co.
- Can't meet fin'al oblgn near future
- Can't reorg. successfully under Chp. 11 of Bankr.
- Unsuccessful good-faith effort 2 get rsbl alt.
- W /o acq., assets of failing firm would exit
mkt then ok 2 merge
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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