Antitrust Laws

Critically important but commonly misunderstood, antitrust laws are meant to promote competition and protect consumers. Here’s everything you need to know.

 

America’s Antitrust Laws Protect Competition and Benefit Consumers

 

Antitrust laws ensure competition in a free and open market economy, which is the foundation of any vibrant economy. And healthy competition among sellers in an open marketplace gives consumers the benefits of lower prices, higher quality products and services, more choices, and greater innovation.

The core of U.S. antitrust law was created by three pieces of legislation: the Sherman Antitrust Act, the Federal Trade Commission Act, and the Clayton Antitrust Act. These laws have evolved along with the market, vigilantly guarding against anti-competitive harm that arises from abuse of dominance, bid rigging, price fixing, and customer allocation.

A Small Faction of Policymakers Are Moving to Rewrite Antitrust Laws, Favoring Regulation Over Competition

 

In recent years, politicians and activists have called for increased regulation over industries and companies that have significant power or market share in comparison to their competitors. The push is intended to attack the largest companies in every industry, simply because they are large, and impose specialized regulatory-like burdens through antitrust enforcement. 

Proposals to change antitrust laws—resulting in greater government oversight of business—would allow antitrust enforcers to wield massive control over our economy, turning antitrust into a super regulatory power that could dictate specific outcomes in each sector of the economy.  

New antitrust standards would unnecessarily harm our national economy, unfairly target companies that earn success in the market, and allow policymakers, not consumers, to pick winners and losers in the marketplace. 

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    America’s Antitrust Laws: Myth vs. Facts

     

    America’s antitrust laws have ensured competition thrives, providing consumers with the benefits of lower prices, higher quality products and services, more choices, and greater innovation.

    However, some seek to rewrite these laws to undermine consumers' ability to determine winners and losers in the marketplace. Before Congress starts making unnecessary and harmful changes to existing antitrust laws, it’s important to set a few things straight.


    Myth: Antitrust enforcement is a form of regulation.
     

    FACT

    Antitrust is a law enforcement tool, not a regulatory tool. It is rooted in the idea that competitive markets are self-policing and that consumers benefit when there is vigorous, even ruthless, competition. Where competition in the market is damaged by certain competitor’s action, antitrust steps in on fact specific grounds and corrects the action of a particular company or group of companies. Antitrust is designed to restore the self-policing power of competition in the market. Regulation on the other hand is about imposing an outcome in the market.


    Myth: The antitrust laws have a hard time keeping up with the modern economy.
     

    FACT

    Antitrust laws endorse a timeless process that can be universally applied to every sector of the economy. The rule of reason is a process that relies on concrete theories of harm that are supported by sound economic analysis that can test the validity of those theories. Economic analysis is used to evaluate the procompetitive effects of a potential merger or specific conduct in the market and weighs that against any anticompetitive effects. Only when the anticompetitive effect is greater than any procompetitive effect is antitrust enforcement warranted.


    Myth: Antitrust is only about price and output.
     

    FACT

    U.S. antitrust law has long considered not only price and output but also quality and innovation. A long list of cases shows that the consumer welfare standard considers a host of factors beyond price, including reduced quality, variety, service, or diminished innovation.


    Myth: Antitrust is concerned with fairness.
     

    FACT

    What is “fair” is not an objective or administrable standard recognized by the antitrust laws. Antitrust law is based in economics, requiring theories of harm with testable implications—something as vague and as subjective “fairness” standard cannot do. Fairness is something left to regulation, which seeks to steer market outcomes, not antitrust which allows competition in the marketplace for consumers to shape market outcomes.


    Myth: Monopolies are illegal.
     

    FACT

    The U.S. Supreme Court has long held that the mere possession of monopoly power, and any associated charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices at least for a short period is what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power is not unlawful unless it is accompanied by anticompetitive conduct. In other words, conduct that is distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.


    Myth: Mergers must seek permission and receive approval before they can be consummated.
     

    FACT

    All mergers are presumed legal. No permission is required. What is required for transactions that reach certain thresholds is notification. Upon notification, the antitrust agency can review the transaction, if it takes issue with the transaction the burden to block the transaction falls on the government to ultimately challenge the merger in court.

     

    The Role & Responsibility of Antitrust

     

    There is a debate over antitrust policy and the appropriate level of enforcement. The Chamber believes strongly in market competition, over government regulation. For this reason we support antitrust enforcement when it seeks to protect or restore competition in the market in the economic interest of consumers, as opposed to advancing amorphous, and even conflicting, policy goals that have little to do with competition.

    The Chamber welcomes a debate over the appropriate level of enforcement. We give antitrust enforcers a wide birth even as antitrust enforcement has had numerous examples of misguided enforcement actions. This is because antitrust enforcement, when done correctly, is fact-specific and impacts a limited number of culpable economic players, not an entire industry. Further, in its more than 100 year history, antitrust mistakes have been overcome with a deeper understanding of economics, without the need for constant course corrections from changes in the statutes.

    The fact-based and economically grounded consumer welfare standard currently implemented by U.S. courts and enforcers has proven to be an effective tool in applying the antitrust laws and rejects the standards applied prior to the mid-1970's that were based on vague, subjective political and policy goals that second guessed the market and ignored consumer benefits. Moreover, over the years we have seen that the antitrust laws and the consumer welfare standard are sufficiently flexible to evaluate new economic theories of harm, including today’s digital economy. 

    However, today too many voices – often with a radical view of antitrust and a broader policy agenda – are trying to move the debate from whether the antitrust laws are being adequately enforced to a troubling notion that the antitrust laws need to be updated. The Chamber strongly opposes statutory changes, because we believe suggested changes are based on inherently flawed theories, reject decades of bi-partisan consensus, and present a whole host of potential dangers to our economy, including hampering innovation, politicizing antitrust, and interfering with U.S. companies' ability to compete with Europe, China and the rest of the world.

    At a fundamental level it is important to evaluate the current antitrust policy and enforcement debates, as well as potential changes in law, by asking oneself what antitrust is and is not.   

     

    What Antitrust Is and What it Is Not

     

    Antitrust IS about economic liberty

    The economic success of the United States is built on the fact that the market, not the government, maximizes economic efficiency for the benefit of consumers. Antitrust therefore relies on competitive forces to police the market, and avoids picking winners and losers, and only acts to ensure competitive conditions. It is not a form of regulation designed to deliver a particular outcome in the market.

    Antitrust IS NOT a tool for political change

    Concerns over jobs, speech, income inequality, corporate political power, and other social interests, are political conversations, not antitrust matters. Antitrust does not play a role, nor do we really want antitrust playing a role. Antitrust can protect competitive markets, but it is not designed to address the concerns above.  Instead, we should look to legislatures to pass separate laws that specifically address these concerns.

    Antitrust IS about protecting competition and consumers

    Consumers are the sole concern of antirust. Consumers win when there is robust competition in the market. When alleged anti-competitive activity is linked to price going up, or output going down without any counter weighting pro-competitive benefit the economics are very straight forward.  Antitrust analysis is also well suited to evaluating other forms of non-price competition such as quality, innovation, or consumer choice. Though some have claimed that antitrust is too focused on price and output, a long history of antitrust enforcement involving various forms of non-price competition shows otherwise.

    Antitrust IS NOT about fairness or competitors

    “Fairness” is not a legal standard. What is fair can often be highly subjective. The role of economic analysis and the consumer welfare standard in antitrust are central to making enforcement decision as objective as possible. For this reason competitor’s complaints of “unfairness” are met with skepticism by antitrust enforcers for good reason. Inefficient competitors often attempt to seek protection from a more efficient competitor rather than competing on the merits. Where competitor complaints are turned away by enforcers, those competitors have often sought a political audience or friendlier foreign jurisdictions that conflate these complaints with market failure or seek to use antitrust enforcement as a tool for industrial policy.

    Antitrust IS highly technical

    Antitrust cannot be divorced form sound economic analysis. Economics is a highly technical trade that is not easily suited to the amateur enthusiast. Theories of competitive harm rise and fall on supporting economic analysis, which requires careful analysis of the market, reams of discovery, and a careful type of cost-benefit analysis, commonly known as the rule of reason. Just because one can point to an anti-competitive harm, doesn’t mean there are not pro-competitive justifications that outweigh that harm. Economic analysis weighs these factors and only where the harms clearly outweighs the benefits does an enforcer feel the need to act.

    Antitrust IS NOT political

    Antitrust is not well-suited for armchair quarterbacking, rooting for the underdog, or speaking in 30 second sound bites. It is a form of law enforcement and should be conducted in a highly professional manner with due process. Sadly, efforts to politicize antitrust efforts are all too common in foreign jurisdictions. The U.S. has had a long and proud history of largely steering clear from efforts to politicize enforcement. This tradition is well worth keeping.

    Antitrust IS highly fact-specific and evidence driven (rule of reason)

    Some antitrust cases can be close calls, economic analysis might not always produce a clear answer, and judgements will need to be made. This is why we have courts. Just because some cases one may or may not agree with, one should not abandon the role of economics or circumvent the rule of reason. 

    For the same reasons, big is not necessarily bad. Antitrust does not punish those that build a successful business – even a monopoly – through competition on the merits. Otherwise, antitrust would undermine incentives for companies to compete hard and strive for success and deny consumers the benefits of competition. Only when big companies engage in exclusionary practices that are not deemed competition on the merits – like tying or exclusive dealing – and the pro-competitive benefits of their conduct does not outweigh the harm, can they be subject to antitrust enforcement.

    Antitrust IS NOT about setting bright line tests (per se)

    Over the past forty years, courts and antitrust enforcers have rejected the bright line and per se unlawful tests applied in the early days of antitrust enforcement. They have done so because economic tools and theories have advanced and courts and enforcers have realized that these bright line tests, while potentially easier to apply, harm consumers. Antitrust, appropriately as a law enforcement function, places the burden on the government to prove its case, to shift the burden suggests the government has insufficient evidence to bring a case. Yet some argue for changes to the antitrust law that would essentially undermine the rule of reason and the role of economics, shifting to a more per se or rules based approach to antitrust. Equally as bad are those voices that call for the burden to be shifted to the targets of an investigation to prove their merger or conduct is pro-competitive. Such approaches are nothing short of economic regulation and repeat the mistakes of the past – imposing bright line tests that harm consumers.

    Antitrust IS flexible

    Antitrust learns from its mistakes, it adjusts based on deeper economic understandings. As the economics behind any given market becomes better understood conduct maybe viewed overtime as pro-competitive or anti-competitive. Changes to antitrust law would stunt the growth of this evolution and lock our economy into an economic straight jacket that overtime will undermine U.S. competitiveness, which is at the core of our dynamic economy.

    One popular misconception is that antitrust is not capable of dealing with changes in the economy. The fact is antitrust enforcement is flexible because it is underpinned by the role of economic analysis and the rule of reason. As disruption in the economy gives rise to new sectors, economic analysis and a weighing of pro vs anti-competitive effects provides antitrust enforcers the tools to enforce the law today and tomorrow. 

    Antitrust IS NOT outdated

    Antitrust is governed by economics and the rule of reason and remains flexible enough to adapt to our digital economy, all while avoiding the temptation for abuse by those who would use it to benefit other interests. Antitrust has made many mistakes in its 100+ years, we should learn from, not repeat our history. The heavy handed nature of the pre-1970's enforcement era is something that, while unfortunate, was short lived. During this time antitrust enforcers by-passed the economics, thought that they knew best and used the antitrust laws to shape our economy. Thankfully, with time, the courts recognized the short coming of the approach. Much of what underpins today’s call for changes in the law would return us to this misguided era of enforcement. If we allow the antitrust laws to be revised, as some suggest, this will endorse economic regulation over competition, and ultimately harm American consumers.

     

    The Dangers of Upending Decades of Supreme Court Precedent

     

    Antitrust critics have signaled their interest to radically change existing U.S. antitrust law. Their ideas often seek to overturn decades of Supreme Court precedent (over 50 years in some cases), risking the very harms the Court sought to prevent.

    Proposed changes look to abandon the Court’s insistence that antitrust law be ground in the rule of reason and adhere to economic evidence, rejecting short cuts used to reach findings of harm. Below are some of the most important Supreme Court determinations that have thoughtfully shaped the enforcement approach to antitrust:

     

    U.S. v. General Dynamics v. U.S. (1974)

    The Court affirmed that the merger did not violation Section 7 of the Clayton Act, rejecting the government’s reliance on mere statistics concerning market share and concentration alone. The Court reiterated its position in Brown Shoe v. U.S. that evidence on market share and concentration alone is “not conclusive indicators of anticompetitive effects.” Proposed changes to antitrust law often suggest banning mergers based on annual revenue or market shares alone, instead of relying on more sophisticated economic analysis. 

    https://supreme.justia.com/cases/federal/us/415/486/

    U.S. v. Citizens and Southern Nat’l Bank (1975)

    The Court held that the proposed acquisitions did not violate the antitrust laws, explaining that, in future competition cases, there must be a realistic prospect that denial of the acquisitions would lead the defendant banks to compete against each other. The Court explained that the Clayton Act is concerned with “probable” effects on competition, not with “ephemeral possibilities.”

    https://supreme.justia.com/cases/federal/us/422/86/

    Continental T.V. v. GTE Sylvania (1977)

    The Court held that a firm’s decision to restrict the locations where retailers can sell its products must be analyzed under a full-blown effects (or rule of reason) analysis. The Court explained that “per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive,” concluding that conduct transgresses the Sherman Act only if it was an unreasonable restraint of trade that would diminish competition and promote inefficiency. Changes to our antitrust laws would have us to return to pre-1977 case law by ignoring economic analysis used today to evaluate conduct.

    https://supreme.justia.com/cases/federal/us/433/36/

    Matsushita v. Zenith (1986)

    The Court established that antitrust claims must make “economic sense,” stating: “If the factual context renders [a plaintiff’s] claim implausible—if the claim is one that simply makes no economic sense—[plaintiff’s] must come forward with more persuasive evidence to support their claim than would otherwise be necessary.”

    https://supreme.justia.com/cases/federal/us/475/574/

    Brooke Group v. Brown and Williamson Tobacco (1993)

    The Court held that charging low prices, even if it harms rivals, is not unlawful unless: (1) the prices are below the appropriate measure of the firm’s costs; and (2) the firm had a “dangerous probability” of recouping its investment in low cost pricing “in the form of later monopoly profits, more than the losses suffered.” Some would like to entirely do away with the second requirement.

    The Court explained that, without recoupment, “predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhanced. Although unsuccessful predatory pricing may encourage some inefficient substitution toward the product being sold at less than its cost, unsuccessful predation is in general a boon to consumers.” The Court went on to say: “That below cost pricing may impose painful losses on its target is of no moment to the antitrust laws if competition is not injured: It is axiomatic that the antitrust laws were passed for ‘the protection of competition, not competitors.’” “Even an act of pure malice by one business competitor against another does not, without more, state a claim under the federal antitrust laws; those laws do not create a federal law of unfair competition.” In other words, the Court rejected a vague and subjective “unfairness” standard.

    https://www.law.cornell.edu/supct/html/92-466.ZO.html

    NYNEX v. Discon (1998)

    The Court held that behavior that evades a given regulatory requirement is not necessarily an antitrust violation, if it does not harm the competitive process. The Court importantly recognized the role of regulation as being separate from the role of antitrust and that conduct outside the scope of the regulation is a matter for antitrust only where a plaintiff can “allege and prove harm . . . to the competitive process, i.e., to competition itself.” See also Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993) (“The purpose of the [Sherman] Act, is not to protect businesses from the working of the market; it is to protect the public from the failure of the market”); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (“[A]ntitrust laws . . . were enacted for ‘the protection of competition, not competitors.’”) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).

    Verizon v. Trinko (Supreme Court, 2004)

    The Court relied upon its 1919 decision in U.S. v. Colgate to reiterate that, as a general matter, U.S. antitrust law “does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.” The Court explained the dangers of compulsory dealing. First, compelling firms to share the source of their advantage risks lessening incentives “for the monopolist, the rival, or both to invest in those economically beneficial facilities.” Second, “[e]nforced sharing also requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing role for which they are ill-suited.” And third, “compelling negotiation between competitors may facilitate the supreme evil of antitrust: collusion.”

    The Court also reiterated its prior holding that monopoly power (i.e., substantial market power) is a necessary but not sufficient condition for harm to competition. Potential legislative changes want to explicitly do away with this joint requirement in favor of a standard where substantial market power is alone sufficient. And, as the Court explained in Eastman Kodak v. Image Technical Service (1992)1 (relying upon its 1966 decision in Brown Shoe), the possession of monopoly power is an essential element in all Sherman Act Section 2 cases. The Court defined monopoly power as the “power to control prices or exclude competition,” stating that monopoly power “of course” requires something greater than market power.

    https://www.law.cornell.edu/supct/pdf/02-682P.ZO.[1] https://www.law.cornell.edu/supremecourt/text/504/451

    Leegin v. PSKS (2007)

    The Court held that resale price maintenance must be analyzed under a full-blown effects (or “rule of reason”) analysis. The Court stated that: “Resort to per se rules is confined to restraints [such as horizontal price fixing] ‘that would always or almost always tend to restrict competition and decrease output.’ To justify a per se prohibition a restraint must have ‘manifestly anticompetitive’ effects, and ‘lack . . . any redeeming virtue.’” The Court reasoned that, to hold otherwise, would be contrary to economics, which has shown that both vertical price and non-price restraints come with procompetitive benefits such as stimulating inter-brand competition, eliminating free-riding, and creating more options for consumers.

    https://www.supremecourt.gov/opinions/06pdf/06-480.pdf

    FTC v. Actavis (2013)

    The Court reiterated its prior unanimous holding from California Dental v. FTC that “abandonment of the ‘rule of reason’ [i.e., a full-blown effects-based analysis] in favor of presumptive rules (or a ‘quick-look’ approach) is appropriate only where ‘an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.’”

    https://www.law.cornell.edu/supct/pdf/12-416.pdf

    Ohio v. American Express (2017)

    The Court relied upon its prior decisions to reiterate that “nearly every” vertical restraint “should be assessed under the rule of reason,” i.e., a full-blown effects analysis. The Court explained that, to determine whether a restraint violates the rule of reason, courts use a three-step, burden-shifting framework under which the “plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market.” The Court again relied upon its prior decisions to instruct that “[t]he rule of reason requires courts to conduct a fact-specific assessment “to assess the [restraint]’s actual effect’ on competition.”

    https://www.supremecourt.gov/opinions/17pdf/16-1454_5h26.pdf

     

     
     

    Antitrust 101: Key Laws

     

    Sherman Act: The Sherman Act, established in 1890 as the first piece of antitrust legislation, proscribes unlawful business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. Supreme Court and other federal case law have interpreted the Act as prohibiting conduct that harms the competitive process and consumers when it would create or maintain a monopoly. Conduct is found to be unlawful when a plaintiff proves the existence of anticompetitive effects (e.g., substantial foreclosure of rivals resulting in higher prices, reduced output, reduced quality, or reduced innovation) that are not outweighed by procompetitive efficiencies or legitimate business justifications.

    Clayton Act: The Clayton Act, enacted in 1914, prohibits mergers and acquisitions when the effect “may be substantially to lessen competition, or to tend to create a monopoly.” As amended by the Robinson-Patman Act of 1936, the Clayton Act also bans certain discriminatory prices, services, and allowances in dealings between merchants. The Clayton Act was amended in 1976 by the Hart-Scott-Rodino Antitrust Improvements Act to require companies planning large mergers or acquisitions to notify the government of their plans in advance. The Clayton Act also authorizes private parties to sue for triple damages when they have been harmed by conduct that violates either the Sherman or Clayton Act and to obtain a court order prohibiting the anticompetitive practice in the future.

    Federal Trade Commission Act: The Federal Trade Commission Act, enacted in 1919, is enforced by the Federal Trade Commission (FTC). Under this Act, as amended, the FTC is empowered, among other things, to prevent “unfair methods of competition.” While the FTC Act may reach conduct beyond the Sherman Act, the FTC’s 2015 “Statement of Enforcement Principles” clarifies that, in enforcing the FTC Act, the FTC will be guided by the same consumer welfare standard applied under the Sherman Act, and that “an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications.”

     

     

    Antitrust 101: Key Terms

     

    Abuse of dominance: In foreign jurisdictions the term is commonly used to capture anticompetitive behavior of firms that have significant market share. U.S. antitrust law is focused on prohibiting unlawful monopolization or attempted monopolization. Such conduct is only prohibited when a plaintiff proves the existence of anticompetitive effects (e.g., substantial foreclosure of rivals resulting in higher prices, reduced output, reduced quality, or reduced innovation) that are not outweighed by procompetitive efficiencies or legitimate business justifications.

    Antitrust bundling claim: An antitrust bundling claim occurs when a firm offers only a package of goods and not the standalone goods. Pure bundling occurs when there are no alternative sellers of the component goods so only the bundle is available. Mixed bundling occurs when both the package and the individual goods are available from the bundling firm. It is important to note bundling has many procompetitive benefits, so the practice is not unlawful. Only after a careful rule of reason analysis can these types of claims rise to level of anticompetitive harm and become a violation of the law.

    Antitrust tying claim: An antitrust tying claim is where a customer is interested in buying one product, but in order to buy this product the customer is coerced into buying separate products. It is important to note tying practices can have many procompetitive benefits, so the practice is not unlawful. Only after a careful rule of reason analysis can these types of claims rise to level of anti-competitive harm and become a violation of the law.

    Bid rigging: Bid rigging is the way that conspiring competitors effectively raise prices when purchasers — often federal, state, or local governments — acquire goods or services by soliciting competing bids. Essentially, competitors agree in advance who will submit the winning bid on a contract being let through the competitive bidding process.

    Cartel: A cartel refers to a group of companies, competing with each other, that form an agreement to set and control the prices for their industry or to allocate the market in a way that has them to agree not to compete against each other. Cartel arrangements along these lines are illegal under U.S. antitrust law and violations include criminal penalties.

    Consumer welfare standard: The consumer welfare standard is a broad standard that values what consumers are willing to pay for, and tethers antitrust analysis to the methodological rigors of economics in terms of theories that can be tested and rejected by empirical analysis. Under the standard, antitrust intervention is only justified when the conduct at issue satisfies two tests: First the conduct must distort the competitive process such that equally efficient competitors are incapable of competing. Second, this conduct and distortion must result in harm to consumers. More simply, there must be both a cause and an effect that can be identified before antitrust intervention is warranted. As the FTC has said, it “does not decide who wins and who loses in the marketplace – consumers do that.”

    Efficiencies: Antitrust efficiencies are benefits from mergers or business practices that are of value to consumers. For example, efficiencies from vertical mergers often include quality improvements and faster and/or better innovation from coordination in product, design, and innovation efforts; and elimination of free-riding from the harmonization of incentives.

    Essential facilities doctrine: The essential facilities doctrine, importantly, has never been recognized by the Supreme Court. The concept suggests that a company or its assets are so vital that other competitors should be given access for the competitor’s use. The doctrine overlooks that a facility is rarely absolutely essential and underestimates the ability of determine rivals to create new ways of doing things or other workarounds to the resulting benefit of consumers. Under this doctrine, there is little incentive to invest. The idea that one company’s hard work should be to the benefit of another company is not compatible with a free enterprise system that relies upon competition. In very limited contexts, outside of antitrust, there are regulatory circumstances, largely infrastructure related, where conditions for access are required under a regulation.

    Exclusive dealing: An exclusive dealing contract prevents a distributor from selling the products of a different manufacturer, and a requirements contract prevents a manufacturer from buying inputs from a different supplier. As with other vertical restraints, they are generally procompetitive or benign. These arrangements are judged under a rule of reason standard, which balances any procompetitive and anticompetitive effects. Exclusive dealing is generally unlawful only when practiced by a monopolist.

    Excessive pricing: Excessive pricing is the view that a company prices its products at too high of a price point. High prices are not prohibited by U.S. antitrust law. Antitrust avoids trying to subjectively determine the “correct” price, but instead relies on market forces to establish price points in the market. As the Supreme Court has stated: “The opportunity to charge monopoly prices is what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth.”

    Relevant Antitrust Market: Antitrust law analyzing conduct within relevant antitrust markets, which require both product and geographic aspects. A relevant product market consists of all goods or services that buyers view as close substitutes. That means if the price of one product goes up, and in response consumers switch to buying a different product so that the price increase is not profitable, those two products may be in the same product market because consumers will substitute those products based on changes in relative prices. But if the price goes up and consumers do not switch to different products, then other products may not be in the product market for purposes of assessing a merger's effect on competition. Antitrust goes awry if the relevant market is defined too narrowly or too broadly.

    Market allocation: Market division or allocation schemes are agreements in which competitors divide markets among themselves.

    Vertical mergers: Vertical mergers involve the integration of complements (like nuts and bolts or peanut butter and jelly), which does not reduce competition on its face. Unlike horizontal mergers, vertical mergers do not involve the combination of businesses that are either actual or potential competitors; thus, they result in at least some loss of rivalry and a combination of actual or potential substitutes.

    Horizontal mergers: A horizontal merger involve the combination of businesses that are either actual or potential competitors.

    Monopoly Power: Monopoly power is the ability to raise market-wide prices above or reduce output below the competitive level. As the Supreme Court has stated: “To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”

    Monopsony/Buyer power: Buyer power arises from monopsony (one buyer) or oligopsony (a few buyers), and is the mirror image of monopoly or oligopoly.

    Per se violations: Certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in other words, no defense or justification is allowed.

    Predatory pricing claim: A predatory pricing claim argues prices are artificially low to drive competitors out of the market, only to later raise prices once competitors leave the marketplace. Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time. A firm's independent decision to reduce prices to a level below its own costs does not necessarily injure competition, and, in fact, may simply reflect particularly vigorous competition. Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave are rare. This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market.

    Price fixing: Price fixing is an agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold. It is not necessary that the competitors agree to charge exactly the same price, or that every competitor in a given industry join the conspiracy. Price fixing can take many forms, and any agreement that restricts price competition violates the law.

    Refusal to deal claim: A refusal to deal claim typically arises when one firm refuses to work with another firm. Refusals to deal are generally lawful except under very limited circumstances such as when a monopolists terminates a prior, profitable course of dealing with a rival that results in the monopolist sacrificing short-term profits.

    Rule of reason: The rule of reason is a full-blown effects-based analysis under which plaintiffs must prove the existence of anticompetitive effects (i.e., substantial foreclosure that results in higher prices and/or reduced output, quality, or innovation) and show that they are not outweighed by procompetitive efficiencies or legitimate business justifications.

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