Table of Contents
Monopoly Final Outlines .............................................................................................................. 1
Possession of Monopoly Power in Relevant Market ............................................................................ 1
Inefficient Conducts ............................................................................................................................... 1
Defense of Monopoly .............................................................................................................................. 4
Question 2 Merger ......................................................................................................................... 6
Step 1: Define Market/Concentrated Market Analysis: ....................................................................... 6
Step 2: Likelihood of Anticompetitive Effects: ..................................................................................... 7
Step 3: Defense: ..................................................................................................................................... 11
Step 4: Weigh the justification with the anticompetitive .................................................................... 12
Question 3 Agreement Bulletin Points ...................................................................................... 12
A.
Agreement............................................................................................................................. 12
Per Se Rule............................................................................................................................................. 13
Quick Look Analysis: ............................................................................................................................ 14
ROR case ............................................................................................................................................... 15
Tying ...................................................................................................................................................... 16
Monopoly Final Outlines
Issue: Whether XX’ s conduct is liable under Sherman §2 Antitrust law?
Monopolization is prohibited by Section 2 of the Sherman Act. A violation of Section 2 has two
elements: monopoly power in relevant market (or a dangerous probability of achieving it) and
inefficient conduct that harms competition.
Possession of Monopoly Power in Relevant Market
*Market defined by customer preference: where customers will go when the price go too high?
Monopoly power or dangerous probability of achieving can be proved through (1) market power:
ability to control the price; or (2) market share proxy:30-60-90 notion
Market Power: Ability of a firm to set the price of a good. Pricing above cost is also evidence of monopoly.
Alcoa. Going to raise price with the position it got.
In the absence of direct evidence, the “market share proxy” is how courts routinely assess monopoly power.
30-60-90 notion, 90% share is in every known instance a sufficient share to meet the element, 60% share is
unclear, 30% is no monopoly power.
Here, XX is likely to have monopoly power in XX (geographic)’s XX(product) market
Inefficient Conducts
Anticompetitive conduct is conduct by a firm that might lead to or preserve an existing monopoly position
and is not a competition on the merits. Courts have identified several types of conduct that meet the
definition of anticompetitive conduct, including denies competitor inputs(foreclosure), predation,
contracting to foreclosure input.
The instance of conduct known as [XYZ]
requires proof of [A] elements: (1), (2), . . .
Applying this rule to the facts. . .
The four factors:
1. The plaintiff first shows that the d’s conduct has the requisite anticompetitive effect; like the act
protects company’s monopoly/market power; does so through a means other than competition is anticompetitive.
reducing rival’s usage of share
2. the monopolist then can provide a “procompetitive justification” for its conduct;
example exercise its copyright rights; efficiency,
3. the burden then shift back to the plaintiff to rebut that claim;
4. if the claim cannot be rebutted, then the plaintiff must demonstrate that the “anticompetitive harm
of the conduct outweighs the procompetitive benefit.”
A.
Denies Competitor Inputs [Foreclosure]:
Essential Facility
(1) the essential facility is controlled by a monopolist;
(2) a competitor cannot reasonably duplicate the facility;
(3) the monopolist denies the access to the facility;
(4) it would be feasible for access to be provided.
U.S. v Terminal Railroad: A group of railroads’ acquisition and control of the Mississippi river bridge
was a violation of 1 and 2 of the Sherman Act.
ATT: ATT unlawfully refused to interconnect MCI with local distribution facilities is governed by
essential facility doctrine.
US. v. Otter Tail: (OT serves 465/510 towns, vertically integrated, generates, transports, and sells
power at retail) Otter tail was a monopolist operator of electronic transmission lines and producer of
electricity selling electricity directly to retail customers. When Otter Tail’s franchise to sell electricity in
four municipalities terminated, the municipalities attempted to set up their own retail distribution
schemes selling electricity produced or transmitted by Otter Tail. Otter Tail refused to sell electricity
to the municipalities or to transmit electricity the municipalities had purchased from other producers.
OT transmission is essential facility that it impracticable for each town to duplicate.
Refusal to Deal（variation of essential facility）
Use of monopoly power ‘to destroy threatened competition’ is a violation of the ‘attempt to
monopolize’ clause of § 2 of the Sherman Act. Can’t exclude on basis other than efficiency, must
compete on merits (superior service, lower price).
A manufacturer, also operating at the retail level, refuses to sell to independently owned retail
competitors.
Aspen Skiing Co v. Highlands: Ski Co has three ski facilities and discontinued the all-Aspen joint
tickets for Highlands and Highlands’ market share dropped from 20% to 11%. There’s no general
duty to engage in a joint marketing program with a competitor. However, the Ski Co’s behavior that
not only (1) tends to impair the opportunities of rivals, but also (2) either does not further competition
on the merits or does so in an unnecessarily restrictive way.”
Otter Tail：The court held OT’s refusal to deal violated 2 because it involved the use of monopoly
power in one market as leverage to gain power in another market.
Refusal to comply with statutory directive (requiring dealing)
*Verizon v. Trinko: V(local service monopoly) sued by customers to get ATT service – V not providing
operational support for QA required by Telecom Act 1996. No violation of § 2. Institutional factors,
no prior course of dealing/profit sacrifice, concern about false-positives, legal remedy requiring judicial
monitoring. No requirement that companies must assist their rivals.
B. Predation
Price Squeeze: Vertically integrated monopolist sells monopoly input to rivals at high price, then
competes against them downstream at a low price.

A firm with no duty to deal in wholesale has no obligation to deal under favorable terms to
its competitors (See Trinko) (Analytical disaggregation)
 Berkey v. Kodak – Price squeeze between photofinishing chemicals/film/service
Price Predation:
Sherman Act 2 Price Predation: when it poses “a dangerous probability of actual monopolization.”
To establish competitive injury resulting from rival’s low prices, the plaintiff must (1) prove that the
prices complained of are below an appropriate measure of its rival’s costs; (2) must eliminate
competition; (3) a demonstration that the competitor had a reasonable prospect, a dangerous
probability, of recouping its investment in below-cost prices.
Matsushita v. Zenith : Japanese companies were charging supercompetitive prices in Japan and prices
below market level in the US to freeze out US companies. Need to invest money in a predatory
campaign but must also be able to recoup the investment + interest on the back end.
Brooke Group Ltd. v. Brown and Williamson Tobacco Corporation ： 6 company cigarette oligopoly；BG
introduces generic cigarettes, BW responds with generics；BW undercuts BG at wholesalers；BG
alleges BW selling below AVC pressuring BG to raise prices closer to branded. The evidence failed to
show BW had a rsnl prospect of recovering its losses from below-cost pricing through slowing the
growth of generics, not liable.
Product bundling
The anticompetitive feature of package discounting is the strong incentive it gives buyers to take
increasing amounts or even all a product to take advantage of a discount aggregated across multiple
products.
Lepage v. 3M3M possessed monopoly power in the United States transparent tape market, with a 90
percent market share. LePage’s, Inc. alleged that 3M violated § 2 of the Sherman Act, 15 U.S.C.S. § 2,
by (1) offering rebates to customers conditioned on purchases spanning six of 3M’s diverse product
lines, and (2) entering into contracts that expressly or effectively required dealing virtually exclusively
with 3M. there was sufficient evidence for the jury to conclude the long-term effects of 3M’s conduct
were anticompetitive. In addition, 3M failed to show adequate business justification for its practices.
Predatory bidding
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc.
Weyerhaeuser was accused of buying more raw materials than it needed at unnecessarily high prices.
Ross-Simmons alleged that Weyerhaeuser's business practices were aimed at monopolizing the
market for purchasing unprocessed sawlogs and forcing its competitors out of business. Brooke
Group test should apply to predatory-bidding claims. Ross failed to meet the requirements.
Design predation:
Monopolist redesigns products so it is incompatible with competitors’ up or downstream products.
There is no duty to disclose a new, innovative design as a matter of law. Product hopping：change
new formula just to maintain its patent strength. (Carrier & Shadowed 2017)
Berkey Photo v. Eastman Kodak:
Berkey sells photo finishing service, claims that Kodak made a new kind of film. Berkey wants to
enforce an obligation to pre-disclose new film design allowing Berkey to design a compatible camera.
No duty to disclose, Head start is a reward for innovation.
C. Contracting to foreclosure inputs
Tying：
when a seller sells a good (more desirable) to a buyer only on the condition that the buyer buys a
second good from the seller.
Microsoft
Licensing agreements with OEMs prevent them distributing browsers other than IE and not creating
a boot-up sequence that would allow users to choose from competing browsers： because OEM is ½
primary channels for distribution of browsers so the license restriction prevents many OEMs from
pre-installing a rival browser thus protects Microsoft’s monopoly from the competition, it is
anticompetitive. Only the prohibition on OEMs automatically launching a substitute user interface
upon completion of the boot process which auto prevents the Windows desktop from being seen by
user is a drastic alteration of Microsoft’s copyrighted work and outweighs the marginal anticompetitive
effect, and the particular restriction is not an exclusionary practice. Overall, liable.
Defense of Monopoly
1. Single producer is sole survivor based on skill, foresight, and industry (Alcoa)
2. Monopolist posits valid business reasons (Aspen) like
1. the conduct helps monopolist compete as to price/quality
2. No duty to deal with competitors, pre-disclose, provide competitive pricing
（Trinko/Berkey）
3. Promote inter-brand equipment competition, improve asset management by reducing
inventory cost, prevent ISOs from free-riding on investment in equipment, parts and
services （Kodak）
4. 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; (Trinko）
3. Burden then shifts to plaintiff to rebut, or to show anticompetitive harm outweighs procompetitive
benefit.
Your client is The Airline, which carries 62% of passenger traffic taking off from or landing at Sea-Tac
airport. Much of the time The Airline charges rates for passenger air service in excess of its cost to provide the
service, with a Lerner Index of 0.4. (A Lerner Index of 0.4 means a price point that is approximately 60%
above the cost of production.) Assume that economic analysis suggests that a price point that is more than 50%
above cost is indicative of monopoly power in the passenger air travel industry.
Startup carriers underprice the market in order to get a toe-hold, making it difficult for the Airline to rely on a
steady stream of passenger traffic. (Example: 1000 passengers fly per day in January. In February, Startup
enters and 300 of those passengers fly on Startup. In March, Startup fails and the Airline carries 1000
passengers again.) Startups do not bear the administrative overhead that The Airlines does, so they may be able
to underbid The Airline and still make a profit. Those start-ups enter the market, operate for a few years, and
then leave, in a seemingly endless revolving door of new companies started and failing.
The Airline asks your advice on the following plan: when a start-up enters (or appears poised to enter) the
market, it will drop its prices below its costs for long enough to drive that start-up out of the market. It will
then return to a price that reflects its market power and make up the lost money. The benefit of this course of
conduct, to The Airline, is that acting as a monopolist it can earn enough money to provide its customers the
level of service, they have a right to expect.
Write a memo to The Airline’s Board of Directors analyzing its planned course of conduct. You may consider
the business sense of the conduct, but your primary contribution is of course the legal question. Because this
is a client memo and protected by privilege, you should be forthright and neutral about the risks and benefits
of The Airline’s planned approach.
Memo
The Risks of Monopoly Accuse for The Airline(the Client)
Monopolization is prohibited by Section 2 of the Sherman Act. A violation of Section 2 has two elements:
monopoly power (or a dangerous probability of achieving it) and inefficient conduct that harms competition.
Monopoly Power
Monopoly power or dangerous probability of achieving monopoly is an essential element of a Section 2
violation. In the absence of direct evidence the “market share proxy” is how courts routinely assess monopoly
power. The market scope is defined by product and geographic.
Market Share Proxy
90% share is in every known instance a sufficient share to meet the element. 70% seems to be about the
bright line between obviously enough and not obviously enough.
Pricing above cost is evidence of monopoly. Alcoa
Here, in the Client’s case, economic analysis suggests that a price point that is more than 50% above cost is
indicative of monopoly power in the passenger air travel industry. And because The Client’s price point for
providing airlines taking off from or landing at Sea-Tac airport is approximately 60% above the cost of
production, Client is likely to be considered to have a monopoly power in Sea-Tac airport. Some cases hold
the power to influence the market if the monopolist has over 60% market share, thus the Client’s 62% of all
passengers could be recognized as sufficient to meet the monopoly.
However, the Client could argue the air travel industry is a national, even international business and the
geographic market should be defined broader so the client could not be proved to have monopoly power.
And the Client could argue even in Alcoa, only a 90% share is a well-recognized standard for monopoly
power, and the share of carries 62% is not enough to prove a monopoly.
For our assessment, we could not deny there’s a possibility that the Client’s market share is large enough to
raise disputes on its monopoly power. Also, the Client can easily use the current market share to conduct
business strategies to achieve a greater share that certainly meet a sufficient threshold. And because dangerous
probability is also an element of proving violation of Section 2. We would like to assume the Client has the
monopoly power or at least a dangerous probability of achieving monopoly to proceed the discussion for the
Client’s planned action.
Conduct
Courts have a four-steps test to generally prove the inefficient conduct. (1) The plaintiff first shows that the
d’s conduct has the requisite anticompetitive effect; Anticompetitive conduct is conduct by a firm that might
lead to or preserve an existing monopoly position and is not a competition on the merits. (2) the monopolist
then can provide a “procompetitive justification” for its conduct; (3) the burden then shift back to the
plaintiff to rebut that claim; (4) if the claim cannot be rebutted, then the plaintiff must demonstrate that the
“anticompetitive harm of the conduct outweighs the procompetitive benefit.” Courts have identified several
types of conduct that meet the definition of anticompetitive conduct, including predatory pricing. It requires
proof of competitive injury resulting from rival’s low prices, the elements include (1) prove that the prices
complained of are below an appropriate measure of its rival’s costs; (2) a demonstration that the competitor
had a reasonable prospect, a dangerous probability, of recouping its investment in below-cost prices.
Here, the Client may face the accusation of predatory pricing when the Client tries to maintain its monopoly
power by dropping prices down below costs to drive competitors out of market. It’s hard for a plaintiff to
prove the prospect of recovering. In Brooke, 6 cigarette companies combined an oligopoly and undercut
another company at wholesales by selling below cost prices. But the evidence failed to show the oligopoly had
a reasonable prospect of recovering its loss from below-cost pricing through slowing the growth of generic.
There’s still a possibility that the plaintiff claims the Client’s pricing strategies have a clear anticompetitive
effect to attack the competition because the Client attacks every startup company once it enters the market
and the action will result in customer harm of losing choices and higher price eventually. It would be helpful
if the Client has valid proof that this action is done for good business reasons like improving the efficiency of
services, like the action is to provide customer superior services. Then the burden of proof will shift to the
plaintiff to rebut or demonstrate the anticompetitive harm of the conduct outweighs the procompetitive
benefits. The startups are likely to win on this because like Microsoft and Aspen, the business justification is
hard to outweigh the anticompetitive effects if the monopolist is the only single player of the market.
A good business justification always seems to win. However, it will be hard to give a good business
justification for pricing below cost.
In conclusion, the Client should consider the risks of predatory pricing and prepare as much as possible
evidence to justify the action is done for a reasonable business consideration of efficiency. The reason to
draw the competitors out of the market is not considered reasonable in prior instances.
pricing below cost to start up a new route, pricing below cost to get passengers who will then fly on other
routes and pay a higher price, etc. But on these facts, you can say "nothing on the facts supports a business
justification argument".
Question 2 Merger
Clayton Act Section 7
Any purchase of assets or stock that may have the effect of substantially lessening competition, or that
may tend to create a monopoly in any line of commerce in any section of the country is prohibited in
Section 7 of Clayton Act. To succeed on a claim under § 7 of the Clayton Act, a plaintiff must prove by a
preponderance of the evidence (1) the relevant product market, and (2) that the acquisition may be substantially
to diminish competition within that market.
In evaluating the competitive implications of an acquisition: the court considers whether an acquisition is likely
to substantially lessen competition by (1) enhancing the likelihood of coordinated interaction by competitors,
and/or (2) placing the acquiring company in a position to unilaterally raise and maintain prices at
supercompetitive levels.
Step 1: Define Market/Concentrated Market Analysis:
What is the market? Whether the market is concentrated?
To determine the effect of a merger on competition, a court must begin by defining the relevant geographic
and product markets.
Product Market: The outer boundaries of a product market are determined by the reasonable
interchangeability of use or the cross-elasticity of demand between the product itself and substitutes
for it. Geographic Market: Area of effective competition where buyers can practically turn for
supplies.
Concentration analysis: The plaintiff must come forward with evidence that the relevant market is
concentrated and that the transaction will increase concentration.
For Horizonal Merger, look at post-merger HHI and the change in HHI
The HHI is calculated by squaring the market share of each firm competing in the market and then
summing the resulting numbers. For example, for a market consisting of four firms with shares of
30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600).
 Unconcentrated Market: HHI below 1500.
 Moderated Concentrated Market: HHI between 1500 to 2500
 Highly Concentrated Markets: HHI above 2500.
Threshold (do not apply to vertical merger)
Unconcentrated Changes resulting in unconcentrated are unlikely to have adverse competitive effects
Moderately Concentrated Markets that involve an increase in the HHI more than 100 points raise
significant competitive concerns and often warrant scrutiny.
Highly Concentrated Markets: Mergers resulting in highly concentrated markets that involve an increase in
the HHT of between 100 points and 200 points potentially raise significant competitive concerns
and often warrant scrutiny. Mergers resulting in highly, concentrated markets that involve an increase in
the HHI of more than 200 points will be presumed to be likely to enhance market power. The
presumption may be rebutted by persuasive evidence showing that the merger is unlikely to enhance
market power.
Acquisition raises potentially significant antitrust concerns that must be evaluated considering other
evidence relating to competitive effects.
Here, after calculated the HHI, the HHI is above 2500, so it’s a highly concentrated market. After
the merger of E and F, the increase of HHI is above 200, (2178), which means the merger will lead
to an enhance of power.
For Vertical Merger,
Two level of market concentration analysis, upstream and downstream, either supplier or retailer’s market
share exceed 60% could raise significant competitive concerns.
IF we don’t have the statistics here, we need information
Each company has an equal market share, like 33%, it probably does not raise a problem.
If one of the company has 60% of market share, it’s likely to have a vertical merger problem.
Step 2: Likelihood of Anticompetitive Effects:
Unilateral Effects: effects caused by the reduction in competition, leading to strong market.
position. Coordinated Conduct: whether the acquisition will facilitate anticompetitive coordinated
conduct, that is, whether the acquisition will make it "easier for the firms in the market to collude,
expressly or tacitly, and thereby force price above or farther above the competitive level."
Horizontal Merger, more obvi harm to consumers
Unilateral Effects

Reduction in competition, the elimination of competition between two firms that results
from their merger may alone constitute a substantial lessening of competition. Brown Shoes,



Simple price increase, a merger firm may be able to raise the price of one product and
capture any sales lost due to that price rise if buyers will switch to another product that is
now sold by the merged firm. It can happen only if there is a significant share of sales in
merging firms as their first and second choices, and that repositioning of the non-parties’
product lines to replace the localized competition lost through the merger is unlikely. In
Kraft, no capture of loss because a variety of similar brands.
Reduction in variety, if at least one of the merging firms has capabilities that are likely to lead
it to develop new products in the future that would capture substantial revenues from the
other merging firm, from guidelines
Reduction in innovation, one of the merging firms is engaging in efforts to introduce new
products that would capture substantial revenues from the other merging firm, from
guidelines
Horizontal Merger: Coordinated Effects



Cartel: collective dominance
A horizontal merger eliminates a competitor and may change the competitive environment
so that the remaining firms could or could more easily coordinate on price, output, capacity,
or other dimension of competition.
Elimination of Maverick: elimination of a maverick firm exhibits direct evidence of an
anticompetitive merger. In Kraft, Nabisco is unlikely to be an industry maverick because it
no longer wants to be in the RTE cereal business, is no reason to believe Nabisco is likely to
compete differently from or more efficiently than Kraft
Brown Shoe v. US, the merger would tend to lessen competition substantially in the retail sale of
men's, women's, and children's shoes in most cities because the shoe market is fragmented and
the increase in market share could have an adverse effect on competition among individual
competitions.
US v. Philadelphia national bank, A merger (2nd and 3rd largest commercial bank in PA, relevant
market is the bank products and services in Philadelphia area..)which produces a firm controlling
an undue percentage share (the increase of more than 33% in concentration must be regard as
significant )of the relevant market, and results in a significant increase in the concentration of
firms in that market is so inherently likely to lessen competition substantially that it must be
enjoined in the absence of evidence clearly showing that the merger is not likely to have such
anticompetitive effects.
As a result, the merger is presumptively unlawful, unless PNB and Girard can produce evidence that the merger will
not result in the feared anticompetitive effects. PNB and Girard have failed to do so, and PNB’s argument that the
merger will create pro-competitive effects in the national market for large loans is not persuasive (1. For customer,
open new ones instead of acquiring; 2. Competing big banks not persuasive which could embarks a series of similar
merger; 3. Bring business and stimulate economics are unwarranted.). If it were possible for a merger’s anticompetitive
effects in the relevant market to be excused by pro-competitive effects in another market, then § 7 would have very
little functional effect. In summary, the prospective merger between PNB and Girard is a violation of § 7 of the
Clayton Act and is therefore enjoined.
US v. General Dynamics Crop,
A merger which produces a firm controlling an undue percentage share of relevant market, and results in significant
increase in concentration of firms in that market, is so inherently likely to lessen competition substantially that it must
be enjoined in absence of evidence clearly showing the merger is not likely to have such anticompetitive effects. The
effect of adopting this approach to a determination of substantial lessening of competition is to allow the Government
to rest its case on showing of even small increases of market share or concentration in those markets where
concentration is already great or has been recently increasing, since if concentration is already great, the importance of
preventing even slight increases in concentration and so preserving the possibility of eventual deconcentrating is
correspondingly great.
Evidence of past production does not, as a matter of logic, necessarily give a proper picture of a company's future
ability to compete. In most situations, of course, the unstated assumption is that a company that has maintained a
certain share of a market in the recent past will be able to do so in the immediate future. Thus, companies that have
controlled sufficiently large shares of a concentrated market are barred from merger by § 7 of the Clayton Act, 15
U.S.C.S. § 18, not because of their past acts, but because their past performances imply an ability to continue to
dominate with at least equal vigor. In markets involving groceries or beer, statistics involving annual sales naturally
indicate the power of each company to compete in the future. Evidence of the amount of annual sales is relevant as a
prediction of future competitive strength, since in most markets distribution systems and brand recognition are such
significant factors that one may reasonably suppose that a company which has attracted a given number of sales will
retain that competitive strength.
The failing-company doctrine is recognized as a valid defense to a § 7 of the Clayton Act, 15 U.S.C.S. § 18, suit. A
company invoking the defense has the burden of showing that its resources were so depleted and the prospect of
rehabilitation so remote that it faced the grave probability of a business failure, and further that it tried and failed to
merge with a company other than the acquiring one.
The government provided statistics showing that the concentration of the coal industry has steadily increased in the
last 10 years and that the top 10 firms now control 98 percent of the market. In many cases, aggregate statistics
showing heavy and increasing market concentration have been accepted as sufficient evidence to support a § 7 claim.
However, here, several changes in the coal industry have decreased the viability of market concentration as a primary
indicator of whether GDC’s acquisition will substantially lessen competition. First, coal now faces significantly
increased competition from alternative-energy sources. Additionally, electric-utility companies have become the
primary purchaser of coal, and nearly all the coal purchased by electric utility companies is sold under long-term
requirements contracts, under which coal producers agree to provide all the coal requirements a utility will need for
the term specified in the contract. Thus, the amount of coal that a firm actually has available for sale is the appropriate
measure of future competitive strength. Here, only 4,000,000 of GDC’s 52,000,000 tons of coal reserves are not
committed to long-term contracts, and GDC is not in a position to increase its reserves or obtain new supplies. Thus,
the conditions of the coal industry have changed, and past production and market share are no longer the most
important factors in determining a firm’s ability to compete in the market. In light of these changes, GDC’s acquisition
is unlikely to substantially reduce competition in the market for coal, and the government has therefore failed to
support the claim. The judgment of the district court is affirmed.
New York v. Kraft General Foods: the extent the merger allows the new firm to raise prices
without considering the rest of the market. Plaintiff argued that the acquisition might
substantially lessen competition in the adult ready to eat cereal market or, in the alternative, the
entire ready to eat cereal market. The court held that plaintiff had failed to show by a
preponderance of the evidence that defendant buyer corporation's acquisition of defendant seller
corporation's cereal assets was likely to have the effect of substantially diminishing competition
in a relevant product market in violation of § 7 of the Clayton Act.
Vertical Merger
Unliteral Effects

Foreclosure, raising rival’s costs (ability and incentive, 60% rule)
A vertical merger may diminish competition by allowing the merged firm to profitably use its
control of the related product to weaken or remove the competitive constraint from one or
more of its actual or potential rivals in the relevant market. For example, a merger may
increase the vertically integrated firm’s incentive or ability to raise its rivals’ costs by
increasing the price or lowering the quality of the related product. The merged firm could
also refuse to supply rivals with the related products altogether (“foreclosure”).
To determine that, a court need to find the ability, incentive, and XX are satisfied. Ability
not satisfied if rivals could readily switch purchases to alternatives to the related product,
including self-supply, without any meaningful effect on the price, quality, or availability of
products or services in the relevant market. Incentive not satisfied if the merged firm would
not benefit from a reduction in actual or potential competition with users of the related
product in the relevant market. fact specific.

Access to competitively sensitive information
Vertical Coordinated Effects


Less obvious but ability to target the maverick: A maverick firm is a firm that deviates from
its rivals and disrupts the market, benefitting customers. a maverick would work to
undermine the possibility that other firms will be able to “reach a mutually satisfactory
outcome at a higher-than-competitive price
Access to competitively sensitive information
Brown Shoe Co. v U.S.
Potential competition theory: Argue NBC’s acquisition of Washington Trust Bank could eliminate
potential competition in violation of § 7 of the Clayton Act. Because the trend of shoe industry tends
to create a monopoly, plus the vertical merger gives Brown Shoe the ability to foreclosure of relevant
market, it’s a violation under Clayton Act 7.
Conglomerate
Merging between firms in entirely different markets.
The anticompetitive effects with which this product-extension merger is fraught can easily be seen:
(1) the substitution of the powerful acquiring firm for the smaller, but already dominant, firm may
substantially reduce the competitive structure of the industry by raising entry barriers and by
dissuading the smaller firms from aggressively competing; (2) the acquisition eliminates the potential
competition of the acquiring firm.
Example 1: Amazon-Whole Foods
Example 2: Verizon-Yahoo
FTC v. P&G (merger with Clorox)
FTC argue (1) the larger and more powerful P&G would create new barriers to entry that would
persuade smaller firms to simply stop competing: ability to use its volume-advertising discounts and
considerable cash reserves to allocate massive amounts of funding to promotional efforts in a way that Clorox could not.
and (2) P&G’s acquisition would eliminate the competition between Clorox and P&G that would
have existed in the absence of the merger was actively attempting to branch out from its existing product lines
into complementary products before the merger and that liquid bleach is a natural complement to P&G’s packaged
detergent products.
Potential Entry
Standard: “timely, likely, and sufficient”
US v. Marine Bancorp A merger does not violate § 7 of the Clayton Act for eliminating potential
competition if the acquiring company could not enter the market as an independent competitor or
through a foothold acquisition.
The principal focus of the potential-competition doctrine is on the likely effects of the premerger
position of the acquiring firm on the fringe of the target market. In developing and applying the
doctrine, the Court has recognized that a market extension merger may be unlawful if the target market
is substantially concentrated, if the acquiring firm has the characteristics, capabilities, and economic
incentive to render it a perceived potential de novo entrant, and if the acquiring firm's premerger
presence on the fringe of the target market in fact tempered oligopolistic behavior on the part of
existing participants in that market. In other words, the Supreme Court has interpreted § 7 as
encompassing what is commonly known as the "wings effect" -- the probability that the acquiring firm
prompted premerger procompetitive effects within the target market by being perceived by the existing
firms in that market as likely to enter de novo.
Nascent Merger
New firm has de minimis or maybe even 0 market share, but has the potential for growth
• “May substantially lessen competition”
• does “may” mean “one chance in 100”?
• OTOH, if anybody would know, wouldn’t it be Google/FB?
• Purchase technology, purchase talent?
• Hypo: you want to work at FB. How do you prove how good you are?
• Real world hypo: you want to work at Barnes but are being spurned. 100% chance of
success strategy: hang out a shingle, develop a $1 million yearly practice.
Step 3: Defense:
Failing Firm: Case of Boeing Decision
1. The company that acquires the failing company or brings it under dominion is the only available
buyer.
2. No longer constitutes a meaningful competitive force in the market.
3. There is not economically plausible strategy.
Efficiencies
A primary benefit of mergers to the economy is their potential to generate significant efficiencies and thus
enhance the merged firm’s ability and incentive to compete, which may result in lower prices, improved
quality, enhanced service, or new products.
Efficiencies also may lead to new or improved products, even if they do not immediately and directly affect
price.
Incremental cost reductions may make coordination less likely or effective by enhancing the incentive of a
maverick to lower price or by creating a new maverick firm
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Cognizable efficiencies same standard as for horizontal
Research, production, distribution efficiencies
Elimination of double marginalization
Pro-competitive Justifications
(1) Can’t trade off lower competition in one market to compete in another (PNB)
(a) Justification must be within the market
Institutional Factors
(1) Lack of federal agency action does not indicate agency approval (Kraft)
(a) Pre-merger notification only goes to feds, not state/private citizens
(2) Implied repeal of antitrust laws is heavily disfavored (PNB)
(a) However, regulation in an industry might still be a consideration
Efficiencies (Merger Guidelines § 10)
(1) Only credit efficiencies that will be accomplished only if there is a merger
(2) Never can be used to justify monopoly
Failure and Exiting Assets (Merger Guidelines § 11)
(1) Merger won’t enhance market power if imminent failure of one of merging would cause the
assets of that firm to exit the market
(2) Elements
(a) Failing firm won’t be able to meet financial obligations in near future
(b) Won’t be able to reorganize under Chapter 11
(c) It has made unsuccessful, good-faith efforts to elicit reasonable alternate offers that would
keep its tangible/intangible assets in the market and pose a less severe danger to
competition than the proposed merger
Step 4: Weigh the justification with the anticompetitive
Question 3 Agreement Bulletin Points
A. Agreement
Whether XX’s action is a violation under antitrust law Sherman Act 1? (Vertical also Clayton 3)
1. Whether there was an agreement? Single entity questions? Tacit collusion??
2. Whether to apply a per se rule, Quick look, or R of R?
3. If R of R, whether the restraint of trade is reasonable? If not presumed harmful, plaintiff shows
harm; if presumed, defendant may disprove harm/show countervailing benefit
4. Plaintiff ultimate burden.
Any agreement among two or more legal distinct entities which is unreasonably in restraint of trade
is prohibited by Section 1 of the Sherman Act. A violation of Section 1 has two elements: agreement and
reasonableness.
A court will apply one of the following three approaches to analyze: (1)a naked restraint is treated as per
se illegal; (2) likely to be harmful but there might be a good justification: quick look rule of reason; (3) most of
the time not harmful conduct: “full blown” rule of reason. An ancillary agreement is treated under rule of
reason.
Whether there’s an agreement?
when is an association of firms a “single firm” for purposes of avoiding Section 1 liability?
A parent corporation and its wholly owned subsidiary are incapable of conspiring with each other for purposes of §
1 of the Sherman Act. Although a parent corporation and its wholly owned subsidiary are "separate" for the
purposes of incorporation or formal title, they are controlled by a single center of decision-making, and they control
a single aggregation of economic power. Joint conduct by two such entities does not deprive the marketplace of
independent centers of decision-making, and as a result, an agreement between them does not constitute a "contract,
combination, or conspiracy" for the purposes of § 1.
American Needle v. NFL, Football league made up of independent companies but may be single entity for
certain purposes. An agreement made within an entity like the NFLP constitutes concerted action covered by § 1
because the parties to the agreement act on interests separate from those of the firm itself.
Copperweld and “sharing of profits and losses”
1. Separately incorporated parent and sub “single entity” making Section 1 inapplicable
2. Court sees no reason to distinguish separate incorporation from unincorporated subsidiary (but
there really is a reason)
3. Stevens dissent: possibility of competition even with common ownership
A parent corporation and its wholly owned subsidiary are incapable of conspiring with each other for
purposes of § 1 of the Sherman Act.
Tactic Collusion
Because relying on tacit coordination among oligopolists as a means of recouping losses from predatory pricing is
highly speculative, competent evidence is necessary to allow a reasonable inference that it poses an authentic threat
to competition. For example, a reliable testimony that the instances of conducts would not have happened but for
the existence of the agreement. Brooke Group case: oligopoly of cigarette manufacturers pricing well above cost.
Williamson Oil Co. v. Philip Morris USA
i)
Facts
(1) Class of cigarette wholesalers allege manufacturers conspiring to fix prices
(2) No direct evidence, theory based on tacit collusion and circumstantial data
ii) Analysis
(1) Court determines whether Π has established parallel behavior
(2) Π must demonstrate 1 or more “Plus Factors”
(a) Signaling – Look for facilitating devices (Early announcing of prices, etc.)
(b) Actions against manufacturers economic interests
(c) History and structure of the industry
(3) Δ can rebut the inference of collusion
(a) If it is possible that it is either agreement or unilateral conduct, the court will find unilateral conduct  there must be
some indication that tends to exclude concerted action
Whether the restraint of trade is reasonable?
A court will apply one of the following three approaches to analyze: (1)a naked restraint is treated as per
se illegal; (2) likely to be harmful but there might be a good justification: quick look rule of reason; (3) most of
the time not harmful conduct: “full blown” rule of reason. An ancillary agreement is treated under rule of
reason.
Per Se Rule
Per se rules are invoked when restraints are so inherently anticompetitive and damaging to the market that
warrant condemnation without further inquiry into effects and justification. Among the practices which the
courts have deemed to be unlawful in and of themselves are horizontal price fixing, horizontal price fixing,
horizonal market allocation, horizontal group boycotts, bid rigging, and tying vertical arrangements.
Burden of Proof: A plaintiff is only required to prove that the specific anticompetitive conduct took place.
The plaintiff does not need to demonstrate the conduct’s competitive unreasonableness or negative
competitive effects in the relevant product and geographic markets.
Addison Pipe v. U.S.:
Ancillary Restraint Exception: A reasonable ancillary restraint (ex, covenant not-compete) on trade is not a
violation of Sherman Act. But this agreement (six piper manufactures to divide up competition and fix prices
within territories)’s sole purpose was to restrain trade; it was inherently anticompetitive and constitute per se
violation.
Chicago Board of Trade v. US: Reasonable restraints that encourage competition (nature, scope, Grain
scheduled time restraint seller and buyers set prices after-market) does not violate antitrust law.
Trenton Potteries, uniform price-fixing by those controlling in any substantial manner a trade or business in
interstate commerce is prohibited by the Sherman Act, despite the reasonableness of the prices agreed upon.
Appalachian Coals, Inc. v. United States, the nature and effect of an agreement that restrains competition
between parties must be considered when determining whether an antitrust violation has occurred.
A. Horizontal Price Fix
US v. Socony Under the Sherman Act, 15 U.S.C.S. §§ 1, a combination (several midwestern oil
companies met and verbally agreed to divide up the spot for gasoline so that each oil company would be
matched with an independent refinery) formed for the purpose and with the effect of raising,
depressing, fixing, pegging 固定, or stabilizing the price of a commodity in interstate or foreign
commerce is illegal per se.
Where the machinery for price-fixing is an agreement on the prices to be charged or paid for the commodity
in the interstate or foreign channels of trade, the power to fix prices exists if the combination has control
of a substantial part of the commerce in that commodity. No showing of so-called competitive abuses or
evils which those agreements were designed to eliminate or alleviate may be interposed as a defense.
Arizona v. Maricopa Medical Society Schemes to fix maximum prices(a set of maximum fees that memberdoctors could accept as payment for medical services that were provided to patients covered by medicalinsurance plans approved by the Foundation), by substituting the erroneous judgment of a seller for the
forces of the competitive market, may severely intrude upon the ability of buyers to compete and survive in
that market. Maximum prices may be fixed too low for the dealer to furnish services essential to the value
which goods have for the consumer or to furnish services and conveniences which consumers desire and for
which they are willing to pay. If the actual price charged under a maximum price scheme is nearly as the
maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an
arrangement fixing minimum prices.
B. Horizontal Market Allocation:
*US v. Topco Associates: An agreement between competitors at the same level of the market structure
(members must be granted vote to operate within certain distance) to allocate territories in order to minimize
competition is a per se violation of the Sherman Act § 1. Per se not valid reason for compete against big
chains.
C. Horizontal output allocation:
For example, labor restriction of working hours.
D. Horizontal group boycott：
Fashion Originators v. FTC, A manufacturers’ group boycott (suppress manufacturers that copying original
designs by FOGA members and selling knockoff garments for cheaper prices) of refusing to deal with
retailers that sell competing products violates § 1 the Sherman Act.
Superior Court Trial Lawyers(labor union non-exist so not apply) A horizontal group boycott (threatened to boycott
any retailer that sold competitive knockoff garments)aimed at manipulating prices is a per se antitrust
violation under the Sherman Act, even if the boycott includes a political message.
E. Big rigging: government contracts. (1)Each of party gets to bid as a monopolist and get the price as a
monopolist for certain area, like market allocation. (2) Agree on not bid less/more than XX money.
F. Vertical Tying: See below
Quick Look Analysis:
A court might apply the quick look analysis when the defendant’s conduct isn’t per se illegal but appears to be
so anticompetitive as to not require an examination and full review.
Burden of Proof: After the plaintiff’s establishment of an agreement, the burden shift to the defendant to
gives a plausible, legally cognizable theoretical justification. Must show efficiency gain, promotion of
competition, increase in quality or information or reduces costs. Then the plaintiff show justification is
inadequate and restraint is likely to harm customers. Defendant must show evidence that justification is
adequate. If plaintiff fails, rule of reason.
Indiana Dentists, Agreement by an association of professionals to withhold information (restricted insurance
company access to x-rays) from insurers is an antitrust violation if the agreement has the effect of reducing
competition among the association’s members.
California Dental, professional association ethical rule prohibiting price advertising, Agreements to limit
Advertising. A court should only apply the quick look test when an observer with even a rudimentary
understanding of economics could conclude that the arrangement in question would have an anticompetitive
effect on customers and the market.
NCAA v. Board of Regents,
A horizontal restraint of trade (agreement with ABC and CBS, restrained member institutions selling its own
broadcast rights) created by member institutions of the NCAA (nonprofit, product is the college footable) is
subject to RoR. t his quick look can sometimes be applied in “the twinkling of an eye.” By fixing a price for
television rights to all games, the NCAA created an unreasonable, anticompetitive price structure (creates a
limit on the quantity of televised football that is available to broadcasters and fans, a limitation on output, precluded
any price negotiation price fix). Although it is true that the NCAA’s goal is to preserve the integrity of amateur
athletics, such a goal does not justify its television restrictions.
ROR case
Issues: Whether conduct is prohibited in a case-by-case evaluation?
A rule of reason analysis requires (1) definition of the relevant product and geographic market, (2) market
power of the defendant(s) in the relevant market, (3) and the existence of anticompetitive effects. The court
will then shift the burden to the defendant(s) to show an objective procompetitive justification. In doing so,
judges consider a variety of factors, including (1) intent and purpose in adopting the restriction; (2) the
competitive position of the defendant—specifically, information about the relevant business, its condition
before and after the restraint was imposed, and the restraint’s history, nature and effect; NCAA v. Board of
Regents; (3) the structure and competitive conditions of the relevant market; (4) barriers to entry; and (5) the
existence of an objective justification for the restriction (California Dental Ass’n v. FTC, 526 U.S. 756 (1999).
None of the factors are decisive and courts must balance them to determine whether a particular restraint of
trade is competitively unreasonable. Leegin Creative Leather Products Inc. v. PSKS Inc. 127 S. Ct US (2007).
Ancillary restraints:
An ancillary agreement is treated under rule of reason. A restraint that is reasonably related to a beneficial
agreement and is reasonably necessary for its purpose.
BMI v. CBS, a blanket license for an entire market of goods is not a per se antitrust violation if the license
does not inevitably produce anticompetitive effects. BMI it is the creation of a new product that could not
exist without the agreement.
Here, BMI’s blanket license was designed to address the particular issues plaguing the market for musical compositions. The market
consists of thousands of copyright owners and users and millions of compositions. As a result, the transaction costs between users
seeking a small number of compositions from individual copyright owners would be prohibitively high without an intermediary
capable of connecting users with copyright owners. Accordingly, BMI’s blanket license creates a more efficient market by providing
an intermediary for users while relieving copyright owners of the need to constantly police and attempt to sell copyrights. CBS argues
that the blanket license fixes prices in the market for individual compositions and that free trade is consequently restrained. However,
copyright owners are free to license their works individually outside of the blanket license, and CBS is still free to forego the blanket
license and attempt to negotiate with individual owners. Thus, the blanket-license agreements are not per se violations, because the
agreements produce significant pro-competitive efficiencies, and thus the agreements should be assessed under the rule of reason.
Continental TV, Vertical restraints challenged as antitrust violations should be assessed under the rule-ofreason analysis.
Monsanto, an inference of concerted action under § 1 of the Sherman Act requires direct or circumstantial
evidence that the defendant and others were engaged in an unlawful scheme to restrain competition.
Suppress, prevent, or destroy competition is unreasonable
furthering public interest, like safety some industrial standard
California Dental, An observer with even a basic understanding of economics could conclude that the arrangements in question
would have an anticompetitive effect on customers and markets.
Tying
A tying arrangement is an agreement by a party to sell one product but only on the condition that the buyer
also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any
other supplier. There are four elements to a per se tying violation: (1) the tying and tied goods are two
separate products; (2) the defendant has market power in the tying product market; (3) the defendant affords
consumers no choice but to purchase the tied product from it; and (4) the tying arrangement forecloses a
substantial volume of commerce. Kodak
Cases：
Jefferson Parish Hosp. v. Hyde
Kodak v. Image Tech. Servs
Microsoft (2001)
Ohio v. Amex
1.Monopoly in tying product
 power to control prices or exclude competition
 profitably raise prices substantially above the competitive level
 inferred from a firm's possession of a dominant share of a relevant market that is protected by entry
barriers（prevent new rivals from timely responding to an increase in price above the competitive
level.）
2.Danger of achieving monopoly in tied product
3.Separate products
 direct：whether, when given a choice, consumers purchase the tied good from the tying good maker,
or from other firms.
 indirect：the behavior of firms without market power in the tying good market
4.Forcing
Patent: In the context of 15 U.S.C.S. § 1, power gained through some natural and legal advantage
such as a patent, copyright, or business acumen can give rise to liability if a seller exploits his
dominant position in one market to expand his empire into the next.
Application:
Monopoly Power
A tying arrangement violates Sherman Act 1 if the seller has "appreciable economic power" in the tying
product market and if the arrangement affects a substantial volume of commerce in the tied market.
Market power is the power to force a purchaser to do something that he would not do in a competitive
market; it has been defined as the ability of a single seller to raise price and restrict output. The existence of
such power ordinarily is inferred from the seller's possession of a predominant share of the market.
Separate market:
Rule:
If each of the products may be purchased separately in a competitive market, one seller's decision to sell the
two in a single package imposes no unreasonable restraint on either market, particularly if competing
suppliers are free to sell either the entire package or its several parts.
A tying arrangement cannot exist unless two separate product markets have been linked.
Application: Unquestionably, the anesthesiologic component of the package offered by the hospital could be
provided separately and could be selected either by the individual patient or by one of the patient's doctors if
the hospital did not insist on including anesthesiologic services in the package it offers to its customers.
Forcing:
Rule: The essential characteristic of an invalid tying arrangement lies in the seller's exploitation of its control
over the tying product to force the buyer into the purchase of a tied product that the buyer either did not
want at all or might have preferred to purchase elsewhere on different terms. When such "forcing" is present,
competition on the merits in the market for the tied item is restrained and the Sherman Act is violated.
Application:
C. Tying arrangements need only be condemned if they restrain competition on the merits by forcing
purchases that would not otherwise be made. A lack of price or quality competition does not create this type
of forcing.
The rule of reason, rather than per se analysis, should govern the legality of tying arrangements involving
platform software products, particularly those for operating systems, and a balancing of these benefits against
the costs to consumers whose ability to make direct price/quality tradeoffs in the tied market may have been
impaired.
Justification：
(a)
One monopoly rent
(b)
“Metering” to create price discrimination more efficient resource allocation
(c)
Quality control
(d)
Brand protection
Conclusion:
Yes,
No,
It depends,