Chapter 22 Promoting Competition: Outline
1. The Sherman Antitrust Act
a. Major Provisions of the Sherman Act
-Prohibits contracts, combinations, and conspiracies in restraint of trade.
-Prohibits monopolies and attempts to monopolize
b. Differences between Section 1 & Section 2
-Violation of Section 1 requires 2 or more people while violation of Section 2 can apply to either one person or two or more persons.
-Section 1 cases usually are concerned with finding an agreement that leads to a restraint of trade, while Section 2 cases deal with the structure of a monopoly that already exists in the marketplace.
c. Jurisdictional Requirements
- The Sherman Act applies only to activities that have a significant impact on interstate commerce.
antitrust law | Laws protecting commerce from unlawful restraints. |
monopoly | A term generally used to describe a market in which there is a single seller or a very limited number of sellers. |
monopoly power | The ability of a monopoly to dictate what takes place in a given market. |
market power | The power of a firm to control the market price of its product. A monopoly has the greatest degree of market power. |
2. Section 1 of the Sherman Act
a. Per se Violations versus the Rule of Reason
- Per se rile is applies to restraints on the trade that are so inherently anticompetitive that they cannot be justified and are deemed illegal as a matter of law, while rule of reason is applied when an anticompetitive agreement may be justified by legitimate benefits. Under this rule the lawfulness of trade restraint will be determined by the purpose and effects of the restraint.
b. Horizontal Restraints
-Price Fixing: A violation of Section 1 in which competitors agree to fix prices.
-Group Boycotts: Are held to constitute Per Se violations of Section 1 of the Sherman Act.
-Horizontal Market Division: Is a Per Se violation of Section 1 of the Sherman Act for competitors to divide up...