MODULE 22 FEDERAL SECURITIES ACTS AND ANTITRUST LAW 105

H. Sherman Act of 1890

1. Contracts, combinations, and conspiracies in restraint of trade are illegal

a. Only unreasonable restraints are illegal (Rule of
Reason)
(1) Determined on a case-by-case basis
b. Per se violations
(1) Per se violations are unreasonable as a matter of law; they do not have to be proven unreason-
able

(2) Not justifiable, nor defendable

c. Generally applies to horizontal restraints (i.e., among competitors) .
(1) Price fixing (agreement) is a per se violation
(a) Whether it actually affects
prices or not

(b) Whether the fixed price is fair or not (presumed unfair)

(c) Dollar volume is unimportant; existence of any price fixing agreement is illegal
(d) An actual agreement is not necessary if the parties have a tacit understanding and adhere
to it
(e) Includes quantity limitations and minimum, maximum, buying, and selling prices
(2) Joint boycotts (i.e., group agreements not to deal with another) are per se violations
(a) Does not include individual refusals to deal with someone as long as not part of an' attempt
to monopolize

. (3) Horizontal territorial limitations is a per se violation

EXAMPLE: Two competitors agree not to sell in each other's section of the city.
d. Vertical territorial limitations (e.g., franchising agreements) where franchisee receives an exclu-
sive right to sell in a specific territory but is precluded from selling in any area are no longer per se
violations but presently only illegal if unreasonable (Rule of Reason)

EXAMPLE: A distributor requires dealer to sell only in X suburban area.

e. Vertical resale price maintenance is illegal (i.e., seller sets a minimum or maximum price to which
the buyer must adhere when s/he resells)

(1) This is a per se violation

2. Formation of, or the attempt to form a monopoly is illegal
\

a. Monopoly is the power to exclude competition and/or to control prices

(1) Percentage share of the market is a determining factor
(a) Various cases now generally hold that 70% of market is monopolistic power
(b) A much lower percentage will suffice if the charge is attempting to monopolize rather than
holding monopoly power
(2) The relevant market consists of the product market and the geographic market
(a) Product market consists of commodities reasonably interchangeable by consumers
EXAMPLE: In a case involving a cellophane wrapping manufacturer, the
product market wasfiexible
wrapping material.

(b) Geographic market is the area in which the defendant and competitors sell the product .
EXAMPLE: A geographic market for a major beer brewer is national while for a taxi company it is very
local.

b. It must be an unreasonable monopolistic tendency

(1) Therefore, the high percentages above are required to constitute a monopoly
(2) If no intent, or monopoly is thrust on defendant then not illegal
(a) Growth resulting from superior product, quality of management, or historical accident is
not illegal

(b) There must not be any predatory or coercive conduct