1.

(the first class) The objective of this class, to analyze

antitrust in economy way, the following are the main jobs

a. Horizontal restraint

b. Monopoly

c. Vertical agreement

d. Merger, taking over the competitors

2. Economic price theory and the four graphs

a. The central question is economic efficiency (allocative

efficiency)

b. The first one, single seller under perfect competitive

market

i. What does perfect competitive market mean

1. Cannot make a price decision, the price they

face are the same

2. Sellers are the price takers

ii. What is the marginal cost the single producer face

1. Why does the MC curve go down and go up

again

2. If MC goes down all the way, it is a natural

monopoly, and you’d better expend your
production

iii. MR curve is flat

1. Because the producers are price taker

iv. The question is, how much is the producer going to

produce

1. When MC = MR

c. The second one, tell us why perfect competition is the best

to us
 i. The central question is the consumer wealth

ii. The second graph is about the entire industry

1. Supply curve

a. It is the summation of the MC curve

b. It is also the opportunity cost

c. Why Total MC also going up

i. when you put more resource in

producing widget, the opportunity
cost will go up

2. Demand curve

a. Desire for the widget will go up when the

price is lower, so the demand curve will
sloping down

3. The equilibrium is when the supply curve cross

the demand curve

iii. Efficiency, allocative efficiency

1. Given the alternative, they got what they want

a. Everyone is satisfied, no loss

2. What is the relationship between allocative

efficiency and Pareto efficiency

3. It is a dynamic equilibrium, not a stable one.

d. The third one, monopoly

i. The producers gang together, and they will change

the price.

ii. MC is still the same, and the question is whether they

will produce at the point where MC = P

iii. Why MC /= P

1. Because the producers no longer is price taker

 2. The demand slope down,

iv. What is the effect of that

1. Still MC = MR

2. But produce less under monopoly

3. We could find out the price under monopoly

from the quantity

4. The reduction of output means the consumer

should pay more

v. Deadweight loss due to the reduction of output

1. Compare this situation to the allocative

efficiency

2. The consumer will spend money on other items

vi. How to find the price under monopoly

1. Two step,

a. First, the quantity, MC = MR, how much

the monopoly produce

b. Second the price

vii. Why MR slope down

e. The last one, merger

i. After merger, the producer are able to influence the

price, they will produce less, and raise the price

1. Consumer surplus, less

2. Producer surplus, more

3. Deadweight loss, the consumer surplus

disappeared

ii. Another effect of the merger

1. Average cost of making produce

 a. If the producer are more productive, AC
will fall

2. The problem is the balance between the fall of

AC, and the loss of consumer surplus

a. Deadweight loss – efficiency gain

3. (the second class) Discussing the fourth graph

a. The major problem is the loss in allocative

efficiency and the gain in productivity efficiency

b. What is the real loss due to the market power

i. Some of consumer surplus disappeared

1. Part go to the producer

2. Part become deadweight loss

ii. Gain of the merger

1. a lower AC because of the productivity

efficiency

2. why use merger as example, because

monopoly has less incentive to increase
productivity

3. Why productivity will come,

a. Because threat from future competitors

b. Reduce cost mean more profit

c. Compared to cartel,

4. Question, as a solo practitioner, could you sue the big law firm
for restriction on partner

a. Why you cannot, what is other legitimate purpose of the

policy

b. What is the productivity gain, and what is the consumer

loss
5. Sherman Act 1

a. Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce
among the several states, or with foreign nations, is hereby
declared to be illegal...

b. How to interpret that clause

6. Trans-Missouri

a. Judge Peckham: the statute’s condemnation of “every

contract...in restraint of trade” encompassed all contract of
that nature, not simply those invalid as unreasonable
under the common law.

b. The problem is that any contract can restrict competition in

some way

c. Peckham, it is impossible to know what is reasonable

i. Where do we get the information – from the market

ii. The price itself is the information system,

iii. The government, and the judge cannot figure what is

the competitive price

7. US v. Addyston Pipe

a. In English common law, what does restraint on

competition mean

b. The judge Taft try to generalize the list

i. If the restraint is the main purpose, then it is illegal

ii. If it ancillary, then legal

c. What does purpose mean?

i. Business purpose other than making money

d. What is the productivity gain in this case

i. If we cannot get productivity gain, there is no

need to figure out the deadweight loss
8. (the third class) Last class’s three principal points

a. Statutory, Sherman act 1,

i. Not intend to prevent all contract

b. Ancillary test (Addyston Pipe case) to some main purpose,

i. It is the balance between product efficiency and cost,

c. Reasonable test, (not going to be a defense), especially

when there is no productive efficiency

i. It is a fundamental economy proposition

ii. Price system itself provided needed information

9. Review of past cases

a. Tran Missouri, footnote , to protect the “small dealers and

worthy men”, is it an good justification

i. It is more like a Jeffersonian,

ii. Eco analysis, whether we need the “small dealer” to

protect efficiency

iii. Political analysis, the big corporation can provide

more political benefit, such as reduce cost,

b. Standard Oil

i. Introduce rule of reason, compared with per se rule

ii. What are the possible justification, productive

efficiency

10. CBOT

a. Issue,

i. What is the restriction

ii. Would the spot sale influence call sale, and would
future influence the price

iii. In some way, they are both substitutes

b. How to justify the restriction, fixing price for certain period,
why this should be legal,

i. Someone who knows better about the price can

determine the price?

ii. Productivity efficiency, and protect consumer?

iii. Make it easier to buy

1. There is need to trade at night, because all

kind of circumstance

2. There is need to set competitive price.

3. How to make sure that the 2pm price can

reflect the market

iv. Is it an restrain of competition

1. What is the competition,

2. Who is the competitor? Compete with the

warehouse?

c. What is the role of public market, the virtue of having an

exchange

i. It will be easier to find the best price, because price

is a system of information

d. It is ancillary, because from 9 am-2 pm is the public

market, so it can be justified

i. People can take that price information into account

and make decision

ii. It there connection between the restraint and the

productivity efficiency

1. Is it real necessary to have the restraint

2. The restraint do not have much effect

e. The substitute of the call price

i. Spot, future
 ii. How to evaluate the substitute, information on the
percentage

f. Argument: there are a lot of people can participate

i. Not a good justification

g. The case is not correctly decided

i. Due to political, the judge inclined to protect

sellers, and do not depend their decision on
consumer welfare model

ii. The judge regard competition as a stable

state, but it is process,

iii. The professor think it is not a good law

11. Today’s assignment

a. Reconcile CBOT and pottery

12. Questions I asked Professor M

a. Why does he think CBOT case is not a good law

i. Because the change of circumstance, it will be harder

use this case in argument

ii. Many of the argument about productive efficiency do

not have good justification

iii. The court is right in using rule of reason

b. About per se rule and rule of reason

i. We will discuss more about that in future classes

ii. Firstly we should use per se rule, and then use rule of
reason

iii. We will also discuss more about price fixing in future

classes

13. ( the fourth class) 3 things of Chicago Board of Trade

a. productivity efficiency
 i. What is productivity efficiency, and how to increase
productivity efficiency and decrease cost

ii. The argument of making a easier life is not a good

justification

b. Do you need that argument,

i. What is the increase of productivity efficiency and

the defendant’s argument

c. What is the danger to the allocative efficiency

i. How substantial effect is the agreement to the

efficiency

ii. The defendant argue that it did not make any

difference to the price of other grain

d. Chicago case is not clearly decided, and not a good law

14. Trenton, this case is a good law

a. What is the issue of this case

b. The defendant argue that the price is reasonable

i. But the key is that the court cannot tell the price

c. How can the case reconcile with the Chicago case

i. In Chicago, the price was set by the market

ii. In this case, the defendant did not argue the

connection to the productivity efficiency

iii. And, also the market share

d. In this case, the court use per se rule, of antitrust, that all
naked price fixing is illegal

15. Socony-Vacuum Oil

a. Footnote 59

b. The main question is why use per se rule,

 i. Why is fixing price per se illegal, even without
evidence

ii. And, where can draw the line

c. Argument

i. There is no advantage, no possible benefit

ii. There was a loss of efficiency

d. What is the argument of defendant

i. The market is mess

ii. The price fixing have benefit, they stabilize the price,
and the price is reasonable

1. But stabilizing the price is in fact manipulation

e. The market problem can be solved by market itself,

instead of cartel

i. For example, You can use future to hedge the risk

ii. Market can find competitive price

f. Why we do not need fact (in the per se analysis)

i. It is very hard to draw the line between

ii. It is about conspiracy,

1. Intent to act – power – effect

iii. And it is not worth do to cost-benefit analysis

g. Question, about agreement for setting price

i. It must be agreement with competitors

ii. The it must be a concerted action, unless you have

implicit agreement

iii. Conspiracy

h. Although the defendant claim that their action are good to

the market
 i. But we do not want private enforcement of law

16. Question 210 (a)

a. It is illegal

b. And the answer if the sentence in p138, illegal per se

c. If they lower the billing price, what is wrong

i. The result is that we cannot explore resource in

highest and best use

ii. Distort the price system

d. Antitrust law is about resource allocation

i. Everything should go to highest and best use

17. Question 210 (b), is the maximum price legal or illegal

a. It is illegal

b. Tomorrow we will analyze that

18. (the fifth class) take away points

a. In Socony, we discuss about per se rule

i. Either raise or lower price, if it is price fixing, then

use per se rule

ii. The question is when to apply per se rule

b. About stabilizing price

i. Cartel suggest that they can stabilizing prices

ii. Market itself can adjust to satisfy the need of

stabilize

iii. There are three ways of stabilizing the market,

private action, market (invisible hand), and
government

1. The question is which is optimal

19. Question 210 (b)

 a. It is illegal

b. Although the law firms lower their cost, but it has bad
potential

c. What is the coordination (connection) between the bill to

client and what they pay to the 1st year associate

i. Economic analysis, resource not in best use

20. The car example about setting territory (market division)

a. It is illegal, although there is no clear effect on price

b. What is the rule, and what is the logic behind the rule

i. There is no benefit of such agreement. It is clearly

that such agreement is not useful

21. Topco

a. What is the issue

i. Was the defendant come together to create private

label illegal

ii. Was territory restriction illegal

1. It is straight forward application of per se rule

b. why did the defendants do that

i. The agreement is good for the small stores to

compete with the big ones

c. Why did horizontal restraints related to this case

i. How does the horizontal agreement help the private

label works

ii. Because it is exclusive

1. If it is not exclusive, people may be less likely

to join the agreement, (so it is ancillary, and
essential to the agreement)

iii. Other factors we should consider

 1. How much market power do they have in the
market, should we take that into
consideration??

a. Because of the percentage is pretty

small, we do not need to worry.

d. Rule of reason

e. Is that good for consumer

i. It is congress’s job, not court’s job

ii. Professor think it is still court’s job, because

congress cannot balance the gain and the loss
in cases

22. Problem 215(e)

a. The increase of productivity is more obvious

23. Is Topco correctly decided

a. The professor think that the congress has done their job

b. Whether Topco is good law depends on how small the

effect of the agreement on the market

i. The question is how can court analyze the market

24. Classmate’s question, what is inter-band competition

a. The court do not know the reasonable price, even they

know it today, they do not know it tomorrow

b. Generally, in free market, there is no reason to suspect

that will happen.

c. There is possible danger, but need particular reason

i. Court will look at real economy effect

25. BMI

a. Is there price fixing

b. Why court do the rule of reason analysis

 i. What is productivity efficiency in this case

c. What is the reason they do that (blanket license)

i. Transaction cost between individual agreement is

high

ii. There is real productivity efficiency

iii. So we should permit the price fixing

26. Question 217(b)

a. They are setting price

b. Under BMI, is it legal or illegal, illegal

i. It is under the justification of patent law

ii. The action of the agreement are easier to monitor

27. Next class’ question, in BMI

a. What is the effect of the agreement on individual contract

b. What is the loss of welfare

c. Should there be more competition between BMI and

ASCAP, would that be better.

28. (The sixth class, Sept. 15) three take away points

a. About per se rule

i. In Socony, we discuss per se illegal, and BMI show

that it is not easy to determine the situation

ii. Because in BMI, although there are some price fixing,

the action of the defendant increase the efficiency,
so it is legal

b. How to characterize the situation

i. When to apply the per se rule

ii. Naked price fixing is per se illegal

 iii. Naked price fixing does not increase productivity
efficiency, so it is a price fixing without justification

c. What is the jurisdiction of per se rule

29. More about BMI case

a. Compare hypothetical (the professor have some

hypothesis)

i. Lower transaction cost

ii. Possible competition, individual can negotiate, the

contract is non exclusive

b. Without the clearing house, negotiate with individual is

much difficult

i. There are substantial restraints

c. Do we need more clearing houses, because there

are only two.

i. Why would that be a better solution

ii. Because there is no barrier to entry, so 2 clearing

house is the market’s choice

1. Unless there are restriction, there is no need to

interfere

2. And there is not easy to know how many is

better

d. Does BMI overrule Topco

i. BMI does not overrule Topco, the judge use different

kind of test (rule of reason v. per se rule)

e. Professor asked, in Topco, the court think the ethic issue is

up to congress.

i. But in BMI, congress did not address the question

ii. So, how much general power does Topco have

f. In BMI, the defendant create new market

 i. In Topco, the market is already there, so court
discuss about efficiency and market power

30. Engineers case

a. It is illegal

i. It does not allow people compete the price

b. Why is it harder to get a competitive price

i. There is no other engineer to compete

ii. Other barrier, such no time to choose other engineer

c. The justification of Engineers

i. Protect the quality of service

d. How does market address this question

i. Legal system

1. Criminal liability

2. Torts

ii. Government regulation

iii. Reputation

e. Quality is one characteristic of service provided by the

engineers

i. The customers need different kind of quality

f. It is a clear violation of sherman

i. Because it prevent customer’s choice of variety of

quality

31. The law school example

a. You need a very long time to pass bar and become a

lawyer

i. And this is an agreement among lawyer (ABA)

 b. It is state law

i. Federal do not have jurisdiction

c. Why is it different from the Engineers case

i. It prevent participant from directly conspiracy

32. Professor’s opinion about per se rule and rule of reason

a. There are not much difference between per se rule and

rule of reason

b. It is less important to think about the difference

i. You should look at the justification

33. 220 (applying engineer)

a. (a): Illegal, restrict competition

b. (b): Illegal, do harm to the consumer

c. (e): illegal

i. It also mean less choice to customer, the students

ii. What is the possible justification

1. College can argue that they can give money to

more student

2. That is not a good justification,

3. This justification focus on other goals, and

should be decided by judiciary

34. (The seventh class, Sept 16) agreement between

competitors

a. In horizontal, it need an agreement

i. If it is unilateral, defendant cannot be sued under

Sherman act

35. NCAA

a. What is the agreement in this case:

 i. limitation on broadcaster to negotiate directly with
member schools

b. the defendant argue that the ground rule is crucial for the
game

i. the defendant stress on the difference between the

college sport and professional sports

1. because college game is less professional, the

members should have more equal opportunity

a. if one team is richer than all the others,

they will have more scholarship, and
more good players

2. defendant argue that the restriction is for the

better of the industry itself

a. it helps the product to be equalize

b. compete against other entertainment

c. it can increase productivity efficiency

ii. the defendant’s argument did not sufficiently

connect to productivity efficiency

1. difficult to find out how necessary the

agreement to the improvement of productivity
efficiency

c. defendant’s argument

1. increase attendance

a. why is it important to the product,

i. if there are less people watch, not

good for the game

b. college itself can make the decision,

more TV broadcast or more ticket sales,
but now the decision is made by NCAA
 2. even there are connection between the
agreement and the productivity efficiency

a. there are other way to attract people,

such as free food

d. it seems the defendant should not argue that the game is

special

i. it means they have market power in that market

36. Dental

a. What is the issue, pg 190

b. What is the potential downside and potential benefit of the

agreement

i. The defendant argue the agreement restrict

misleading decision

1. What is the possibility of misleading decision

ii. Who has the most knowledge about dental customer

1. The dentist

c. Does dental industry so special that we need that kind of

agreement

i. What is the agreement

1. In some sense it is pro-competitive.

2. Court argue it restrict true quality

a. Consumer are ignorant

b. They need more info about price

d. rule of reason

i. We need to find out the connection between info and

productivity

ii. The next question is, who should provide the

information
 1. What do you want to know to analyze whether
it is pro-competitive

e. Classmate raise an argument on switch cost

f. Compare with Engineer case

i. What is the difference

1. This is just advertisement restriction

2. In Engineer, you cannot set the price

ii. Is price information crucial

1. Information are systemically

2. Engineer more deal directly with consumer

iii. How could the professional do good job

1. In these two cases, they argue restriction can

help customer

2. But it is the government’s job

a. Why rely on self interest people

3. People are not completely rational?

37. (the eighth class, Sept 18th)

38. Problem 225

a. illegal

b. what is the aim of the hospital

i. They want to lower the purchasing price.

ii. The agreement will decrease competition, decrease

productivity efficiency, and bad for the economy

c. What is the economical analysis to prove that the

agreement can be legal

i. In what way can the hospital save money

 1. And how can they increase productivity
efficiency

d. If this hospital is the only one in this area

i. We should analyze market power of defendant, and

how that can decrease allocative efficiency

39. Texaco and problem 227, like the case,

a. Joint venture try to set price

b. What is the difference between this case and Socony

i. In this case, defendant are approved by FTC

ii. They act as one business (the fundamental

characteristic)

1. Defendant argue that can improve allocative

efficiency

c. How to use Texaco to argue 277

i. In 277, although they set up a joint research center,

they still compete with each other

1. That will be real danger to allocative efficiency

ii. We should balance the necessity of the joint venture

and the danger to efficiency

iii. Also, in this case, there is potential they will

cooperate in other way

d. In 277, what can you do to convince the judges

i. To prove there will be more innovation? Not

convincing

ii. It will increase productivity? Also not convincing, due

to the technology development, productivity gain
would happened anyway

e. Can we get the gain without danger to allocative efficiency

i. Set up separate research group

 f. Compare between texaco can topco

i. In texco, there is just one entity; In topco, there are

separate entities

ii. To professor, it seems that reason is not convincing,

1. He said, antitrust is not about formality, it is

about economically fact,

2. It seems he thinks the difference, in Texco,

they put their capital together

40. BMI socony

41. Review

a. In the last 3 week, we discuss explicit agreement

i. If the agreement is naked price fixing, then we

sue per se rule

ii. If it could improve efficiency, we should use

rule of reason

b. We also discuss whether the agreement is

necessary or ancillary to the improvement of
productivity efficiency

i. How close in the connection between the

agreement and the improvement

ii. How much can the agreement improve the

productivity efficiency

c. We discuss the danger of the agreement to

allocative efficiency

i. How substantial is the effect

ii. How much market power do they have

iii. How to argue they are connected

d. Productivity efficiency
 i. How to argue the agreement can improve
productivity

e. The professor think Topco is a mistake

42. Implicit, oligopoly

a. Although the agreement is implicit, but the competitor

always have incentive to undercut

i. Oligopoly can also decrease allocative efficiency

ii. In oligopoly, it is not necessary for them to have

explicit agreement

1. Because they can watch each other

43. Interstate case (rely on circumstantial evidence to prove its case,

at the same time)

a. It is a vertical agreement (it is explicit)

b. The legal issue is whether the distributors agreed

with each other, horizontally, by making identical
agreements in parallel.

i. It is also a horizontal agreement between the

distributors (although it is implicit)

c. There is no formal agreement

i. Without formality, without trace

d. The question is, why do they have the implicit

agreement to set minimum price

i. They know everyone well

ii. It is logical to do that, other will follow

e. Why do we worry about the coordination

i. Economically, it will depress competition,

ii. As price will go up, consumer has less choice, and

that will hurt allocative efficiency
 f. In some way, the vertical agreement is strange, and need
more analysis

i. Should interstate want the distributors to run

efficiently

1. Why would they want oligopoly between

distributors

ii. Why is it interstate’s interest to have minimal price

1. People may see it elsewhere

g. Vertical agreement

i. Intend to distributors to act more efficiently

ii. Why they have vertical agreement

1. It is not simply an agreement among

competitors

Manufactu Vertical distribut

res agreement ors
(minimal price)
44. Theater case

a. What is the business justification

b. What is the difference between this case and interstate

i. In this case, there are no literal evidence, in

interstate, there is a letter

ii. The change in status quo

iii. The difference in administrators

c. The court considered the conduct of movie distributors,

and the defendant distributors showing why each had
chosen independently to follow the same course of action

d. Circumstantial evidence of consciously

45. (Sept 22) What is the nature of agreement

a. Interstate v. Theater

i. how to determine the parallel business behavior,

whether there is an agreement (conspiracy) of not

ii. the action in Interstate is also business justified

iii. so, the question is how to connected the business

justification with productivity (work more efficiently)

iv. in the Theatre, the business justification is not as

clear in Interstate???

b. what kind of remedy could court order in interstate

c. antitrust does not pay much attention to the formality,

contract

i. it concentrate on economical argument

ii. so we should analysis what is the downside in

economy (or productivity)

iii. if there is a contract, then what is the term of the

contract

d. what can judge do, to bring it more close to competition

46. American Tobacco

a. Why it is a cartel

i. When the economy is down, they raise the price, that

does not make sense

ii. What is the agreement, the implicit agreement is

that when price leader rise the price, other will follow

b. What can court do

i. Can court determine what is justified price

1. Theoretically, It should be the same price in

perfect competition, but very impossible to
know
 ii. Why does court see this price is unjustified

1. Both court and judge cannot set the price

iii. The reason is that it is bad for individual

1. If they raise price, and other do not follow, they

will lose the market

c. The defendant’s argument

i. They argue the justification is to make more

advertisement

ii. The historical background is 1931, the great

depression

1. The how can court say it is not a good

argument

iii. What differentia it from Theater case, why it is not

just parallel business behavior

1. Because the action is interdependent, and your

action is dependent on others

d. The court’s argument

i. They raise price on the same day

1. Why is that a good point

ii. When the demand is fall, they raise the price

e. What can court do,

i. is there some remedy

ii. who can court coordinate

1. it is rational for them to behave like that

2. what is the possible solution

a. break up the company

iii. why do we lower the price of tobacco

 1. Tobacco kill people, so oligopoly is good to the
society

a. Student said but only a few a people will

be saved

2. The professor think it like the engineer case

a. It is a public policy problem, we should

let legislator do that job,

b. Antitrust is not about public welfare

c. So it is not a good justification

47. Problem 239

a. (a) the big player is the price leader

i. There are economical reasons for following the price

deduction

1. Because of scale economy, cost are lower

2. Better advertisement, more influence on the

market

3. Market power

4. Price leader has better knowledge

ii. Why price are going down is not a defense

1. Because price will lower anyway,

2. It is not an issue in antitrust

a. Antitrust is about efficiency

48. Bell Atlantic

a. It is a famous civil procedure case

b. Two claims

i. Keep competitors out of market

ii. Not compete one other

 c. Evidence of parallel conduct is not enough

i. Theatre case

d. Argument

i. They do not assume other company will do that

ii. Why do not go to other’s territory

1. Is that independent justified?

iii. They have been monopoly for a long time

iv. The discovery is very expensive because some

internal reason

1. It is a plausible argument

2. And it will help consumer welfare

3. In Tobacco case, the discovery is 15 years

a. So that is the concern of the court

b. And it is opposite to the purpose of

antitrust

e. Dissent opinion, Stevens

i. The evidence of the CEO

1. It would profit, but not right

2. Stevens also suggest limited discovery, not

huge discovery

a. Was that a plausible way

49. Tomorrow’s question

a. If there are only three competitors in the market, will that

change

b. If baby bell have been convicted

c. If they have annual convention, should that change?

50. Sep 29, oligopoly

a. In some way, it like monopoly, it raise price and decrease

welfare,

i. But it has multiple actors, and they have to

coordinate

ii. They have to reach an agreement,

iii. And the question is how do they coordinate

1. The oligopoly should facilitate the coordination

b. There are some ways that make it easier to coordinate

c. The good side of oligopoly is that more info means more

efficiency

51. Maple flooring

a. What is the evidence

i. They calculate the average cost

ii. They also distribute the price book

b. What is the decision of the court

i. It is not a violation of Sherman act

c. What is the benefit of the agreement

i. The price is open to the public

1. Consumer also know the price,

d. There are some historical price fixing, is that important

e. What is the basic point pricing, is that a problem

i. That is an advantage to the consumer

f. Compare to the American column, why is it an easier case

i. This agreement control larger amount of production

ii. There are less member, more concentration

 iii. They has a history of fixing price

52. Comparison

a. Both right

i. Maple is just past price, not future price

b. Both wrong,

i. American column is not enough to hurt the economy

c. A right, m wrong

i. Some argue it should be per se rule

ii. To differentiate the two case need us to understand

the structure

1. But we could not know better than the industry

it self

iii. What is the agreement

d. A wrong, m right

i. Exchange information is not essential to decrease

competition

ii. A is more about industry segregation

iii. If M is right, then A should be wrong

1. Because M is an, there are less member

iv. And exchange information can promote honesty

1. Because it keep the buyers know about the

price

2. But like the engineer case, it is not an issue in

antitrust

v. The price is more stable

1. Is that an justification

53. Sept 30 passed class

 a. In oligopoly case, we should find the agreement, otherwise
we could not use Sherman act, agreement

i. Normally the agreement itself is not about fixing

price

ii. But, it will show other things, which can be used as

circumstantial evidence

b. Simply parallel action will not be violation of Sherman act 1

i. Occasionally, you can infer oligopoly from the

concerted action

ii. Such as if every members will give some profit to the

losing competitor

1. Under normal condition, company will not do

that

54. Container (dissent’s opinion)

a. Dissent

i. Easy industry enter

ii. A lot of excess capacity

iii. Does these two evidence support dissent’s argument

b. The professor does not think so

i. People enter the market because the price is above

the market price

ii. Cartel leads to the excess capacity

iii. So, easy entry does not mean there is no cartel

1. If there is excessive capacity, we can argue

that there is cartel

iv. Marshall’s argument is self-contradiction

v. And the key of the above analysis is the combination

of easy entry and excess capacity
55. Fashion

a. What is the nature of the agreement

i. Prohibit retailer from buying from copiers

ii. How do they make the determination

b. Agreement

i. Without the agreement, will they do that?

1. If individual still act like that, then their

concerted action will be legal

ii. If the agreement is just between the individual

retailer stores

1. There is argument for business justification

2. It may not have much effect on the market

3. It may increase allocative efficiency

c. Compare with the BMI case,

i. They both argue for protecting intellectual property

ii. But in BMI

1. There is new product (the blanket license, and

it increase efficiency)

2. Intellectual property issue should be done by

government

d. Why not argue that their action can help state law

i. Compare with the socony

ii. Why it is not a good argument

1. Private company should not enforce state law

2. Public service should be done by the

government

iii. Government’s action, page 77

 e. If it is between single manufacture and retailers

i. It is vertical agreement

f. Copy right protection argument

i. In BMI, there is no boycott,

1. BMI just change the way of doing business

ii. The job of practice state law cannot be delegated to

private actos

56. Problem 261(a)

a. What is the agreement, they restrict access to loan

b. What is the benefit of the agreement

i. Prevent the risk

ii. But this job should be done by the government

c. What is their argument

i. Prevent bad loan

ii. There is no agreement on price

57. Problem 262(b)

a. What is the difference

i. In (a),there is no product efficiency

ii. (b) can improve product efficiency

iii. And it is an ancillary to the agreement

1. It is like joint enterprise, so we can argue it

could improve product efficiency

b. What is the danger, even worse than a

i. People could less opportunities

ii. And there is more opportunity for collusion

iii. The danger is determined by their market share

 c. What if the government require them to do

i. Government will pass the bill

ii. how could that change the allocative efficiency

iii. the bank would use the resource in other ways

d. What if the bank could take the risky loan and sell them to
the government

i. The first example is like the community reinvest act,

The second example is like Fannie Mae and Freddie
Mac

ii. These laws distract the market

iii. Government can also cause the problem

58. Klor

a. Issue

i. What is the reason of not using klor, individually

ii. What if they do it jointly

b. Why they do that

i. What is the benefit to the manufacturer

ii. If there are more retailer, every individual will has

less market power, and it is better to the
manufacturer

c. The defendant argue they do not have market power, is

that plausible,

i. They argue because they do not have market, their

action do not matter to the consumer

d. Incipient argument

i. May not hurt use now, but will in the future

ii. Is that a good argument (tomorrow’s question 1)

 iii. Does Judge Black use consumer welfare in his
argument, or something else (tomorrow’s question 2)

59. Oct. 1, klor

a. It is bout boycott, competitors agree not to deal with

b. How is the boycott affect the competition

c. Should it be per se rule

d. What is the downside of boycott

i. It drive some competitor out of business

e. In Klor, it is easy to enter, so not very danger to the

competition

i. So, black is not particular about competition

ii. He is particular about welfare

iii. It has potential to be monopoly, and monopoly will

decrease output

f. Is this case wrongly decided

i. Judge cannot decide how many actors should be in

the competition, and who should be protected

ii. It is not a legitimate object

g. The best argument is, there is no benefit in the boycott

i. If the agreement has not potential benefit

ii. There is o need to decide whether it is good or not

iii. So, we do not want waste time and money

60. Associated press

a. What is the issue in this case

b. What is the remedy

61. Question 265(a)

 a. It is a natural monopoly,

i. It need high cost to construct the railway

b. It is a network industry

c. The case is easier than AP, because there is no alternative

62. Question 265(b), legal

a. It is about new invention

i. If we decide it is illegal, then will reduce their

incentive to do so

63. Which two of the three are more similar

a. Terminal, AP, Edward

b. From the perspective of productivity efficiency

c. Is the agreement to have exclusive agreement

d. What is the advantage of the agreement

i. In some way, we need some restriction, or it will

defeat competition

e. How to analyze, ex ante or ex post

i. We shall look at some benefit after the time

64. How did black understand the competition

a. P286,

65. FOGA, is AP like FOGA

a. What is the difference between the two cases

b. The difference is between the two agreement

i. The agreement is AP increase productivity efficiency

1. It is about new way of gathering news

ii. In FOGA, it is not very clear,

 1. It is about protect design, which should be
done by the government

c. So, AP is about new production, new business method, and

is as beneficial to the society as new product

d. Judge black should not use per se rule

i. He even permit summary judgment, do not give AP

chance to provide evidence

ii. So it is a bad case

66. Problem 266

a. We should not use black’s analysis

b. Then, how to deal with this case

i. Allocative efficiency

ii. business justification

67. Oct 6 boycott

a. In large picture, there is no difference between boycott

cases and horizontal restraints cases

i. The central problem is still about efficiency

(productivity efficiency, allocative efficiency)

ii. We could use rule of reason, if we could find

plausible justification

iii. AP is a hard case, because the agreement has some

productivity efficiency

1. The argument judge Black can make, instead

which he made, is that the agreement had
greater danger to allocative efficiency

68. 266, 20 firms

i. (2) it is a business justification, and the court should

not take into consideration (the court cannot decide
whether the contribution is valuable or not)
 ii. (3) defendant could work out an agreement to
protect the secrets

1. It is potentially good justification??

iii. What is the real problem to the competition,

1. Plaintiff is a free rider

iv. AP’s (per se) rule cannot be applied when there is

room for competition

1. If in AP’s case, there are Reuters or others, the

result will be different

69. Northwest

a. the facts: why Pacific is excluded, what is the boycott, and

what is the result

b. Why the court use rule of reason, instead of per se rule

i. Because in this case, the agreement can increase

efficiency, pg 293

ii. In Klor, the agreement does not have any

productivity efficiency

c. Could we use the ancillary test in Addyston, pg 294

i. There is some reasonable connection between the

agreement and the expulsion

1. The main goal was to achieve efficiency, and

the expulsion was for that goal

d. Pacific also complain about the due process

i. Pacific complain that northwest do not apply the rule

in fair way

1. Complain about the procedural

ii. What is the difference between this case and Silver

 1. Silver, immune from per se rule only if
adequate procedural safeguards
accompany self-regulation

2. In silver, NYSE is in dominant position ,pg 292

a. Is that means market power?

b. In Silver, NYSE is the only choice, but in

this case, the wholesale company can
easily be set up

3. There is congress regulation, Security

Exchange Act,

a. It was the specific need to accommodate

the important national policy of
promoting effective exchange self-
regulation tempered by the principle that
the Sherman act should be narrowed

e. Footnote 7, if there is some evidence about the motive of

Northwest, would the result be different

i. Will the motive change the result? If the answer is

yes, the question should be why is this more harmful
to consumer welfare, why will that hurt competitors

ii. Today, it is not sure whether the court should think

about the intent (in the Interstate, we also discuss
about motive)

70. 268, used car question

i. Is there productivity efficiency in this agreement

ii. What is the use of the agreement, and could they do

it individually

1. The agreement could increase trust

iii. How trust can lead to productivity efficiency

1. The used car market is a lemon market,

different from new car market
 iv. Why shall we worry that someone being expelled

1. Shall we discuss market power in this case

2. Shall we discuss the fairness of the procedure

3. This case is more about allocative

efficiency, instead of productivity
efficiency??

71. Indiana Dentists

a. Why they could not do it individually, and have to do it

collectively, pg 296

b. The court use rule of reason, why (page 297, northwest,

engineer, BMI)

i. No difficulty of using rule of reason

1. Because a refusal to compete with respect to

the package of services is the same as a
refusal to compete with respect to the price
term, and it cannot be sustained under rule of
reason

c. Defendant’s three principal arguments

i. Market power

1. If there is evidence of actual detrimental effect,

do not need to show market power

ii. No effect

1. They did not show the productivity advantage

(as in Klor)

iii. Qualify justification

1. They argue that they could provide good care

2. The court use engineer case

d. More information always means better, why the court treat

this case and California dentist differently
 i. Both cases are about asymmetric info

1. In California, the judge think the market itself is

the solution, , there is no need of government
action, not to say the competitors

2. In this case, the judge interfere with the

asymmetrical info in the market

a. Because they think the competitors can

exploit asymmetric info

72. Tomorrow’s question, which one is more dangerous to

competition

i. 50 or 100 competitor enter into a cartel

ii. Government set the price by regulation, and impose

penalty on whose price is lower

73. Oct 7, to determine the allocative efficiency

a. We should determine how close is the productivity

efficiency and the agreement

i. We will discuss more about that in monopoly

74. Yesterday’s question, which one is more dangerous

a. Lobbying the government to achieve monopoly, or entering

into a cartel

b. What is the justification of the government

i. Government is doing this for public interest

c. Government is more dangerous

i. Because government can restrict in other ways,

instead of setting price

ii. Such as in the past cases, they can restraint on

service

d. What is the good of allowing government doing this

i. Government should protect public interest

 ii. They have interest, but do not have strong incentive,
so they are ignorant in some way

1. that is why consumer has to lobby the

government

e. why do we allow the lobby, or why Sherman act do not

make it illegal

i. because we actually need the people to get

information

1. but the information is self-interest info

ii. it could also help democracy

1. because both sides will provide info

75. Noerr

a. How did the case violate antitrust law, and how could we
use sherman act

i. the railway’s concerted act satisfy the agreement

requirement

b. Noerr-Pennington immunity

i. Why we give them the immunity

c. What is the real objective of the railway

i. They want to create a bad image of the truck

ii. But this cannot be an argument, because there is no

specific evidence to demonstrate that

d. Noerr exception

i. What is the standard,

1. sham

2. is that a right standard,

ii. what is the Black’ argument

 1. he think intent can be relevant

iii. what is your intent to bribe legislator

1. antitrust focus on competition

2. Judge Black try to find balance

3. Bribery law will deter illegal action from politics

4. Antitrust law should protect consumer

5. So there is no overdeterrence

76. Oct 8th, what is the purpose of the D-P immunity

a. The defendant try to use the government,

b. There should be other benefit we want to protect

i. The agreement increase productivity efficiency,

ii. It make politics works better

iii. It protect democratic system

1. It generate information the politics need

iv. This is the legitimate reason to protect the

defendant’s lobby

77. Noerr’s exception (sham)

a. How to define it

b. Two possible ways

i. Objective

1. If they have legitimate campaign, we do not

look at intention

ii. Subjective

1. Real Estate will discuss how to define

subjective intention

78. 274,
 a. It is hard to define the intent

b. We will use the effect as evidence

c. N-P is a strong immunity

79. California

a. They want to influence judge (compared with legislative in

Noerr)

i. They use court to prevent plaintiff’s access

b. What is the difference between this case and Noerr

i. The strategy used by defendant

c. What make it a sham

i. Subjective intention

d. Why this case is worse than Noerr

i. The misrepresentation

ii. And the difference between judicial and legislative

e. Do we overdeterrence

i. Because there is additional harm to the consumer

welfare,

ii. So, no overdeterrence

80. 275

81. Real Estate

a. The judge think Columbia is not objective baseless,

b. But it is not cost justified to the plaintiff

i. Because of difference resource, it will be a huge

amount to the plaintiff

ii. To the little players, it is a big burden

c. Should we take that into consideration

 i. Is that a mistake of this case?

d. The judge think the litigation is justified

i. But It is not cost justified

ii. Is that a way to know defendant’s intent?

e. The defendant’s action will hurt its reputation

f. If it is objective justified, you do not need to show intent

82. Oct 13 Real Estate

a. The plaintiff must show its object base

i. To prove that your complain is not frivolous

ii. The problem are what is the scope of appropriate

litigation

iii. And what is the necessary condition of the objective

base

b. It is a misleading that there is no subjective test

i. It is not easy to use subjective test in cases like real

estate

ii. In previous cases, because there is a agreement,

then the agreement itself can prove the subjective
intent

iii. But in the case like real estate, you do not need to
have a agreement

83. Indian Head

a. What distinguishes this case from Noerr

i. Lee said it is not political, because association is not

a political organization

ii. But the association can influence the legislators

iii. Why legislators accept their codes, because they lack

the information
 iv. Some students also mentioned that the motivation in
this case is commercial, and the association is a
private body

b. The reason is that

i. The difference is that in this case, they use their

rules to influence the legislators

ii. But the Noerr, they went to the legislators to get the
strength

c. Interest groups can do something good for us

i. We rely on them to get the info

ii. But we do not need them to create the restraint

iii. That job should be done by the legislators

d. Restraint is the agreement among competitors

i. In Noerr, they influence legislators to get the

potential restraints

ii. But in this case, they work out the restraint, then
hope legislators to implement that

84. Expert set the standard

i. Is that legal?

ii. There is some positive productivity efficiency,

iii. what is good to the consumers? It can lower

productivity cost

iv. is the restraint ancillary to the setting standard

b. if the expert are paid by the competitors, then there is

inherent bias

c. then, where is the line, between the legal action and the
illegal action

i. such as, if the university get the donation from the

competitors
 d. so court should set the norm

85. another question, congress want to set a new bill on

environmental goal

a. there is some new widget can reduce pollution but the cost
is 371

b. where does the exact number come from

i. it is calculated by GM and Ford

c. why under Noerr, it should be legal

i. because they just try to influence the government

d. why under Indian Head, it should be illegal

i. because it is a facilitate practice? (because they

already calculate the number, and want the
government to accept that)

86. how to calculate the damage

a. we should calculate what is the damage before the

legislator pass the restraint, and what is the damage after
that

87. FTC v. SCTLA

a. Strike is not protected by the bill of right

b. But it is permitted under other law

i. Why don’t they take that exception

c. What happened in this case

i. The lawyer try to fix the price

d. Why they did not get the Noerr immunity

i. Noerr’s immunity cannot extend to every case

ii. In Noerr, the restraint is the consequence of the

legislation
 iii. In this case, they use the restraint as a method, they
create the restraint to influence the government

e. Is this a easier case?

i. It is easier because the court use the per se rule

1. Some student suggest boycott is per se illegal,

but in Northwest, the court held that boycott is
not per se illegal

a. Boycott can also improve productivity

efficiency

2.

88. Tomorrow we will discuss more about the fact in this case

a. And the structure of the case

b. And how it can prove allocative efficiency

c. And we will also enter the New section, monopoly

89. Oct 14 Noerr Immunity

a. Two different kind of actions

b. Act without actually create restraint

i. And influence the government to create a restraint

ii. This kind of action has public benefit to information

iii. And we do not care whether they bribe legislators to

legislation under antitrust law

c. Try to use restraint to influence government

i. There is no immunity for that

ii. We should use rule of reason, and analyze whether

the restraint is ancillary to their aim

iii. And we need to balance between restraint and

efficiency
90. Trial Lawyer case

a. It is a naked boycott, and without efficiency?

b. Compared with other case, from antitrust ground, is it a

harder case?

i. It is about social justice

ii. And it is also about consumer welfare,

1. Who is the consumer, the defendant they

provide legal service

iii. It is not clear about the allocative efficiency in this

case

91. Monopoly

a. Sherman act section 2, monopolization

i. Two step analysis

ii. Assume the defendant have monopoly

iii. Whether you have abuse your power

b. What is monopoly

i. It is depend on the structure of the industry

92. Compare Cartel and monopoly

a. Which one is worse

b. Monopoly is like cartel

i. It set supra competitive price

c. Whether we should condemn monopoly per se

i. What is the distinction between monopoly and cartel

ii. From ex post they are same

iii. But from ex ante, monopoly actor did well in the

market, and we want to encourage that
 d. Natural monopoly

i. How to distinguish natural and unnatural,

ii. It is very hard to define

e. Cartel have a new entrance to market

i. If they set the price too high, new player will enter
the market

ii. Monopoly is more flexible

93. Standard oil

a. What is the unduly restraint,

b. How to find out they actually monopoly power

i. Monopoly + some factors = monopolization

c. How to define the plus factors

i. How does the judge can use the economic analysis to

define that

d. What is the method they use the deter the new entry, and
how could that affect allocative efficiency

i. They use excess facility

ii. But they can argue that they made a mistake of the
excess facility

e. The professor also asked about noncompete agreement

with employee

i. Is that monopoly or abuse of monopoly power

94. Am Tobacco

a. Judge think am tobacco’s action is not business justified

i. Is that the plus factor?

95. Aloca
 a. The government is better to protect the market than the
market itself

b. What is the issue in the case

i. How did they abuse the market power

c. Evidence

i. They did not let foreign firm sale in the market

ii. They signed exclusive contract with water power

iii. They have excessive capacity

d. The test is different from the first two

e. The burden is on the defendant to show that they did not

abuse the market power

f. Is that a natural monopoly?

g. The professor also mentioned consumer welfare view

i. He think the judge use Jefferson view, that they want

to protect little player in the market, and restraint
the big player

96. Tomorrow’s question

a. What can we do about the damage

b. How to compare that with cartel

97. Oct 15

a. Monopoly + not business justified practice =

monopolization

b. The monopoly cases are about abuse of monopoly power

i. So, the question is what is an abuse of power

ii. It is not a normal business course

iii. In the past cases, Judges use different standards

98. What can be the remedy

 a. Dissolve

i. Not efficient, we do not know what is the right scale

ii. If we can not find out the right scale, it is highly likely
that the dissolve will damage consumer welfare

iii. The judge know nothing about the business

b. Fine

i. How to determine that

c. Bad remedy will hurt consumer welfare,

99. United shoe

a. What is the non business justification of the act

i. 10 year term lease

1. 10 year can lower the cost

2. But they should give consumer the choice

ii. They only lease the machine, do not sale

1. They do not give the consumer the option

iii. They combined the service contract with the lease

contract

1. It make the small player had to enter into two

market simultaneously

2. But there are some business justification to do

that, such as protecting their name

b. Price discrimination

i. Some people had to pay more, some people could

pay less

ii. Will that increase consumer welfare?

iii. Under simple monopoly, it will decrease output and

some people cannot get the product
 iv. Under price discrimination, the producer do not
reduce output, not good to the consumer, but good
to the economy efficiency

1. There is no deadweight loss

100. Microsoft

101. Oct 20 Microsoft

a. What is the framework (doctrine)

i. How business justification work

ii. Firstly, the plaintiff show that the defendant

has monopoly power

1. And its practice foreclose competition

iii. Then, the burden shift to defendant,

1. The defendant should prove the conduct

has business justification

iv. Then, the plaintiff should prove that the

conduct has more harm to competitor than the
business justification justified

102. Microsoft

a. What is Java, it is a middleware type system

b. What is the threat of Java, it will help potential free

operating system

c. What did Microsoft did, and how could that foreclose

competition

i. First argument, Microsoft just use their own Java to

compete

ii. What is the problem with that competition

iii. It require someone to use their java, and that will

help their monopoly in operating system

iv. The false information is an evidence of foreclose

 d. What is the remedy

i. They suggest split Microsoft into operating system

and office

ii. other operating system could use office, and will help
the competition

iii. downside, it may be incompatible with other

operating system, and the judge has no idea how it
will work

e. the significance of Judge’s opinion in the first paragraphs

i. about the technology change

1. what is the effect of technology change on the

antitrust

2. we will worry less about the market power (it

will harder to analyze )

103. Aspen

a. What is the liability

i. A monopolist can violate section 2 by terminate an

agreement with competitor?

ii. How to provide a business justification to excuse the

refusal to deal

b. In this case

i. Participation would have been profitable to both

monopolist and competitor

ii. Refusal to participation was probably profitable only

on the assumption that competitor will lose market
share (short term not profitable, long term good to
the monopolization, so they abuse their market
power)

1. So refusal do not have a justification

c. Why was Highlight disadvantaged

 i. it is a weak competitor?

ii. Highlight is a small mountain for amateur, instead a

expert choice

d. It this business justified?

i. How could we know the consumer welfare and

consumer preference

1. The business justification is whether the action

will increase consumer welfare?

e. Pass cases (are these two cases similar to this one?)

i. Terminal railroad

ii. Associated press

f. It is a joint agreement between competitors

i. It could increase productivity efficiency

ii. And there still are some incentives to compete

g. If it is easy entry market

i. We do not need to worry about the market power

104. Oct 21

105. when does antitrust discipline the market better than the
market itself

a. for different alternatives to antitrust law

i. deregulation, allow more competition (is

deregulation means government’s action)

ii. technical innovation, in Microsoft case

iii. international trade

iv. better capital market

1. if companies can get loan and capital

easier, there will be more entries
106. question 328 d

a. it is not a monopoly, because it is research, no easy to find

business justification

i. share research will discourage company to invest in

R&D

b. Noerr Immunity

c. How to find business justification in this situation

i. It is not economic to repair other’s machine, because

they know their machine better, and the repairing
cost will be lower

d. No monopoly

i. business justification for excess capacity

1. Because you can adapt to the change of

demand easily

e. Do not understand its meaning

107. How to prevent joint enterprise to be anticompetitive

i. You can have an independent standard setting

group, (in Trinko, it is FCC?)

108. Trinko

a. Why this case not like Aspen

i. In Aspen, the defendant denied something good to it

(the joint venture may be profitable)

ii. In Aspen, the defendant already have an agreement,

and terminate it

b. The judge think that Aspen is at or near the outer boundary

c. In the first paragraph of section 3, the judge praise

monopoly

i. It suggests that the judge does not want to penalize

monopoly (without business justification?)
 d. The structure of the industry

i. It is a network industry, and it will likely to have

natural monopoly

1. Is that why the judge keep the big player out of

the market, and regard Verizon’s action as
legal

2. Is that good to consumer welfare

e. FCC’s regulation

i. Expertise know the market better

ii. FCC is more specific,

iii. Is that right?

f. Is there harm to the consumers?

i. How can antitrust remedy that

109. Barry v. ITT

a. It is about predatory pricing, the monopolist use its market

power to abuse price

b. What is the downside of antitrust to predatory pricing

i. It may discourage people to lower price

c. What is the logic behind regarding predatory pricing as

illegal

i. They cannot continue the low price and will raise the
price in the future

110. Oct 22

111. Predatory pricing

a. It is an abuse of monopoly power

b. If it below the marginal cost, the it is not business justified

112. Barry Wright

 a. Judge think the price is about the marginal cost, and reject
the plaintiff’s argument

b. Why the judge reject 9th’s test

c. I took a nap in this class and missed most part of

this case

113. Question 334

a. It is not enough to only find Delta charged a monopoly

price, you should find whether they have business
justification

i. In this problem, its monopoly is lawful

b. It is legal, because it use predatory pricing to prevent new

entry

c. We should find business justification

i. Is it above marginal cost, if the price is lower than

marginal cost, then Delta is abusing its market power

ii. maybe because they have higher volume, their cost

is lower than the competitor

iii. if Puny set the price lower than the marginal cost,
and Delta cut its price below Puny’s , is that legal

1. i think no, because they are monopoly, they

cannot abuse their market power

d. Trans Missouri, and Trenton Potteries

i. Subjective and objective

1. In Trans, we use market price, it is more

objective (it is determined by the whole
market)

2. In Barry, we use marginal, it is more subjective

(it depends on individual producer)

3. Both of them are difficult to determine

 ii. Productivity efficiency

1. We think Cartel will hurt productivity efficiency

2. In Barry, if the price is about marginal cost, it

will improve productivity efficiency

114. Brooke (oligopoly predatory pricing)

a. In this case, the judge think that under oligopoly, it is

impossible for the defendant to recoup cost

i. Because under oligopoly , it is not easy to coordinate,

and everyone has incentive to cheat

ii. It is a very strong presumption

b. In this case, the judge think the plaintiff’s evidences are

not convincing

i. Reduce output

ii. Rise price

c. Dissent opinion

i. Because he is too old, Steven focus on intent, instead

of using economic analysis

115. Oct 27

116. About Final Exam

a. 3 questions

i. The first two are general question, you should find

out the issues and analyze

ii. The third one is about the value,

1. how antitrust law should work, and how certain

doctrine should put together

2. whether some cases are rightly or wrongly

decided
117. the past classes focus on the practice side of the sherman
act

a. whether you have monopoly

118. U.S. v. A.M.R.

a. This case is about the difficulty in calculating predatory

pricing

i. The problem is what is the marginal cost

b. In the past case, to decide that the defendant’s cost is

predatory pricing, plaintiff should prove

i. It is below marginal cost

ii. Defendant will recoup it in the future

c. AMR is about the first aspect of the test

i. There are varieties of accounting issues

ii. So, the problem is how to use the accounting rules

and get the economical analysis

d. Someone ask question about the balance between

consumer welfare and pro competitive

i. Professor said in case like this, we focus on pro

competitive

ii. Because the lower price will benefit consumer

welfare, but will anti competitive

119. Market power

a. The question is what is market power

120. Alcoa

a. Why the court use percentage to determine whether there

is monopoly

i. Above certain percentage, you are likely to

manipulate
 ii. It is the proxy for ability to raise without substantial
competition

b. The elasticity of the market

i. It is important to take into consideration that

ii. If you sell lemonade, even the market share is above

certain percentage, you are not likely to have the
market power

1. Because the market is highly elastic, if you

raise the price, consumer will choose other
beverage

c. In this case, there are four markets: External, internal,

secondary and foreign importer

i. Internal market

1. Defendant did not sell all the product and use

it by themselves

2. We should include it because defendant can

flood the market anytime, and sell it externally

ii. Secondary market,

1. Defendant do not sale directly in the market,

but they control that market

2. If we count market, the Defendant’s market

share will be lower,

3. Whether the secondary market is the

substitute of the primary market?

iii. Import

1. Should not include, because of tariffs and

transportation cost

a. The professor think there is problem with

that
 b. Trade may be more substantial than
what judge predict, so we should include
that

2. International trade is very important to

antitrust analysis

a. It is the best anti monopoly discipline

121. Problem 354

a. All these calculations are right

i. So, the problem is which we should use

122. The question of next class

a. How does popular culture affect the monopoly case

123. Oct 29

a. What is market power

b. From Alcoa, percentage is necessary to determine the

market power

i. Other factors, such as elasticity, control of supply,

and international trade

124. Problem 354

a. (d)(1) most uses, but not all, so there is still discipline on

price rising

b. (d)(2) all use

c. (d)(3) rise price, a lot of substitution

i. But the question is whether they already charge

monopoly price

ii. So, court could not figure what is the market price

d. (e) restrict on the capacity,

i. There is no substitution.
 ii. New competitor could enter the market in the long
run, but what it the difficulty to do that

125. Du Pont

a. What is the market, packaging material or cellophane

b. The essential question, can they raise price without

response

c. Profit is not significant

i. Why look at profit

ii. What is difficult with just looking at profit

1. If you take much risk, you should take the

profit.

2. Profit can not be evidence

126. Problem 356

a. (b) no necessary

i. Because the cost is different, so although in the

same market, the price could be different

127. Problem 357

a. Tariff, some market power, but no monopoly

b. Internal memo

128. Other points

a. We should look at practice, how the defendant abuse the

market power,

b. We do not want antitrust law to become “fair to your

competitor’

c. The market need competition

d. You could have market power in a product, but not in the

market
129. Microsoft

130. Oct 29, Question 360

a. What should we take into consideration

i. Feasibility , cost

ii. The guideline at page 501, potential

b. other arguments

i. Other competitors can enter into the market

ii. Government regulation

iii. Exclusive contract

iv. Rule of law

v. Capital market

c. If entry is very easy, is there monopoly

i. New entry will make it impossible to raise price,

ii. Percentage is only a proxy

iii. The guideline at page 502

d. Two steps

i. How to define the market

ii. Whether they have monopoly power

131. 361

a. Yes

b. No, monopoly is not monopolization

c. No

d. The possibility to monopolize

132. Lorain

a. The possibility to monopolize

 i. In the past, they have history of monopolization

b. How is it harder for Radio to contest

i. No ad

c. Is this exclusion practice business justified

i. Business justification is not keeping monopoly power

ii. There is no justification

iii. And the market is not a natural monopoly market

d. What is the cost in the short run

i. Less revenue in the short run

ii. So it is like the predatory pricing cases

e. WEOL?

i. They should not worry too much

ii. Because it need a government license to set up a

radio station

1. they could look for government regulation

f. this case is very clear, because we could not find business

justification

133. problem 364

a. did A violate sherman act

i. no they did not, there is no agreement

b. also no violation to sherman act 2

i. need enough market share, and possibility to

monopolize

134. Sports

a. What is the market, and what is the product

i. There is a lot of substitute

 b. The distribution market

i. Does not seems they could control the distribution

market

c. The reason of the termination is not legally relevant

i. Court does not care that

d. Business justification

i. There is justification for the family business

135. Next class, checklist of market definition

136. Nov. 3 checklist

a. Product market

i. Du Pont case, how much does the competitors

compete with the product

b. Geography market

i. Trashking, we should take into consideration of

transportation cost

ii. Geography is not all that important now,

c. Supply,

i. Alcoa, the secondary market

137. Elasticity

i. How much is the response to the increase of the

price

ii. the elasticity of supply of foreign firm is extremely

strong

138. the central question is whether the monopoly can charge

above market price

a. What is market price

 i. Court cannot figure out the market price, and make it
difficult to sue monopoly

139. Other factors that have antitrust effect

a. Free trade is one of the best antitrust policies

i. The growth of trade makes antitrust unnecessary

b. New entry, which mean the supply response to the raise of

price

i. It is Adam Smith’s invisible hand

c. A well functional capital market

i. It means lower cost to compete with the monopolist

ii. It is also one of the best antitrust policies

d. Government regulation

140. Vertical agreement

a. It is between manufacturer and distributors

b. It is the greatest revolution

i. Economic analysis

ii.

141. Dr. Miles

a. Two issues

i. Secret process

1. Is the price fixing agreement ancillary to the

secret process

ii. Own the product

1. What is the difference from the price fixing

agreement among the dealers

b. Restriction on alienation
 i. Common law is hostile to alienation

ii. But it is too broad

iii. And not a strong economic argument

c. It is like the agreement among dealers

i. The same is that both are the loss of competition

between dealers

d. The difference

i. Incentive

1. Why would the manufacturer set a price to

make the dealer have a easy life

ii. What it the cost to the manufacturer

1. The output will decrease, and the profit will go

the dealer?

iii. Economic analysis

1. It would limit intrabrand competition, but

increase interbrand competition

2. It would increase productivity efficiency

3. Although it is price fixing, but not the same

e. What is the advantage of vertical agreement

i. Free rider

ii. Improve service

iii. What is the alternative to free riding

1. Assign territory between dealers

a. That means give dealers a monopoly in

that territory

2. Manufacturer provide the service themselves

 a. But the dealers know the consumer
better

3. Transaction cost

142. Khan

a. In the previous cases, setting maximum price is per se

illegal

b. Why condemn maximum price

c. Why permit this kind of agreement

143. The agreement is ancillary to serve productivity efficiency

144. Nov. 4 Class

a. Class after thanksgiving is cancelled

b. Thursday is review class

c. Wednesday lecture topic

i. International antitrust

ii. Robinson-Patman act

iii. Intellectual property and antitrust

145. Khan

a. In Dr Miles, the court use per se rule to price fixing

agreement

b. The court use two methods

i. Under common, there is a restraint on alienation

ii. They use analogy to horizontal price fixing, and

prove it is a restraint of competition and illegal under
sherman act

1. But the analogy is imperfect

c. What is the incentive of manufacturer

 i. The incentive is not giving dealer a monopoly profit
because it will decrease output

ii. Under economics analysis, the manufacturer’s

incentive could be a proxy to consumer welfare

iii. It could also increase productivity efficiency

1. Dealer will more incentive to penetrate the

market

iv. It could also free rider problem

v. It also could increase allocative efficiency

1. It is a agreement between manufacturer and

dealers,

2. it only limit intraband competition, does not

constrain interband competition

3. consumer will have more choice, and the

resource will be efficiently allocated

vi. under coase’s theory, the agreement could be a

economic decision

d. Klan is about productivity justification for maximum

vertical price fixing agreement

146. Leegin

a. Overrule the per se rule of minimum vertical price fixing

agreement

b. What is the downside of vertical price fixing agreement

i. Dealer could form cartel

ii. Manufacturer could coordinate

1. As price becomes more transparent, in

oligopoly industry, the manufacturers will
coordinate

2. It will depends on the structure of the industry

 c. The majority think rule of reason is more appropriate than
per se rule

d. Why is the logic under overruling the per se rule

i. The Dr. Miles court do not have much experience on

that subject

1. We are always in better position

ii. if we use rule of reason to non price fixing

agreement, and use per se rule to price fixing
agreement,

1. the market players can use non price fixing

agreement to circumvent the per se rule

2. there is no clear line between no price fixing

and price fixing

147. leegin case tell us antitrust law could be changed by

knowledge

148. what constitute vertical agreement

a. leegin does not say

149. Nov. 5 Leegin

a. The change from per se rule to rule of reason

b. So vertical agreement is not necessarily illegal

c. The incentive of manufacturer could be coincide with

consumer interest

d. Under what condition could it be illegal

i. It is an Cartel agreement between dealers

ii. The manufacturers coordinate between themselves

150. Vertical agreement

a. What is a vertical agreement

b. All the cases are decided under the old regime

 i. Now, if there is an agreement, we should use rule of
reason

151. Colgate

a. How did they make that clear that they will cut off price
discounter

b. The court think that because they prospectively tell the

distributors, so they have right to do that.

c. What is the policy rationale

i. Business judgment

d. What is the downside risk

i. Lose competition between dealers

e. How could it affect allocative efficiency

i. Dealership would be less efficient, because of less

competition

ii. The legal cost and administration cost would

increase

152. 422(b)

a. It is an agreement,

b. An non-binding agreement

c. It is like Colgate, is an unilateral action

153. Park

a. Is it an unilateral action or an agreement

i. Unilateral , and force other

154. agreement

a. Horizontal,

i. Price fixing is per se illegal

ii. Non price fixing use rule of reason

 b. Vertical, more lenient

i. All use rule of reason

155. Monsanto

a. 7th circuit’s reasoning

i. Because the action is based on other dealer’s

complain, so it is an agreement

ii. Why other dealer complain

1. Because they do not like competition

2. To manufacturer, they want to know more info

b. Supreme court’s opinion

i. Need more evidence to decide whether the action is

independent or non-independent

ii. The professor think there is no clear distinction

between those two actions

iii. It is not clear what will put you into trouble, and it
will dependent on different circumstance

c. If the agreement is among the dealers themselves, it is per

se illegal

156. As now we use rule of reason, it may be easier to find

vertical agreement

157. Nov. 10.

158. The lecture on Nov. 26 will be international antitrust

159. The vertical agreement cases

a. In the past, it is per se illegal, and the problem is to find a

agreement

b. Under modern rule, the court use rule of reason,

i. Monsanto case: suggested retail price + effort to

control
 c. It will be easier to find agreement under modern rule

d. The real policy reason is

i. Other dealer always has incentive to complain

ii. Manufacture always has incentive to behave in that

way, even without agreement

160. International Salt

a. What is the tie agreement,

b. The court’s opinion is that the tie agreement is illegal

161. 430

a. (a) if you do not have market power on both market, then

the agreement cannot be a problem

b. (b) monopoly in can will raise the price of can

i. Consumer will choose other product

ii. New producers will enter the market

162. If they already get monopoly profit in one market

a. It is not necessarily you can get monopoly profit in the tie-

in market

i. Because of the economic cost

b. If the defendant did not get monopoly profit from the tie-in
market, why it could be a problem

i. It will decrease the incentive to enter the machine

market and the can product market

ii. It will increase start up cost

1. If there is a perfect capital market, that will not

be a problem

163. What about the patent

a. If the monopoly is caused by patent, will that be different

 i. The tie-in agreement began in patent area

b. If the monopoly is caused by law, will that be different

164. In the International salt case

a. There is no monopoly in the salt market

b. What is the harm, or what it the cause of action

i. The best argument is that the tie-in agreement may

have harm on other market

ii. Other people will act like that

165. What is the argument of international salt

a. To protect the reputation

b. But the problem of this argument is it is not easy to tell the

quality

i. It is hard to figure out the specific quality issue

166. Professor is not sure about court’s justification

a. There is no harm at all in this case

b. And no possibility of monopoly

c. How strong is the defendant’s productivity efficiency

argument

i. Not very strong, but there is possibility

d. There is no threat to competition, and it has possibility to

make the market better

167. In tie-in case,

a. we should balance between the cost of competition

and the increase of productivity

b. if there has any cost to competition, we should put more

pressure on productivity efficiency

c. the danger to competition cannot be justification

168. International salt is no longer a good law

169. Illinois tool case

a. The old view is that if you have patent, than you have
monopoly

b. Congress change it view

i. The court, rely on congress’s opinion, also change its

view

c. It overrule international salt

170. Northern Pacific

a. What is the reasoning of this case

i. Restraint on alienation

b. In this case, there is no requirement of market power

i. The evidence is that you make a tie-in agreement

c. The argument about its harm

i. It is not a strong argument,

ii. Because it does not have effect on the pricing

1. No monopoly power, no economic effect

171. Nov. 11,

172. Northern Pacific

a. In this case, there is no requirement of monopoly power

i. It is the worst reasoning antitrust case

ii. There is no economic rational under this case

1. The court think big firm can be harmful

173. Two questions

a. Why use sherman, rather than clayton act

i. Sherman is more comprehensive

 ii. Now there is no difference

b. What did them want to accomplish, or what is the idea

behind the time

i. The defendant want to evade price regulation

ii. A low price for land transportation and bundled with

the service

174. Jerrold

a. What is the tie-in product

b. Why should defendant make a requirement contract

i. To protect its reputation

1. If the system broke down, it will be costly to

figure out it is whose fault

c. It is one product or two products?

i. Court’s test

1. If you can buy it separately from other

company on the market, then there are two
products

ii. Is it a sensible test? The professor doubt about it

1. To the consumer, it is only one product

iii. In some way, the defendant’s argument is

reasonable

1. Economy of scale

2. The joint product can be better

3. Productivity efficiency

175. 441(c)

a. (1) Using J’s test, there are two separate products

 i. whether it is one product or two product should be
determined by ‘economy efficiency’

b. (2) same as (1)

176. In Jerrold, the court is struggling with Supreme Court’s

decision in Northern Pacific

177. Jefferson

a. The majority want to change N.P.’s decision

b. If the plaintiff what to prove the agreement is illegal, what

does he need to show

i. Anticompetitive consequence

ii. Market power

c. In this case, why there is market power

i. Although the defendant does not have a huge

market share, but they can raise price without losing
customer

ii. You would not go around to compare the price, as

shopping other goods

1. The customer do not have much choice

d. The judge use Jerrold’s test, and think there are two
separate products

i. But the professor think here is no independent

market for anesthesia

178. Nov. 12

a. Jefferson,

i. It is a two-product tying agreement issue

ii. What is the majority test, Jerrold’s test?

b. What is the downside of the typing agreement

c. Does the hospital has market power

179. The court use different test in this case

a. O’ Connor test

b. Steven’s test

c. Business justification test

180. Microsoft case

181. Standard Oil (requirement contract)

a. Violation of Clayton act

b. The defendant do not have market power in this case

c. Is it a sound holding?

i. Whether this agreement can improve productivity

efficiency

ii. The court think that it would benefit both seller and
buyer

d. So, why is it illegal

i. It will lead to less competition

ii. Court is unconfident to evaluate

1. if there is no market power, then no danger to

competition

e. if the defendant has more market share, should we worry

about that.

i. What is the real cost to competition

ii. The requirement contract can solve free rider

problem

iii. The manufacturer can use vertical integration to

achieve the same effect

f. The analysis in this case is not consistent with what

learned
182. Judge douglas’s opinion

183. Barry Wright

a. Citing Standard Oil, and try to distinguish from that case

b. What make it potentially worse than Standard Oil

i. Market share

ii. Three facts

c. Possible business justification

i. Favorable price

ii. Not a restrain to new entry

iii. Transformation

184. Nov 17

a. Tomorrow’s assignment, general dynamic

185. Sidebar, about progress in antitrust law

a. The antitrust law developed with the theory of consumer

welfare

186. Tying agreement

a. Plaintiff must prove

i. Market power

ii. Two distinct products

1. Whether there is efficiency in selling the

products together, or separately

b. The test is unlike the test in monopoly

c. The defendant could show the business justification of the

typing agreement

i. After that, the plaintiff should prove whether it is

more harmful
187. Barry Wright

188. Merger

189. Brown shoes

a. Define the market

i. It is essential to find the market power

b. What is the market in this case

i. It can be defined by the kind of shoes

ii. And also can be defined by the geography market

c. what could you do to prohibit

i. If they have market power in certain cities, you could

require them to divest certain asset

ii. The court acknowledge that it is not easy to do that

d. The court condemn the merger because it is over 5%

market share

e. What is the rational

i. The corporation will be efficiency and hurt small

competitors

ii. Incipient antitrust issue

1. Internal growth

iii. The court might have to approve other merger

1. But merger is not per se legal

f. We will see the argument of incipient of merger again and

again

g. Brown shoes case is one of the worst opinion

i. At least it did not take into consideration of new

entry

190. Nov. 18 Merger

191. U.S. v. Philadelphia

a. How to define the market

i. Product definition

ii. Geography definition

b. Product definition

i. Commercial banking

ii. Bundle the service, integrated service

iii. Some cost to that definition

iv. Under this situation, marginal customer will

determine the boundary

c. Geography market

i. Why four counties is the market

ii. Some people just go to the community bank

iii. Under this situation, average customer determine

the boundary

d. In this case, there is no significant increase of the market

share?

e. Is this case change the court’s holding in Brown Shoes

i. Moving a little from brown shoes

ii. Still not enough business clarity

f. Bank’s affirmative defense (Three defense)

i. Large customer will go to other city, and they will

lose market

1. Court focus on average customer

2. The competition in one market, should not

mention other markets
 ii. Customer move to suburbs, and the bank will follow
customer

1. Those customer could be served by new

competitor

2. The merger increase the cost to new entry, and

make the market less efficient

iii. Need large bank to attractive business

1. In congress’s opinion, they think small player

are better than big one

192. Doctrine of Clayton act 7

a. Does the plaintiff need to show the merger is monopoly, no

b. How to justify the different rule of merger, compared to the

rule of monopoly

i. Incipient argument

1. But it is unpredictable

ii. The productivity efficiency is a price to allocative

efficiency

1. Is this argument consistent with sherman

193. General dynamic

a. What is the market, coal

b. Who is the customer, the power plant

c. This case is about natural reserve, (deplete resource),

i. if the court use the incipient argument, defendant

may not have market power in the future

194. Nov 19

195. General dynamic

a. Does not matter the market share in the past

 i. It is a poor indicator of the future

ii. Sunk cost policy

b. Could the defendant use “failing company defense”

i. The court should take that into consider

ii. Some factors, such as the possibility of bankruptcy,

and the reputational cost

196. The merger guidelines

a. HHI

b. Product space

c. Entry analysis

d. Efficiency

197. Staple

a. What is the price

i. Whether we should think about super stores

b. The court find there is strong correlation between the

number of stores and the prices

c. Defendant’s argument

i. Different Cost

d. Probable effect

i. HHI

ii. Under HHI analysis, the question is still how to define

the market

iii. In this case, exclude Wal-Mart is crucial to the

analysis

e. The efficiency argument

i. Not very convincing

 f. Does the court use the framework of Brown Shoes

i. No, they use merger guidelines

g. This case has better economic analysis

198. Next week,

a. reconcile merger analysis

b. vertical merger

199. Nov 24

a. Review will be on next Thursday

200. Staple

a. Two improvement

i. Merger guideline,

1. Compared with previous case law, merger

guideline is more lenient

2. In merger case, we should use merger

guideline

ii. Economic analysis

1. How price perform in areas where there is only

super store

201. Merger guideline could change antitrust analysis,

a. The guideline is try to capture the balance between the

danger to allocative efficiency and the benefit to
productivity efficiency

i. Merger is not per se illegal

202. Other factors

a. The intent of merger

i. Because manufacturer can grow internally, so why

merger
 b. Foreclosure of market share

c. Incipient argument,

i. Trend toward concentration

203. Brown shoes, Vertical merger

a. Two kind of merger

i. Horizontal

ii. vertical

b. the first question is still how to define the market

i. The product method, used in this case

ii. The geography

c. Effect of merger

i. Foreclosure of market share

1. Exclusive dealing? Otherwise competitor can

get the market share

2. Use Leegin case and rule of reason to analysis

foreclosure in merger

ii. More concentration

1. Difficult for new entry to enter the market

d. Plaintiff do not need to prove monopoly,(incipient

argument)

i. Do not need to market power

ii. Need to prove having the possibility of monopoly in

the future

204. Nov 25

a. Brown shoes

b. It represent the revolution of antitrust

 c. In vertical merger case, we concerned with coercion

i. As in exclusionary case, about forcing people

d. Also, we concerned with small business?

e. Most important is the incipient argument in merger case

i. It is the heart of the revolution

ii. The court intervene the market

iii. But in most of the area, market is better

iv. And government need to get out of the way

f. As we mentioned before, the landscape of market is

changing, and deregulation, tech development are better
solution than intervention

205. Problem 541

a. (a)

i. What is the structure of the market,

ii. and what is the nature of the product

iii. they are complimentary product

iv. so it is less likely to have monopoly

b. (b) what is the productivity efficiency

i. What is the possible of the merger

ii. The foreclosure argument, stop buying from

competitors

iii. More difficult to new entry

iv. What is the effect of tech develop

206. Clorox

a. It is conglomerate merger, neither horizontal nor vertical

b. What is the reason to the merger

 i. Diversification

ii. Market this product better

c. Why condemn the merger

i. Defendant might enter the market

1. It is incipient argument, but who knows

2. FTC refuse to find a probability

3. This argument transfer it into horizontal

merger

ii. Dissuading small competitors

1. What is wrong with using defendant’s

expertise,

iii. Predatory argument

d. The judge think ad is a waste of money

i. But it is advantageous to customer

ii. It helps customer to ensure the quality

iii. And invest your reputation

iv. It is like hostage taking

e. Predatory pricing

i. Because defendant is deep pocket, so there is

possibility

ii. Merger can lead to monopoly abuse

iii. But it is too speculative

207. We could use conglomerate guideline to deal with these

cases

208. Nov 26

a. Consolidate
b. Like a tie-in agreement case