Chapter 8

Market
Regulation
The Origin and
Development
of Antitrust
Law

Roger Sherman

Copyright 2009 Pearson Education, Inc. Publishing as Pearson Addison-Wesley

Origin and Development of
Antitrust Law

The Beginnings of Antitrust Policy

The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-2
Origin and Development of
Antitrust Law

The Beginnings of Antitrust Policy

The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-3
Beginnings of Antitrust Policy

British Origins
Statute of Monopolies
Industrial Revolution
America in 1890
No radio, TV, movie, subway
Economic Growth at end of 19th Century
Trusts, ICC

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-4
Origin and Development of
Antitrust Law
The Beginnings of Antitrust Policy
The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-5
The Sherman Act

The Law
Sec. 1 Restraint of Trade: [e]very 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
declared to be illegal.
Sec. 2 Monopolizing or Attempting to Monopolize: [e]very person
who shall monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons, to monopolize any
part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a felony.

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-6
The Sherman Act

Early Enforcement
President Harrison 7 suits
President Cleveland 8 suits
President McKinley 3 suits
Cases came to Higher Courts
1897, Trans-Missouri Freight Association
1898, Addyston Pipe and Steel
1904, Northern Securities Case

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-7
The Sherman Act

Essential Facilities
1912, Terminal Railroad Association
The Rule of Reason
1911, Standard Oil Company
test of reasonableness
came to mean case-by-case analysis

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-8
Origin and Development of
Antitrust Law
The Beginnings of Antitrust Policy
The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-9
Clayton, Federal Trade Commission
Acts

The Clayton Act Against practices that could substantially

lessen competition to tend to create a monopoly in any line of
commerce (price discrimination, exclusive dealing, tying,
mergers, interlocking directorates)
The Federal Trade Commission Act Set up Federal
Trade Commission and said [U]nfair methods of competition in
or affecting commerce, and unfair and deceptive acts or practices
in or affecting commerce , are declared unlawful
A Quiet Period for Antitrust

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-10
Origin and Development of
Antitrust Law
The Beginnings of Antitrust Policy
The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-11
Enforcement Agencies and
Remedies

The Department of Justice

The Federal Trade Commission
Remedies for Violation of Antitrust Law
1. Treble Damages
2. Fines
3. Jail Terms
4. Injunctions
5. Structural Changes
The Role of States
Copyright 2009 Pearson Education, Inc.
Publishing as Pearson Addison-Wesley 8-12
Origin and Development of
Antitrust Law

The Beginnings of Antitrust Policy

The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-13
Monopoly Conduct/ Monopoly
Power

Monopoly Conduct and the Rule of Reason

Alcoa and the importance of Monopoly Power
The Special Burden of Market Dominance

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-14
Origin and Development of
Antitrust Law

The Beginnings of Antitrust Policy

The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-15
Government Control of Mergers

Effective Antimerger Law

Celler-Kefauver Act of 1950
Conglomerate Mergers
Product-Extension or Geographic-Extension
Mergers
Market Definition
Premerger Notification
Takeovers

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-16
Origin and Development of
Antitrust Law

The Beginnings of Antitrust Policy

The Sherman Act
The Clayton and Federal Trade Commission Acts
Enforcement Agencies and Remedies
Should Courts Oppose Monopoly Conduct or
Monopoly Power?
Government Control of Mergers
Unfair and Deceptive Practices

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-17
Unfair and Deceptive Practices

unfair competition
FTC Meetings about Rules Public
Funeral Homes example
Line-of-Business Reporting
Advertising

Copyright 2009 Pearson Education, Inc.

Publishing as Pearson Addison-Wesley 8-18