Chapter 43 Part 2

Enacted in 1914. Deals with very specific practices: price descrimination, tying contracts, exculsive dealing, and mergers.

Private parties may bring civil actions in fed court for treble damages and attorney's fees. DOJ and FTC may bring civil actions to prevent and restrict violations of the act.

Unlike Sherman Act, Clayton applies only to practices involving commodities (goods), NOT services, intangibles, or land.

Same rules as Sherman Act; Vertical agreement where seller requires buyer of one product (the tying product) to also buy a second product, service, or intangible (the tied product) from the seller.Per Se Illegal Tying AgreementsOccur when seller has considerable economic power in the tying product, AND if it affects more than an insubstantial amount of interstate commerce in the tied product. Other wise, judged under R/R Test

Seller prohibits buyer from purchasing products from the seller's competitors. R/R Test applied; illegal if they substantially lessen competition or tend to create a monopoly.

Clayton Act; Prohibited if it creates monopoly or substantially lessens competition. Focus is on the size of the merged firm in relation to the relevant market, not on the resulting entity's absolute size.

Merger between firms that compete w/ each other in the same market

Merger where a company acquires one of its customers (forward) or suppliers (backward).

Mergers that are not horizontal or vertical.

An important factor in determining if the merger will be allowed,

• Used by the FTC and DOJ to determine market concentration for approval/denial of mergers.
• - merger that produces an increase in the HHI b/w 50 & 100 points raises significant competitive concerns (need to look at other factors)
• - Those that produce an increase of more than 100 points are presumed to enhance market power.

• Clayton uses R/R Test. The following are considered with Horizontal Mergers:
• - market share of each firm
• - degree of market concentration
• - the number of firms in the industry
• - entry barriers
• - strength of competitors
• - character and history of merging firms
• - market trends and demand

• - failing company merger
• - small companies (when 2 small companies merge to compete with larger companies in the industry)

• Usually not challenged since they create greater economic efficiency.
• - transferring assets to their most productive uses
• - extending product lines
• - reducing overhead

Ammended Clayton Act to prohibit buyers from inducing and sellers from granting price discrimination in interstate commerce.

When seller charges different buyers different prices for the same goods. To violate act the price discrimination must substantially lessen competition or tend to create a monopoly

• 1.) Primary Line Injury - injury to competitors of seller
• 2.) Secondary Line Injury - injury to non-favored buyers who are in competition with favored buyer
• 3.) Tertiary Line Injury - injury to purchasers who buy from the non-favored buyers

• 1.) Cost justification - cost less to sell to one company than the other
• 2.) Meeting competition - seller may lower price to buyer in good faith to meet the price of a competitor. Can NOT beat the price though.
• 3.) Functional discount - discount was functionally or realistically available to all buyers but non-favored one didn't take advantage of it.

• Enacted in 1914. Prohibits unfair methods of competition and unfair or deceptive acts or practices in commerce.
• - 5 member FTC can conduct appropriate investigations and hearings.
• - objective: supplement Sherman and Clayton. FTC is to stop unfair competitive practices in early stages.
• - Act is a "catchall" statute

• - Labor
• - Argriculture and fishery associations
• - insurance
• - foreign trade
• - pro baseball (got exemption from supreme court in 20's)
• - cooperative research and production
• - join biz efforts to obtain legislation or executive action

Foreign persons can sue US companies in US courts even if violations occured outside US. Foreign persons also subject to US antitrust laws.

When a director serves on 2 public boards where one has $10 million or more in capital. Prohibited under Clayton Act.