Incredibly wealthy people who become that way by unethical means (implying thay steal from the poor)
created a monopoly over the oil industry
Antitrust Laws a.k.a anti-monopoly law
seek to make businesses compete fairly and prevent monopolies
Sherman Act (1890)
- 1. must show ACTUAL monoploy violation
- 2. not very specific
- 3. applied to labor unions
- 4. criminal sanctions
to carry on a legal contest by judicial process
Reasons for Competition
- 1. encourages innovation in new products
- 2. prices tend to drop in competitive market
- 3. fair distributions of income to all parties
Purpose of Antitrust laws
- 1. Encourage large number of competitors
- 2. PREVENT MONOPOLY
- 3. Provide workable competitionw (only room for a few competitors)
- 4. Prevent accumulation of economic power/wealth (ex: only two companies build commercial air crafts)
Ethical Issues with Antitrust laws
- people don't believe that govt. should be used to put a cap on how wealthy a person can become SO antitrust laws should not be crossed to become wealthy.
- IF YOUR NOT CROSSING THE LINE THERE IS NO CAP!
Sherman Act Provisions
- 1. Prevent a Monopoly
- 2. Illegally enter into a CONTRACT IN RESTRAINT OF TRADE
Contract in restraint of trade
- a contract agreeing not to compete
- (Microsoft vs. DELL)
Sherman Act sanctions
- Criminal Sanctions-a fine against corporation or executives face jail time
- Equitable Sanctions-injunctions or divestiture
- Treble Damages
if you can prove damage by a company and that they were violating the Sherman Act you will get the amount of damages x 3.
required by court to refrain from certain behaviors/acts
order to an offending party to rid itself of property in order to prevent a monopoly
Who uses treble damages?
- Competitiors (use it most)
- Attorney General
- (Walmart vs Vitamins)
Sherman Act Pleas
- Not Guilty
- Nolo Contendere
- Plea of Guilty or a conviction (prima facie cases for treble damages)
Is price fixing a contract in restraint of trade?
Rule of reason (1911)
- NOT every contract in restraint of trade is illegal.
- Prevents thats that are an "unreasonable" restraint of trade
- (fondu restaurant contract not to compete allowed because of rule of reason)
- ALWAYS illegal whether prices are fair and unreasonable or not
- Includes dividing up market territories or limiting supply (causes prices to rise)
agreeing on a price
problems with collusion
- eliminates competition
- what is beneficial today may not be tomorrow
Clayton Act (1914)
- 1. easier to prove a violation
- 2. sanctions not criminal (can't put in jail for what has not yet been done)
- 3. FTC may enforce
- 4. Justice department can enforce
- 5. antitrust laws do NOT apply to labor unions
Clayton Act Section 8
one person can't be on the board of two corporations if they are or have been competitors (could result in price fixing)
Clayton act section 2
- Unlawful for seller to discriminate in price where effect MSLC or TCM
- NOT EFFECTIVE SECTION of clayton act
What act amended section 2 of the clayton act?
Where do you find price discrimination?
unlawfuly sold at low prices to drive out competitors and then raised the prices after the mom n' pop shops went out of business.
Price discrimination Affirmative defense
- Cost difference (shipping)
- Manafacture ( may cost more or less for other people)
- Administrative (no overhead)
- Changing Conditions (prices are constantly changing)
Clayton Act Section 3
- unlawful to sell of lease a product tied to another whre effect might be to SLC or TCM
- generally unlawful when one product is pattened
- (salt processing machines)
- requires purchaser to purchase full line of products in order to get major product.
- (chicken delight case)
Clayton act section 7
no comopany may acquire stock of assets of another company if is MSLC or TCM
Clayton Act merger guidlines
- Horizontal Mergers
- Vertical Mergers
- Conglomerate Mergers
- Product Extesion Mergers
two companies merge
By directly merging with suppliers, a company can decrease reliance and increase profitability
firms to want to merge, to increase market share, synergy and cross selling. Firms also merge to diversify and reduce their risk exposure. However, if a conglomerate becomes too large as a result of acquisitions, the performance of the entire firm can suffer.
FTC Act 1914 (section 5)
prohibits entities from engaging in unfair or deceptive acts or practices in interstate commerce
stop a violoation before it has happened (section 5)
Section 5 sanctions
- cease and desist order
- daily fine
- consent order (order to stop/injunction)
FTC issues trade regulations/rules regarding entire industry
- health hazard warning for cigarettes
- leak-proof battery
unfair methods of competition
methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.
Deceptive trade practices
"regular price" or manafactures' list price may only be used if it regularly sells at that price
FTC Vs Mary Carter Paint
- is the second item really free?
- Mary Carter lost for deception, pain was originally less so the free gallon was actually $2
"Bait and Switch"
run ad at low price (bait), bait runs our so you offer more expensive alternative (switch).
- making the bait look worse that other products by upselling alternative items.
- (subtle form of bait and switch)
Recend Developments in Trade Practice Regulation
- Corrective Advertising
- Advertising Substantiation
- Comparative Advertising
- Must reverse deception and let consumers know the truth.
- Ads must be replace in all the same spots until the same amount of money is spent.
- Proof of claim
- Mock-ups can be use in advertising but not to establish proof
Ice cream ads
Campbell's alphabet soup
- became legal more recently
- (french fry wars)
way for FTC to decide if the advertisement is breaking some regulations
Fair Labor Standards Act
- Restricted child labor and set wages for first tme
Workers Compensation Recovery
- Loss of income 60%-70% of normal pay
- Death Benefit for family
- permenant/partial disability by shcedule lump sum check
- Medical benefits
- state law so different w/in each state
- eliminated defenses for employers
Employer defense before workers comp
- assumption of risk
- contributory negligence
- fellow servant doctrine (negligence of another employee caused injury so suit is served to them)
result of workers comp.
employer passes cost on to product increasing prices in order to cover the new cost of wokers comp.
American Federation of Labor
- after slump in 1930 membership tripled by 1936
- Was passed because employers had too much power
Wagner Act Legislation
- gave employees rights to organize and bargain effectively
- outlawed unfair labor practices of employers (yellow dog contracts & black list)
- Created nation labor relations board
Because of the Wagner Act Employers Can't do what?
- refuse to bargain in good fith with employees
- interfere with efforts to join union
- dominate union
- discriminate against union members
- agree with union to SECONDARY BOYCOTT
Conflicts between LAbor & Management
- Yellow-Dog Contracts
- Black List
Yellow dog contract
contratc between employer and employee that the employee will not join the labor union
prohibited members of labor union from being hired.
- still legal today
- employer locks out employees because they know they uion is going to go on strike
Taft Hartley Act
- union members were gaining too much power after WWII so congress reacted with this act
What unfair practices by labor unions did the Taft Hartley Act put an end to?
- refusal to bargain in good faith
- coercing employee to join union
- causing an employer to discriminate agains non-union members
- secondary boycott
- requirement of excessive fees
unions making employers pay people even if there is no job for them to do
80 day cooling-off period
president can issue if a union strike can affect national defense
what does the NLRB do?
- supervise union elections
- ajducated charges
- jurisdiction over interstate commerce
- "cease and desist" order
- resulted from hearings of the Senate committee on improper activities in the fields of labor and management, which uncovered evidence of collusion between dishonest employers and union officials.
Bill of Rights for Union Members made what possible?
- participate in elections
- free expression
- vote on dues
- sue union
- fair hearing before diciplinary action
- could see a copy of collective bargaining agreement