1. (the first class) The objective of this class, to analyze antitrust in economy way, the following are the main jobs

a. Horizontal restraintb. Monopolyc. Vertical agreementd. Merger, taking over the competitors

2. Economic price theory and the four graphsa. The central question is economic efficiency (allocative efficiency)b. The first one, single seller under perfect competitive market

i. What does perfect competitive market mean1. Cannot make a price decision, the price they face are the

same2. Sellers are the price takers

ii. What is the marginal cost the single producer face1. Why does the MC curve go down and go up again2. If MC goes down all the way, it is a natural monopoly, and

you’d better expend your productioniii. MR curve is flat

1. Because the producers are price takeriv. The question is, how much is the producer going to produce

1. When MC = MRc. The second one, tell us why perfect competition is the best to us

i. The central question is the consumer wealthii. The second graph is about the entire industry

1. Supply curvea. It is the summation of the MC curveb. 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 curvea. Desire for the widget will go up when the price is

lower, so the demand curve will sloping down3. The equilibrium is when the supply curve cross the

demand curveiii. Efficiency, allocative efficiency

1. Given the alternative, they got what they wanta. 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 = Piii. Why MC /= P

1. Because the producers no longer is price taker2. The demand slope down,

iv. What is the effect of that1. Still MC = MR2. But produce less under monopoly3. We could find out the price under monopoly from the

quantity4. The reduction of output means the consumer should pay

morev. Deadweight loss due to the reduction of output

1. Compare this situation to the allocative efficiency2. The consumer will spend money on other items

vi. How to find the price under monopoly1. Two step,

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

b. Second the pricevii. Why MR slope down

e. The last one, mergeri. After merger, the producer are able to influence the price, they

will produce less, and raise the price1. Consumer surplus, less2. Producer surplus, more3. Deadweight loss, the consumer surplus disappeared

ii. Another effect of the merger1. Average cost of making produce

a. If the producer are more productive, AC will fall2. The problem is the balance between the fall of AC, and the

loss of consumer surplusa. Deadweight loss – efficiency gain

3. (the second class) Discussing the fourth grapha. The major problem is the loss in allocative efficiency and the gain in

productivity efficiencyb. What is the real loss due to the market power

i. Some of consumer surplus disappeared1. Part go to the producer2. Part become deadweight loss

ii. Gain of the merger1. a lower AC because of the productivity efficiency2. why use merger as example, because monopoly has less

incentive to increase productivity3. Why productivity will come,

a. Because threat from future competitorsb. Reduce cost mean more profitc. 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 policyb. What is the productivity gain, and what is the consumer loss

5. Sherman Act 1a. 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 clause6. 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 wayc. Peckham, it is impossible to know what is reasonable

i. Where do we get the information – from the marketii. The price itself is the information system,

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

7. US v. Addyston Pipea. In English common law, what does restraint on competition meanb. 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 legalc. What does purpose mean?

i. Business purpose other than making moneyd. 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 pointsa. Statutory, Sherman act 1,

i. Not intend to prevent all contractb. 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 efficiencyi. It is a fundamental economy proposition

ii. Price system itself provided needed information9. 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

efficiencyiii. 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 ruleii. What are the possible justification, productive efficiency

10. CBOTa. Issue,

i. What is the restrictionii. Would the spot sale influence call sale, and would future influence

the priceiii. 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

marketiv. 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 exchangei. It will be easier to find the best price, because price is a system of

informationd. It is ancillary, because from 9 am-2 pm is the public market, so it can be

justifiedi. People can take that price information into account and make

decisionii. It there connection between the restraint and the productivity

efficiency1. Is it real necessary to have the restraint2. The restraint do not have much effect

e. The substitute of the call pricei. Spot, future

ii. How to evaluate the substitute, information on the percentagef. Argument: there are a lot of people can participate

i. Not a good justificationg. 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 assignmenta. Reconcile CBOT and pottery

12. Questions I asked Professor Ma. 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 reasoni. We will discuss more about that in future classes

ii. Firstly we should use per se rule, and then use rule of reasoniii. We will also discuss more about price fixing in future classes

13. ( the fourth class) 3 things of Chicago Board of Tradea. 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 justificationb. 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 efficiencyi. 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 law14. Trenton, this case is a good law

a. What is the issue of this caseb. The defendant argue that the price is reasonable

i. But the key is that the court cannot tell the pricec. How can the case reconcile with the Chicago case

i. In Chicago, the price was set by the marketii. In this case, the defendant did not argue the connection to the

productivity efficiencyiii. 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 Oila. Footnote 59b. The main question is why use per se rule,

i. Why is fixing price per se illegal, even without evidenceii. And, where can draw the line

c. Argumenti. There is no advantage, no possible benefitii. There was a loss of efficiency

d. What is the argument of defendanti. 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 manipulatione. The market problem can be solved by market itself, instead of cartel

i. For example, You can use future to hedge the riskii. 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 analysisg. Question, about agreement for setting price

i. It must be agreement with competitorsii. The it must be a concerted action, unless you have implicit

agreementiii. Conspiracy

h. Although the defendant claim that their action are good to the marketi. But we do not want private enforcement of law

16. Question 210 (a)a. It is illegalb. And the answer if the sentence in p138, illegal per sec. 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 systemd. Antitrust law is about resource allocation

i. Everything should go to highest and best use17. Question 210 (b), is the maximum price legal or illegal

a. It is illegalb. Tomorrow we will analyze that

18. (the fifth class) take away pointsa. In Socony, we discuss about per se rule

i. Either raise or lower price, if it is price fixing, then use per se ruleii. The question is when to apply per se rule

b. About stabilizing pricei. 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 optimal19. Question 210 (b)

a. It is illegalb. Although the law firms lower their cost, but it has bad potentialc. What is the coordination (connection) between the bill to client and what

they pay to the 1st year associatei. 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 priceb. 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. Topcoa. What is the issue

i. Was the defendant come together to create private label illegalii. Was territory restriction illegal

1. It is straight forward application of per se ruleb. 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 casei. How does the horizontal agreement help the private label works

ii. Because it is exclusive1. 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 consider1. 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 reasone. Is that good for consumer

i. It is congress’s job, not court’s jobii. 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 decideda. The professor think that the congress has done their jobb. Whether Topco is good law depends on how small the effect of the

agreement on the marketi. The question is how can court analyze the market

24. Classmate’s question, what is inter-band competitiona. The court do not know the reasonable price, even they know it today,

they do not know it tomorrowb. 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 effect25. BMI

a. Is there price fixingb. Why court do the rule of reason analysis

i. What is productivity efficiency in this casec. What is the reason they do that (blanket license)

i. Transaction cost between individual agreement is highii. There is real productivity efficiency

iii. So we should permit the price fixing26. Question 217(b)

a. They are setting priceb. Under BMI, is it legal or illegal, illegal

i. It is under the justification of patent lawii. The action of the agreement are easier to monitor

27. Next class’ question, in BMIa. What is the effect of the agreement on individual contractb. What is the loss of welfarec. 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 rulei. In Socony, we discuss per se illegal, and BMI show that it is not

easy to determine the situationii. Because in BMI, although there are some price fixing, the action

of the defendant increase the efficiency, so it is legalb. How to characterize the situation

i. When to apply the per se ruleii. 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 rule29. 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 difficulti. 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 interfere2. And there is not easy to know how many is better

d. Does BMI overrule Topcoi. 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 havef. 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 casea. It is illegal

i. It does not allow people compete the priceb. Why is it harder to get a competitive price

i. There is no other engineer to competeii. Other barrier, such no time to choose other engineer

c. The justification of Engineersi. Protect the quality of service

d. How does market address this questioni. Legal system

1. Criminal liability2. Torts

ii. Government regulationiii. Reputation

e. Quality is one characteristic of service provided by the engineersi. The customers need different kind of quality

f. It is a clear violation of shermani. Because it prevent customer’s choice of variety of quality

31. The law school examplea. 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 jurisdictionc. Why is it different from the Engineers case

i. It prevent participant from directly conspiracy32. Professor’s opinion about per se rule and rule of reason

a. There are not much difference between per se rule and rule of reasonb. It is less important to think about the difference

i. You should look at the justification33. 220 (applying engineer)

a. (a): Illegal, restrict competitionb. (b): Illegal, do harm to the consumerc. (e): illegal

i. It also mean less choice to customer, the studentsii. 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 agreementi. If it is unilateral, defendant cannot be sued under Sherman act

35. NCAAa. 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 equalizeb. compete against other entertainmentc. 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 speciali. it means they have market power in that market

36. Dentala. What is the issue, pg 190b. What is the potential downside and potential benefit of the agreement

i. The defendant argue the agreement restrict misleading decision1. What is the possibility of misleading decision

ii. Who has the most knowledge about dental customer1. The dentist

c. Does dental industry so special that we need that kind of agreementi. What is the agreement

1. In some sense it is pro-competitive.2. Court argue it restrict true quality

a. Consumer are ignorantb. They need more info about price

d. rule of reasoni. We need to find out the connection between info and

productivityii. 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 costf. Compare with Engineer case

i. What is the difference1. This is just advertisement restriction2. In Engineer, you cannot set the price

ii. Is price information crucial1. Information are systemically2. Engineer more deal directly with consumer

iii. How could the professional do good job1. In these two cases, they argue restriction can help

customer2. But it is the government’s job

a. Why rely on self interest people3. People are not completely rational?

37. (the eighth class, Sept 18th)38. Problem 225

a. illegalb. 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 economyc. What is the economical analysis to prove that the agreement can be legal

i. In what way can the hospital save money1. And how can they increase productivity efficiency

d. If this hospital is the only one in this areai. We should analyze market power of defendant, and how that can

decrease allocative efficiency39. Texaco and problem 227, like the case,

a. Joint venture try to set priceb. What is the difference between this case and Socony

i. In this case, defendant are approved by FTCii. They act as one business (the fundamental characteristic)

1. Defendant argue that can improve allocative efficiencyc. 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 efficiencyii. We should balance the necessity of the joint venture and the

danger to efficiencyiii. Also, in this case, there is potential they will cooperate in other

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

i. To prove there will be more innovation? Not convincingii. 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 efficiencyi. Set up separate research group

f. Compare between texaco can topcoi. In texco, there is just one entity; In topco, there are separate

entitiesii. 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 socony41. Review

a. In the last 3 week, we discuss explicit agreementi. If the agreement is naked price fixing, then we sue per se rule

ii. If it could improve efficiency, we should use rule of reasonb. We also discuss whether the agreement is necessary or ancillary to the

improvement of productivity efficiencyi. 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 efficiencyi. How substantial is the effect

ii. How much market power do they haveiii. How to argue they are connected

d. Productivity efficiencyi. How to argue the agreement can improve productivity

e. The professor think Topco is a mistake42. Implicit, oligopoly

a. Although the agreement is implicit, but the competitor always have incentive to undercut

i. Oligopoly can also decrease allocative efficiencyii. In oligopoly, it is not necessary for them to have explicit

agreement1. 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 traced. The question is, why do they have the implicit agreement to set

minimum pricei. They know everyone well

ii. It is logical to do that, other will followe. 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 efficiencyf. In some way, the vertical agreement is strange, and need more analysis

i. Should interstate want the distributors to run efficiently1. Why would they want oligopoly between distributors

ii. Why is it interstate’s interest to have minimal price1. People may see it elsewhere

g. Vertical agreementi. Intend to distributors to act more efficiently

ii. Why they have vertical agreement1. It is not simply an agreement among competitors

44. Theater casea. What is the business justificationb. 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 quoiii. 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 consciously45. (Sept 22) What is the nature of agreement

a. Interstate v. Theateri. how to determine the parallel business behavior, whether there is

an agreement (conspiracy) of notii. 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 interstatec. antitrust does not pay much attention to the formality, contract

i. it concentrate on economical argumentii. 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 competition46. American Tobacco

a. Why it is a carteli. When the economy is down, they raise the price, that does not

make sense

Manufactures

Vertical agreement (minimal price)

distributors

ii. What is the agreement, the implicit agreement is that when price leader rise the price, other will follow

b. What can court doi. 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 unjustified1. Both court and judge cannot set the price

iii. The reason is that it is bad for individual1. If they raise price, and other do not follow, they will lose

the marketc. The defendant’s argument

i. They argue the justification is to make more advertisementii. The historical background is 1931, the great depression

1. The how can court say it is not a good argumentiii. What differentia it from Theater case, why it is not just parallel

business behavior1. Because the action is interdependent, and your action is

dependent on othersd. The court’s argument

i. They raise price on the same day1. Why is that a good point

ii. When the demand is fall, they raise the pricee. What can court do,

i. is there some remedyii. who can court coordinate

1. it is rational for them to behave like that2. what is the possible solution

a. break up the companyiii. why do we lower the price of tobacco

1. Tobacco kill people, so oligopoly is good to the societya. Student said but only a few a people will be saved

2. The professor think it like the engineer casea. It is a public policy problem, we should let

legislator do that job, b. Antitrust is not about public welfarec. So it is not a good justification

47. Problem 239

a. (a) the big player is the price leaderi. There are economical reasons for following the price deduction

1. Because of scale economy, cost are lower2. Better advertisement, more influence on the market3. Market power4. Price leader has better knowledge

ii. Why price are going down is not a defense1. Because price will lower anyway,2. It is not an issue in antitrust

a. Antitrust is about efficiency48. Bell Atlantic

a. It is a famous civil procedure caseb. Two claims

i. Keep competitors out of marketii. Not compete one other

c. Evidence of parallel conduct is not enoughi. Theatre case

d. Argumenti. They do not assume other company will do that

ii. Why do not go to other’s territory1. Is that independent justified?

iii. They have been monopoly for a long timeiv. The discovery is very expensive because some internal reason

1. It is a plausible argument2. And it will help consumer welfare3. In Tobacco case, the discovery is 15 years

a. So that is the concern of the courtb. And it is opposite to the purpose of antitrust

e. Dissent opinion, Stevensi. The evidence of the CEO

1. It would profit, but not right2. Stevens also suggest limited discovery, not huge discovery

a. Was that a plausible way49. Tomorrow’s question

a. If there are only three competitors in the market, will that changeb. If baby bell have been convictedc. 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 coordinationb. There are some ways that make it easier to coordinatec. The good side of oligopoly is that more info means more efficiency

51. Maple flooringa. What is the evidence

i. They calculate the average costii. They also distribute the price book

b. What is the decision of the courti. It is not a violation of Sherman act

c. What is the benefit of the agreementi. The price is open to the public

1. Consumer also know the price, d. There are some historical price fixing, is that importante. What is the basic point pricing, is that a problem

i. That is an advantage to the consumerf. Compare to the American column, why is it an easier case

i. This agreement control larger amount of productionii. There are less member, more concentration

iii. They has a history of fixing price52. Comparison

a. Both righti. 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 wrongi. Some argue it should be per se rule

ii. To differentiate the two case need us to understand the structure1. But we could not know better than the industry it self

iii. What is the agreementd. A wrong, m right

i. Exchange information is not essential to decrease competitionii. A is more about industry segregation

iii. If M is right, then A should be wrong1. Because M is an, there are less member

iv. And exchange information can promote honesty1. Because it keep the buyers know about the price2. But like the engineer case, it is not an issue in antitrust

v. The price is more stable1. Is that an justification

53. Sept 30 passed classa. In oligopoly case, we should find the agreement, otherwise we could not

use Sherman act, agreementi. 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 1i. 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 that54. Container (dissent’s opinion)

a. Dissenti. Easy industry enter

ii. A lot of excess capacityiii. Does these two evidence support dissent’s argument

b. The professor does not think soi. People enter the market because the price is above the market

priceii. Cartel leads to the excess capacity

iii. So, easy entry does not mean there is no cartel1. If there is excessive capacity, we can argue that there is

carteliv. Marshall’s argument is self-contradictionv. And the key of the above analysis is the combination of easy entry

and excess capacity55. Fashion

a. What is the nature of the agreementi. Prohibit retailer from buying from copiers

ii. How do they make the determinationb. 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 justification2. It may not have much effect on the market3. It may increase allocative efficiency

c. Compare with the BMI case, i. They both argue for protecting intellectual property

ii. But in BMI1. 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 lawi. Compare with the socony

ii. Why it is not a good argument1. Private company should not enforce state law2. Public service should be done by the government

iii. Government’s action, page 77e. If it is between single manufacture and retailers

i. It is vertical agreementf. 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 actos56. Problem 261(a)

a. What is the agreement, they restrict access to loanb. What is the benefit of the agreement

i. Prevent the riskii. But this job should be done by the government

c. What is their argumenti. Prevent bad loan

ii. There is no agreement on price57. Problem 262(b)

a. What is the differencei. In (a),there is no product efficiency

ii. (b) can improve product efficiencyiii. 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 ai. People could less opportunities

ii. And there is more opportunity for collusioniii. The danger is determined by their market share

c. What if the government require them to doi. Government will pass the bill

ii. how could that change the allocative efficiencyiii. 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 marketiii. Government can also cause the problem

58. Klora. Issue

i. What is the reason of not using klor, individuallyii. What if they do it jointly

b. Why they do thati. 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 consumerd. Incipient argument

i. May not hurt use now, but will in the futureii. 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, klora. It is bout boycott, competitors agree not to deal withb. How is the boycott affect the competitionc. Should it be per se ruled. 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 competitioni. So, black is not particular about competition

ii. He is particular about welfareiii. It has potential to be monopoly, and monopoly will decrease

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

i. If the agreement has not potential benefitii. There is o need to decide whether it is good or not

iii. So, we do not want waste time and money60. Associated press

a. What is the issue in this caseb. What is the remedy

61. Question 265(a)a. It is a natural monopoly,

i. It need high cost to construct the railwayb. It is a network industryc. The case is easier than AP, because there is no alternative

62. Question 265(b), legala. It is about new invention

i. If we decide it is illegal, then will reduce their incentive to do so63. Which two of the three are more similar

a. Terminal, AP, Edwardb. From the perspective of productivity efficiencyc. Is the agreement to have exclusive agreementd. 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 posti. We shall look at some benefit after the time

64. How did black understand the competitiona. P286,

65. FOGA, is AP like FOGAa. What is the difference between the two casesb. The difference is between the two agreement

i. The agreement is AP increase productivity efficiency1. 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

governmentc. So, AP is about new production, new business method, and is as

beneficial to the society as new productd. 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 case66. Problem 266

a. We should not use black’s analysisb. Then, how to deal with this case

i. Allocative efficiencyii. business justification

67. Oct 6 boycotta. In large picture, there is no difference between boycott cases and

horizontal restraints casesi. 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 firmsi. (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 secrets1. 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. Northwesta. the facts: why Pacific is excluded, what is the boycott, and what is the

resultb. 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 efficiencyc. 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 processi. Pacific complain that northwest do not apply the rule in fair way

1. Complain about the proceduralii. 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 292a. Is that means market power?b. In Silver, NYSE is the only choice, but in this case,

the wholesale company can easily be set up3. 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 questioni. 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 trustiii. 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 expelled1. Shall we discuss market power in this case2. Shall we discuss the fairness of the procedure3. 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 argumentsi. Market power

1. If there is evidence of actual detrimental effect, do not need to show market power

ii. No effect1. They did not show the productivity advantage (as in Klor)

iii. Qualify justification1. They argue that they could provide good care2. 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 info1. 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 competitioni. 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 efficiencya. We should determine how close is the productivity efficiency and the

agreementi. We will discuss more about that in monopoly

74. Yesterday’s question, which one is more dangerousa. Lobbying the government to achieve monopoly, or entering into a cartelb. What is the justification of the government

i. Government is doing this for public interestc. 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 serviced. What is the good of allowing government doing this

i. Government should protect public interestii. They have interest, but do not have strong incentive, so they are

ignorant in some way1. that is why consumer has to lobby the government

e. why do we allow the lobby, or why Sherman act do not make it illegali. because we actually need the people to get information

1. but the information is self-interest infoii. it could also help democracy

1. because both sides will provide info75. 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 requirementb. Noerr-Pennington immunity

i. Why we give them the immunityc. What is the real objective of the railway

i. They want to create a bad image of the truckii. But this cannot be an argument, because there is no specific

evidence to demonstrate that

d. Noerr exceptioni. What is the standard,

1. sham2. is that a right standard,

ii. what is the Black’ argument1. he think intent can be relevant

iii. what is your intent to bribe legislator1. antitrust focus on competition2. Judge Black try to find balance3. Bribery law will deter illegal action from politics4. Antitrust law should protect consumer5. So there is no overdeterrence

76. Oct 8th, what is the purpose of the D-P immunitya. 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 system1. It generate information the politics need

iv. This is the legitimate reason to protect the defendant’s lobby77. Noerr’s exception (sham)

a. How to define itb. Two possible ways

i. Objective1. If they have legitimate campaign, we do not look at

intentionii. Subjective

1. Real Estate will discuss how to define subjective intention78. 274,

a. It is hard to define the intentb. We will use the effect as evidencec. N-P is a strong immunity

79. Californiaa. They want to influence judge (compared with legislative in Noerr)

i. They use court to prevent plaintiff’s accessb. What is the difference between this case and Noerr

i. The strategy used by defendantc. What make it a sham

i. Subjective intentiond. Why this case is worse than Noerr

i. The misrepresentationii. And the difference between judicial and legislative

e. Do we overdeterrencei. Because there is additional harm to the consumer welfare,

ii. So, no overdeterrence80. 27581. 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 burdenc. 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 justifiedii. Is that a way to know defendant’s intent?

e. The defendant’s action will hurt its reputationf. If it is objective justified, you do not need to show intent

82. Oct 13 Real Estatea. The plaintiff must show its object base

i. To prove that your complain is not frivolousii. The problem are what is the scope of appropriate litigation

iii. And what is the necessary condition of the objective baseb. It is a misleading that there is no subjective test

i. It is not easy to use subjective test in cases like real estateii. In previous cases, because there is a agreement, then the

agreement itself can prove the subjective intentiii. But in the case like real estate, you do not need to have a

agreement83. Indian Head

a. What distinguishes this case from Noerri. Lee said it is not political, because association is not a political

organizationii. 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 thati. The difference is that in this case, they use their rules to influence

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

c. Interest groups can do something good for usi. We rely on them to get the info

ii. But we do not need them to create the restraintiii. That job should be done by the legislators

d. Restraint is the agreement among competitorsi. 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 standardi. Is that legal?

ii. There is some positive productivity efficiency, iii. what is good to the consumers? It can lower productivity costiv. is the restraint ancillary to the setting standard

b. if the expert are paid by the competitors, then there is inherent biasc. then, where is the line, between the legal action and the illegal action

i. such as, if the university get the donation from the competitorsd. so court should set the norm

85. another question, congress want to set a new bill on environmental goala. there is some new widget can reduce pollution but the cost is 371b. 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 governmentd. 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 damagea. we should calculate what is the damage before the legislator pass the

restraint, and what is the damage after that87. FTC v. SCTLA

a. Strike is not protected by the bill of rightb. But it is permitted under other law

i. Why don’t they take that exceptionc. What happened in this case

i. The lawyer try to fix the priced. Why they did not get the Noerr immunity

i. Noerr’s immunity cannot extend to every caseii. 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 efficiency2.

88. Tomorrow we will discuss more about the fact in this casea. And the structure of the caseb. And how it can prove allocative efficiencyc. And we will also enter the New section, monopoly

89. Oct 14 Noerr Immunitya. Two different kind of actionsb. Act without actually create restraint

i. And influence the government to create a restraintii. 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 efficiency90. 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 justiceii. 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 case91. Monopoly

a. Sherman act section 2, monopolizationi. Two step analysis

ii. Assume the defendant have monopolyiii. Whether you have abuse your power

b. What is monopolyi. It is depend on the structure of the industry

92. Compare Cartel and monopolya. Which one is worseb. Monopoly is like cartel

i. It set supra competitive pricec. Whether we should condemn monopoly per se

i. What is the distinction between monopoly and cartelii. 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 monopolyi. How to distinguish natural and unnatural,

ii. It is very hard to definee. Cartel have a new entrance to market

i. If they set the price too high, new player will enter the marketii. Monopoly is more flexible

93. Standard oila. What is the unduly restraint, b. How to find out they actually monopoly power

i. Monopoly + some factors = monopolizationc. How to define the plus factors

i. How does the judge can use the economic analysis to define thatd. What is the method they use the deter the new entry, and how could

that affect allocative efficiencyi. They use excess facility

ii. But they can argue that they made a mistake of the excess facilitye. The professor also asked about noncompete agreement with employee

i. Is that monopoly or abuse of monopoly power94. Am Tobacco

a. Judge think am tobacco’s action is not business justifiedi. Is that the plus factor?

95. Alocaa. The government is better to protect the market than the market itselfb. What is the issue in the case

i. How did they abuse the market powerc. Evidence

i. They did not let foreign firm sale in the marketii. They signed exclusive contract with water power

iii. They have excessive capacityd. The test is different from the first twoe. The burden is on the defendant to show that they did not abuse the

market powerf. 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 questiona. What can we do about the damageb. How to compare that with cartel

97. Oct 15 a. Monopoly + not business justified practice = monopolizationb. The monopoly cases are about abuse of monopoly power

i. So, the question is what is an abuse of powerii. It is not a normal business course

iii. In the past cases, Judges use different standards98. What can be the remedy

a. Dissolvei. 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 businessb. Fine

i. How to determine thatc. Bad remedy will hurt consumer welfare,

99. United shoea. What is the non business justification of the act

i. 10 year term lease

1. 10 year can lower the cost2. But they should give consumer the choice

ii. They only lease the machine, do not sale1. They do not give the consumer the option

iii. They combined the service contract with the lease contract1. It make the small player had to enter into two market

simultaneously2. But there are some business justification to do that, such

as protecting their nameb. Price discrimination

i. Some people had to pay more, some people could pay lessii. 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 loss100. Microsoft101. 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 competitioniii. 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. Microsofta. What is Java, it is a middleware type systemb. What is the threat of Java, it will help potential free operating systemc. What did Microsoft did, and how could that foreclose competition

i. First argument, Microsoft just use their own Java to competeii. 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 remedyi. 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 paragraphsi. about the technology change

1. what is the effect of technology change on the antitrust2. we will worry less about the market power (it will harder

to analyze )103. Aspen

a. What is the liabilityi. A monopolist can violate section 2 by terminate an agreement

with competitor?ii. How to provide a business justification to excuse the refusal to

dealb. 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

preference1. The business justification is whether the action will

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

i. Terminal railroadii. Associated press

f. It is a joint agreement between competitorsi. It could increase productivity efficiency

ii. And there still are some incentives to competeg. If it is easy entry market

i. We do not need to worry about the market power104. Oct 21 105. when does antitrust discipline the market better than the market itself

a. for different alternatives to antitrust lawi. deregulation, allow more competition (is deregulation means

government’s action)ii. technical innovation, in Microsoft case

iii. international tradeiv. better capital market

1. if companies can get loan and capital easier, there will be more entries

106. question 328 da. it is not a monopoly, because it is research, no easy to find business

justificationi. share research will discourage company to invest in R&D

b. Noerr Immunityc. 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 monopolyi. business justification for excess capacity

1. Because you can adapt to the change of demand easilye. Do not understand its meaning

107. How to prevent joint enterprise to be anticompetitivei. You can have an independent standard setting group, (in Trinko, it

is FCC?)108. Trinko

a. Why this case not like Aspeni. 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 itb. The judge think that Aspen is at or near the outer boundaryc. 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 industryi. 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 welfaree. FCC’s regulation

i. Expertise know the market betterii. FCC is more specific,

iii. Is that right?f. Is there harm to the consumers?

i. How can antitrust remedy that109. 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 pricingi. It may discourage people to lower price

c. What is the logic behind regarding predatory pricing as illegali. They cannot continue the low price and will raise the price in the

future110. Oct 22111. Predatory pricing

a. It is an abuse of monopoly powerb. If it below the marginal cost, the it is not business justified

112. Barry Wrighta. Judge think the price is about the marginal cost, and reject the plaintiff’s

argumentb. Why the judge reject 9th’s testc. I took a nap in this class and missed most part of this case

113. Question 334a. It is not enough to only find Delta charged a monopoly price, you should

find whether they have business justificationi. In this problem, its monopoly is lawful

b. It is legal, because it use predatory pricing to prevent new entryc. 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 Potteriesi. 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 determineii. Productivity efficiency

1. We think Cartel will hurt productivity efficiency2. In Barry, if the price is about marginal cost, it will improve

productivity efficiency114. 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 presumptionb. In this case, the judge think the plaintiff’s evidences are not convincing

i. Reduce outputii. Rise price

c. Dissent opinioni. Because he is too old, Steven focus on intent, instead of using

economic analysis115. Oct 27 116. About Final Exam

a. 3 questionsi. The first two are general question, you should find out the issues

and analyzeii. 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 decided117. 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 costb. In the past case, to decide that the defendant’s cost is predatory pricing,

plaintiff should provei. It is below marginal cost

ii. Defendant will recoup it in the futurec. AMR is about the first aspect of the test

i. There are varieties of accounting issuesii. So, the problem is how to use the accounting rules and get the

economical analysisd. Someone ask question about the balance between consumer welfare and

pro competitivei. 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 powera. The question is what is market power

120. Alcoaa. Why the court use percentage to determine whether there is monopoly

i. Above certain percentage, you are likely to manipulateii. It is the proxy for ability to raise without substantial competition

b. The elasticity of the marketi. 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 market1. Defendant did not sell all the product and use it by

themselves2. We should include it because defendant can flood the

market anytime, and sell it externallyii. 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. Import1. Should not include, because of tariffs and transportation

costa. The professor think there is problem with thatb. Trade may be more substantial than what judge

predict, so we should include that2. International trade is very important to antitrust analysis

a. It is the best anti monopoly discipline121. Problem 354

a. All these calculations are righti. So, the problem is which we should use

122. The question of next classa. How does popular culture affect the monopoly case

123. Oct 29 a. What is market powerb. From Alcoa, percentage is necessary to determine the market power

i. Other factors, such as elasticity, control of supply, and international trade

124. Problem 354a. (d)(1) most uses, but not all, so there is still discipline on price risingb. (d)(2) all usec. (d)(3) rise price, a lot of substitution

i. But the question is whether they already charge monopoly priceii. 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 Ponta. What is the market, packaging material or cellophaneb. The essential question, can they raise price without responsec. Profit is not significant

i. Why look at profitii. 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 356a. (b) no necessary

i. Because the cost is different, so although in the same market, the price could be different

127. Problem 357a. Tariff, some market power, but no monopolyb. Internal memo

128. Other pointsa. 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 competitiond. You could have market power in a product, but not in the market

129. Microsoft130. Oct 29, Question 360

a. What should we take into considerationi. Feasibility , cost

ii. The guideline at page 501, potential b. other arguments

i. Other competitors can enter into the marketii. Government regulation

iii. Exclusive contractiv. Rule of lawv. Capital market

c. If entry is very easy, is there monopolyi. New entry will make it impossible to raise price,

ii. Percentage is only a proxyiii. The guideline at page 502

d. Two stepsi. How to define the market

ii. Whether they have monopoly power131. 361

a. Yesb. No, monopoly is not monopolizationc. Nod. The possibility to monopolize

132. Lorain

a. The possibility to monopolizei. In the past, they have history of monopolization

b. How is it harder for Radio to contesti. No ad

c. Is this exclusion practice business justifiedi. Business justification is not keeping monopoly power

ii. There is no justificationiii. And the market is not a natural monopoly market

d. What is the cost in the short runi. Less revenue in the short run

ii. So it is like the predatory pricing casese. WEOL?

i. They should not worry too muchii. Because it need a government license to set up a radio station

1. they could look for government regulationf. this case is very clear, because we could not find business justification

133. problem 364a. did A violate sherman act

i. no they did not, there is no agreementb. also no violation to sherman act 2

i. need enough market share, and possibility to monopolize134. Sports

a. What is the market, and what is the producti. There is a lot of substitute

b. The distribution marketi. Does not seems they could control the distribution market

c. The reason of the termination is not legally relevanti. Court does not care that

d. Business justificationi. There is justification for the family business

135. Next class, checklist of market definition136. Nov. 3 checklist

a. Product marketi. Du Pont case, how much does the competitors compete with the

productb. 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 priceii. 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 pricei. Court cannot figure out the market price, and make it difficult to

sue monopoly139. Other factors that have antitrust effect

a. Free trade is one of the best antitrust policiesi. The growth of trade makes antitrust unnecessary

b. New entry, which mean the supply response to the raise of pricei. It is Adam Smith’s invisible hand

c. A well functional capital marketi. It means lower cost to compete with the monopolist

ii. It is also one of the best antitrust policiesd. Government regulation

140. Vertical agreementa. It is between manufacturer and distributorsb. It is the greatest revolution

i. Economic analysisii.

141. Dr. Miles a. Two issues

i. Secret process1. Is the price fixing agreement ancillary to the secret process

ii. Own the product1. What is the difference from the price fixing agreement

among the dealersb. Restriction on alienation

i. Common law is hostile to alienationii. But it is too broad

iii. And not a strong economic argumentc. It is like the agreement among dealers

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

d. The differencei. Incentive

1. Why would the manufacturer set a price to make the dealer have a easy life

ii. What it the cost to the manufacturer1. The output will decrease, and the profit will go the dealer?

iii. Economic analysis1. It would limit intrabrand competition, but increase

interbrand competition2. It would increase productivity efficiency3. Although it is price fixing, but not the same

e. What is the advantage of vertical agreementi. Free rider

ii. Improve serviceiii. What is the alternative to free riding

1. Assign territory between dealersa. That means give dealers a monopoly in that

territory2. Manufacturer provide the service themselves

a. But the dealers know the consumer better3. Transaction cost

142. Khana. In the previous cases, setting maximum price is per se illegalb. Why condemn maximum pricec. Why permit this kind of agreement

143. The agreement is ancillary to serve productivity efficiency144. Nov. 4 Class

a. Class after thanksgiving is cancelledb. Thursday is review classc. Wednesday lecture topic

i. International antitrustii. Robinson-Patman act

iii. Intellectual property and antitrust145. Khan

a. In Dr Miles, the court use per se rule to price fixing agreementb. 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 imperfectc. 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 efficiency1. Dealer will more incentive to penetrate the market

iv. It could also free rider problemv. 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 competition3. consumer will have more choice, and the resource will be

efficiently allocatedvi. under coase’s theory, the agreement could be a economic

decisiond. Klan is about productivity justification for maximum vertical price fixing

agreement146. Leegin

a. Overrule the per se rule of minimum vertical price fixing agreementb. What is the downside of vertical price fixing agreement

i. Dealer could form cartelii. 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 industryc. The majority think rule of reason is more appropriate than per se ruled. Why is the logic under overruling the per se rule

i. The Dr. Miles court do not have much experience on that subject1. 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 knowledge148. what constitute vertical agreement

a. leegin does not say149. Nov. 5 Leegin

a. The change from per se rule to rule of reasonb. So vertical agreement is not necessarily illegalc. The incentive of manufacturer could be coincide with consumer interestd. Under what condition could it be illegal

i. It is an Cartel agreement between dealersii. The manufacturers coordinate between themselves

150. Vertical agreementa. What is a vertical agreementb. All the cases are decided under the old regime

i. Now, if there is an agreement, we should use rule of reason151. Colgate

a. How did they make that clear that they will cut off price discounterb. 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 judgmentd. What is the downside risk

i. Lose competition between dealerse. How could it affect allocative efficiency

i. Dealership would be less efficient, because of less competitionii. The legal cost and administration cost would increase

152. 422(b)a. It is an agreement, b. An non-binding agreementc. It is like Colgate, is an unilateral action

153. Park a. Is it an unilateral action or an agreement

i. Unilateral , and force other154. agreement

a. Horizontal,i. Price fixing is per se illegal

ii. Non price fixing use rule of reason

b. Vertical, more lenienti. All use rule of reason

155. Monsantoa. 7th circuit’s reasoning

i. Because the action is based on other dealer’s complain, so it is an agreement

ii. Why other dealer complain1. Because they do not like competition2. To manufacturer, they want to know more info

b. Supreme court’s opinioni. Need more evidence to decide whether the action is independent

or non-independentii. The professor think there is no clear distinction between those

two actionsiii. It is not clear what will put you into trouble, and it will dependent

on different circumstancec. 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 agreement157. Nov. 10.158. The lecture on Nov. 26 will be international antitrust159. The vertical agreement cases

a. In the past, it is per se illegal, and the problem is to find a agreementb. Under modern rule, the court use rule of reason,

i. Monsanto case: suggested retail price + effort to controlc. It will be easier to find agreement under modern ruled. The real policy reason is

i. Other dealer always has incentive to complainii. Manufacture always has incentive to behave in that way, even

without agreement160. International Salt

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

161. 430a. (a) if you do not have market power on both market, then the agreement

cannot be a problemb. (b) monopoly in can will raise the price of can

i. Consumer will choose other productii. New producers will enter the market

162. If they already get monopoly profit in one marketa. It is not necessarily you can get monopoly profit in the tie-in market

i. Because of the economic costb. If the defendant did not get monopoly profit from the tie-in market, why

it could be a problemi. It will decrease the incentive to enter the machine market and the

can product marketii. It will increase start up cost

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

163. What about the patenta. If the monopoly is caused by patent, will that be different

i. The tie-in agreement began in patent areab. If the monopoly is caused by law, will that be different

164. In the International salt casea. There is no monopoly in the salt marketb. 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 that165. What is the argument of international salt

a. To protect the reputationb. 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 issue166. Professor is not sure about court’s justification

a. There is no harm at all in this caseb. And no possibility of monopolyc. How strong is the defendant’s productivity efficiency argument

i. Not very strong, but there is possibilityd. There is no threat to competition, and it has possibility to make the

market better167. 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 justification168. International salt is no longer a good law

169. Illinois tool casea. The old view is that if you have patent, than you have monopolyb. Congress change it view

i. The court, rely on congress’s opinion, also change its viewc. It overrule international salt

170. Northern Pacifica. What is the reasoning of this case

i. Restraint on alienationb. In this case, there is no requirement of market power

i. The evidence is that you make a tie-in agreementc. 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 effect171. Nov. 11, 172. Northern Pacific

a. In this case, there is no requirement of monopoly poweri. It is the worst reasoning antitrust case

ii. There is no economic rational under this case1. The court think big firm can be harmful

173. Two questionsa. Why use sherman, rather than clayton act

i. Sherman is more comprehensiveii. Now there is no difference

b. What did them want to accomplish, or what is the idea behind the timei. The defendant want to evade price regulation

ii. A low price for land transportation and bundled with the service174. Jerrold

a. What is the tie-in productb. Why should defendant make a requirement contract

i. To protect its reputation1. If the system broke down, it will be costly to figure out it is

whose faultc. It is one product or two products?

i. Court’s test1. If you can buy it separately from other company on the

market, then there are two productsii. Is it a sensible test? The professor doubt about it

1. To the consumer, it is only one productiii. In some way, the defendant’s argument is reasonable

1. Economy of scale2. The joint product can be better3. 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 Pacific177. Jefferson

a. The majority want to change N.P.’s decisionb. If the plaintiff what to prove the agreement is illegal, what does he need

to show i. Anticompetitive consequence

ii. Market powerc. 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 choiced. 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. 12a. Jefferson,

i. It is a two-product tying agreement issueii. What is the majority test, Jerrold’s test?

b. What is the downside of the typing agreementc. Does the hospital has market power

179. The court use different test in this casea. O’ Connor testb. Steven’s testc. Business justification test

180. Microsoft case

181. Standard Oil (requirement contract)a. Violation of Clayton actb. The defendant do not have market power in this casec. Is it a sound holding?

i. Whether this agreement can improve productivity efficiencyii. The court think that it would benefit both seller and buyer

d. So, why is it illegali. It will lead to less competition

ii. Court is unconfident to evaluate1. if there is no market power, then no danger to

competitione. if the defendant has more market share, should we worry about that.

i. What is the real cost to competitionii. 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 learned182. Judge douglas’s opinion183. Barry Wright

a. Citing Standard Oil, and try to distinguish from that caseb. What make it potentially worse than Standard Oil

i. Market shareii. Three facts

c. Possible business justificationi. Favorable price

ii. Not a restrain to new entryiii. Transformation

184. Nov 17a. Tomorrow’s assignment, general dynamic

185. Sidebar, about progress in antitrust lawa. The antitrust law developed with the theory of consumer welfare

186. Tying agreementa. Plaintiff must prove

i. Market powerii. 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 harmful187. Barry Wright188. Merger189. Brown shoes

a. Define the marketi. It is essential to find the market power

b. What is the market in this casei. It can be defined by the kind of shoes

ii. And also can be defined by the geography marketc. 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 thatd. The court condemn the merger because it is over 5% market sharee. What is the rational

i. The corporation will be efficiency and hurt small competitorsii. Incipient antitrust issue

1. Internal growthiii. The court might have to approve other merger

1. But merger is not per se legalf. We will see the argument of incipient of merger again and againg. Brown shoes case is one of the worst opinion

i. At least it did not take into consideration of new entry190. Nov. 18 Merger191. U.S. v. Philadelphia

a. How to define the marketi. Product definition

ii. Geography definitionb. Product definition

i. Commercial bankingii. Bundle the service, integrated service

iii. Some cost to that definitioniv. Under this situation, marginal customer will determine the

boundaryc. Geography market

i. Why four counties is the market

ii. Some people just go to the community bankiii. 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 shoesii. 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 customer2. The competition in one market, should not mention other

marketsii. Customer move to suburbs, and the bank will follow customer

1. Those customer could be served by new competitor2. The merger increase the cost to new entry, and make the

market less efficientiii. 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 7a. Does the plaintiff need to show the merger is monopoly, nob. How to justify the different rule of merger, compared to the rule of

monopolyi. Incipient argument

1. But it is unpredictableii. The productivity efficiency is a price to allocative efficiency

1. Is this argument consistent with sherman193. General dynamic

a. What is the market, coalb. Who is the customer, the power plantc. 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 19195. General dynamic

a. Does not matter the market share in the pasti. It is a poor indicator of the future

ii. Sunk cost policyb. Could the defendant use “failing company defense”

i. The court should take that into considerii. Some factors, such as the possibility of bankruptcy, and the

reputational cost196. The merger guidelines

a. HHIb. Product spacec. Entry analysisd. Efficiency

197. Staplea. What is the price

i. Whether we should think about super storesb. The court find there is strong correlation between the number of stores

and the pricesc. Defendant’s argument

i. Different Costd. Probable effect

i. HHIii. Under HHI analysis, the question is still how to define the market

iii. In this case, exclude Wal-Mart is crucial to the analysise. The efficiency argument

i. Not very convincingf. Does the court use the framework of Brown Shoes

i. No, they use merger guidelinesg. This case has better economic analysis

198. Next week,a. reconcile merger analysisb. vertical merger

199. Nov 24a. Review will be on next Thursday

200. Staplea. Two improvement

i. Merger guideline, 1. Compared with previous case law, merger guideline is

more lenient2. In merger case, we should use merger guideline

ii. Economic analysis1. 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 illegal202. Other factors

a. The intent of mergeri. Because manufacturer can grow internally, so why merger

b. Foreclosure of market sharec. Incipient argument,

i. Trend toward concentration203. Brown shoes, Vertical merger

a. Two kind of mergeri. Horizontal

ii. verticalb. the first question is still how to define the market

i. The product method, used in this caseii. The geography

c. Effect of mergeri. 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 concentration1. 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 shoesb. It represent the revolution of antitrustc. In vertical merger case, we concerned with coercion

i. As in exclusionary case, about forcing peopled. Also, we concerned with small business?e. Most important is the incipient argument in merger case

i. It is the heart of the revolutionii. The court intervene the market

iii. But in most of the area, market is betteriv. 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 541a. (a)

i. What is the structure of the market, ii. and what is the nature of the product

iii. they are complimentary productiv. so it is less likely to have monopoly

b. (b) what is the productivity efficiencyi. What is the possible of the merger

ii. The foreclosure argument, stop buying from competitorsiii. More difficult to new entryiv. What is the effect of tech develop

206. Cloroxa. It is conglomerate merger, neither horizontal nor verticalb. What is the reason to the merger

i. Diversificationii. Market this product better

c. Why condemn the mergeri. Defendant might enter the market

1. It is incipient argument, but who knows2. FTC refuse to find a probability3. This argument transfer it into horizontal merger

ii. Dissuading small competitors1. What is wrong with using defendant’s expertise,

iii. Predatory argumentd. The judge think ad is a waste of money

i. But it is advantageous to customerii. It helps customer to ensure the quality

iii. And invest your reputationiv. It is like hostage taking

e. Predatory pricingi. Because defendant is deep pocket, so there is possibility

ii. Merger can lead to monopoly abuseiii. But it is too speculative

207. We could use conglomerate guideline to deal with these cases208. Nov 26

a. Consolidate

b. Like a tie-in agreement case