Legal and Political Environment - Competition Law - Lecture Slides, Slides of Competition Law and Policy

Download Legal and Political Environment - Competition Law - Lecture Slides and more Slides Competition Law and Policy in PDF only on Docsity! 1 The Legal and Political Environment Docsity.com Business-Related Legislation: The Focus Is on Three Areas 2 1. Protect companies from each other 2. Protect consumers 3. Protect the interests of society Docsity.com Sherman Antitrust Act (1890) • Prohibits monopolies or other acts in restraint of trade that affect interstate or foreign commerce. • Allows for injunctions to stop such activities and for anyone injured by such activities to recover through treble damages in civil court. – Treble damages: three times the actual loss as a result of a violation of antitrust law. • It provides for criminal penalties (substantial fines, and jail time up to three years) 5 Docsity.com Clayton Act (1914) • A supplement to the Sherman Act. • Corporate Officers and officials can be held responsible, but the Clayton Act is only applied to individuals and transactions engaged in interstate commerce. • The Clayton Act does exempt labor and agricultural organizations from antitrust legislation. 6 Docsity.com Areas Limited by the Clayton Act (1914) • Tying contracts – A requirement to purchase ancillary goods/services in order to get the offering desired. • Exclusive Dealing – Occurs when a seller sells to only one buyer in a region and competition is lessened. • Intercorporate stockholding – Occurs when one company controls the stock of another and exercises control to restrain trade. • Interlocking directorates – Occurs when firms that compete with one another but have common members on their boards of directors. 7 Docsity.com Celler-Kefauver Act (1950) • Often called the anti-merger act. • Broadened powers under the Clayton Act to prevent mergers that may substantially reduce competition. 10 Docsity.com Celler-Kefauver Act (1950): An Example • Question: Suppose Company A and Company B are PC manufacturers. Overall, they have 5% and 3% shares, respectively, in PC sales (and the market leader has 20%) • However, Company A also manufactures a particular component and has a 30% market share, and Company B has a 25% market share for the same component. Combined, they would control over half the market for this component. • What would the FTC likely do? 11 Under the Celler-Kefauver Act, the FTC would likely order the merged company to sell off either A’s or B’s component business in order to approve the merger. Docsity.com Consumer Goods Pricing Act (1975) • Repealed the Miller-Tydings Act – Miller-Tydings had allowed fair trade pricing (allowing manufacturers to dictate the resale price of a product) • CGPA prohibits price maintenance agreements among manufacturers and resellers 12 Docsity.com 15 Intercorporate Stockholding Occurs when a company owns another company in the same market in an attempt to control the company so that competition is reduced. It is not illegal necessarily for one company to own more than one company in the same market. However, it is illegal to use that ownership to reduce competition and choice. Docsity.com 16 Interlocking Directorates Occurs when a company has members of its board of directors serve on the board of directors of another company. Companies that compete in the same market cannot have common directors such that actions would lessen competition in their markets. A key is how you define a “market.” Docsity.com 17 Price Maintenance Occurs when a manufacturer attempts to dictate the resale price of an item – this is generally illegal. A supplier is allowed some influence on price when the supplier contributes to the value of the offering (e.g., providing financing for inventory.) This helps protect full-service retailers from free rider retailers Free ride retailers provide fewer services and a reduced selling price. Without this protection, consumers would likely go to full service retailers for product information, but purchase from free ride retailers Docsity.com 20 Price Discrimination Occurs when a supplier sells the same product to the “same class” of buyers at different prices such that it reduces competition. Selling products at different prices to customers that are not in competition with one another is not considered discriminatory. Docsity.com Pacific Model 1000 5,000 units/month — $38 per unit — Pacific Model 1000 5,000 units/month $38 per unit Docsity.com  Pacific Model 1000 5,000 units/month §38 per unit UniMem Model 300 5,000 units/month - $32 per unit - Pacific Model 1000 5,000 units/month _ $38 per unit “Docsity.com Substantiality Test • Business regulation is not characterized by precision, since enforcement is discretionary. • Violation are subject to a substantiality test – it has three considerations: – The size of the organizations involved (is a large business coercing behavior from a small business?) – The volume of business involved (is the volume of business large compared to the total market?) – Market preemption (preventing access to markets) 25 Docsity.com Intellectual Property: Patent • Patent – Protection granted by the federal government to inventors of original products, processes, or compositions of matter. – Functional patents last 20 years. – Design patents last 14 years. 26 Docsity.com Intellectual Property: Copyright • Copyright – Protection for the original works of authors, musicians, and photographers. – Protects the expression of an idea, not the underlying idea itself. – Copyrights are granted to individuals for their lifetimes plus fifty years. – Copyrights automatically apply to all work created since 1989. 27 Docsity.com