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Competition Law Overview

Competition Law Overview. Antitrust Purpose Protect “perfect competition” Sherman Act Historical context (oil, steel, railroads) Section Differences §1 = concerted actions that restrain trade §2 = willful acquisition or preservation of monopoly power Market Relevance

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Competition Law Overview

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  1. Competition Law Overview Antitrust Purpose Protect “perfect competition” Sherman Act Historical context (oil, steel, railroads) Section Differences §1 = concerted actions that restrain trade §2 = willful acquisition or preservation of monopoly power Market Relevance “market share proxy” “Market Power” is the ability of a firm or group of firms within a market to profitably charge prices above the competitive level for a sustained period of time.

  2. Facts • Coopetition • Members: Likeus, Yahoo, Altervisiter, Webwiggler, 8 other search engines • 70% web traffic • Purpose: link to one another’s web sites, reduced rates to advertisers of fellow member search engines • Websnail Denial • Websnail: • web traffic decrease (10% to 5%) • Current advertisers threaten to discontinue • Dated search algorithm

  3. Relevant Market • Geographic Market • Range: • The Internet? Brick and Mortar Substitutes? Submarkets? • Circuit splits • F.T.C. v. Staples (superstores considered submarket) • Constrained by transportation and/or shipping costs • Product Market • “reasonable interchangeability” • Products consumers actually view as substitutes • Cross-price elasticity of demand • Products functionally similar • Cellophane fallacy (U.S. v. E. I. du Pont) • Narrow vs. Broad • Barriers to entry

  4. Sherman Act § I “…every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States…” • Per Se • Boycott (A.K.A. “concerted refusal to deal”) • Agreement • market power • Intent to raise prices, restrict output, or divide territories? • Rule of Reason • Facially anticomp., justifications, pre-textual? • Peculiar facts of business (Nascent Industry, NCAA) • Purpose or end sought to be attained • Structural analysis

  5. Sherman Act § 2 “…every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States." • Monopolize • Requirements • Threshold market power - 70% • Intent to maintain or create a monopoly • Factors (Aspen Skiing, Microsoft) • Conduct of instrumental people • Cooperation with rivals • Variance from prior practices • Impact on customers, competition and efficiency • Countervailing business justifications • Attempt to Monopolize • Requirements • Below the monopoly threshold • Intent to monopolize • Dangerous probability of success - high standard of proof

  6. Remedies • Money Damages • Fed. Gov., Private plaintiffs, States acting in ParensPatriae • ***TREBBLE DAMAGES*** plus attorney’s fees + costs • Whistle blowers • Lost profits, expectation costs, diff b/t inflation prices • F.T.C. enforcement power • Cease and desist, disgorgement of illicit gains, forfeiture • Divestiture and Dissolution • Bell Corp. problem • Merger guidelines

  7. Implications on E-Commerce • Defining markets • Natural monopolies • Jurisdiction • Regulation • I.P. rights • Emerging markets • Speed of technology • Pleading injury

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