Anti-Trust

Anti-Trust

It is not possible in any document to describe in detail all the anti-trust laws (also called competition laws) that affect businesses. However, while those laws differ in some respects, they generally address similar kinds of conduct and share a common underlying philosophy. Their common theme is that competition benefits consumers by providing the best products at the lowest prices, and society’s productive resources are allocated most effectively when companies are subject to the rigors of the competitive market. Therefore, the anti-trust laws operate to prevent competition from being undermined by anticompetitive practices, such as cartels and abuse of market power.

 

Anti-trust Sensitive Conduct Inherently Anticompetitive Conduct   Certain conduct is considered inherently harmful to competition, and applicable competition laws nearly always condemn it. Such conduct includes agreements among competitors to:

 

(1) Fix sale or purchase prices (“Price-fixing”);

(2) Fix other terms of sale or purchase;

(3) Restrict capacity or output;

(4) Refrain from supplying a product or service;

(5) Limit quality competition or research;

(6) Divide markets or customers; or

(7) Exclude competing firms from a market.

 

Price-fixing includes not only agreements on specific prices, but also agreements among competitors on maximum or minimum prices, discounts, or credit terms. Agreements among buyers of a product or service as to the prices they will pay are as illegal as agreements among sellers of a product or services as to the prices they will charge. The mere extension of such agreements will suffice to establish a violation (such conduct is called a “per se” violation under the U.S. Sherman Act). In such cases, courts do not consider the reasonableness or pro-competitive effects of the agreements.   An actual agreement, whether formal (a contract) or informal (a handshake), is not required for an anti-trust law violation to occur. Such an agreement can be inferred from conduct and other suspicious circumstances. That is why any contact with competitors, through trade associations or otherwise, may present an opportunity for allegations that the parties entered into an anti-competitive agreement. In particular, an agreement may be inferred based on discussions or exchanges of information with competitors, followed by a common course of conduct.   Other Sensitive Conduct   There are other types of conduct that may restrain trade in some respects, but which are not considered inherently harmful to competition. Those are evaluated in light of their surrounding facts and circumstances to determine whether they present significant anti-trust risks. Consideration is given to whether the risk of anticompetitive effects, and whether the risk of anticompetitive harm is outweighed by the precompetitive benefits. This is called a “rule of reason” analysis in U.S. antitrust law. Although EU authorities do not specifically recognize a “rule of reason” in applying EU competition rules, similar considerations may be taken into account in deciding whether conduct may be exempt from their competition rules.   The following are examples of other sensitive conduct requiring a rule of reason analysis:

 

(1) Tying arrangements (conditioning the sale of one product or service upon the purchase of another product or service);

 

(2) Requirements or output contracts and exclusive dealing arrangements (agreements with customers that they will purchase all of their requirements or certain goods of services from a single supplier for a significant period of time);

 

(3) Customer restrictions (territorial or other non-price restrictions imposed by a supplying firm on its resellers);

 

(4) Reciprocal dealing (“I will buy from you if you will buy from me:);

 

(5) Joint operations or ventures (arrangements between two or more firms which are competitors or potential competitors to participate jointly in an activity that affects commerce);

 

Giving one buyer a competitive advantage over other buyers, whether it be through a lower price, promotional allowances, or promotional services (generally called “price discrimination”), can raise legal issues under the Robinson-Patman Act in the U.S. and under the competition laws of some other countries. Generally, the Courts are now analyzing most of this conduct under a type of rule of reason analysis requiring an anticompetitive effect.   Contact Dow Law Office so that David W. Dow, an experienced attorney, can advise you on the application of those laws to specific circumstances.