Textbook Notes (362,734)
Canada (158,032)
ECON 308 (6)

308 Kovacic and Shapiro Reading.docx

3 Pages
Unlock Document

McGill University
Economics (Arts)
ECON 308
Christopher Green

Kovacic and Shapiro: Antitrust Policy- A century of Economic and Legal Thinking *Notes: Horizontal agreement: agreement between competing businesses in same economic sphere; leads to price-fixing and limiting competition Vertical agreement: agreement between firms at different levels of the supply chain - Among American statutes that regulate commerce, the Sherman Act is unequaled in its generality. The Act outlawed every contract, combination or conspiracy in restraint of trade and monopolization and treated violations as crimes. By these open-ended commands, Congress gave federal judges extraordinary power to draw lines between acceptable cooperation and illegal collusion, between vigorous competition and unlawful monopolization. - Although the Sherman Act’s first two decades featured no whirlwind of antitrust enforcement, the courts began shaping the law’s vague terms. The Act’s categorical ban on every contract in restraint of trade required judges to develop principles for distinguishing between collaboration that suppressed rivalry and cooperation that promoted growth. - The court distinguished between “naked” trade restraints, where direct rivals simply agreed to restrict output and raise price, and reasonable “ancillary” restraints, which encumbered the participants only as much as needed to expand output or to introduce a product that no single participant could offer. - Judges also rejected arguments that price-fixing by competitors was benign because the cartelists set “reasonable” prices or desired only to halt an endless downward price spiral. - The Supreme Court held that resale price maintenance agreements, by which a manufacturer compels retailers to sell its products above a specified piece, is illegal per se. - The Sherman Act’s language and legislative history indicated that Congress didn’t condemn the status of monopoly, but rather had to define the sort of behaviour which, when coupled with monopoly power, constituted illegal monopolization. - Not until 1904, when it blacked the combination of the Northern Pacific and Great Northern railroads, did the Supreme Court show that the Sherman Act could forestall mergers and monopolies. - In Standard Oil Co vs United States (1991), the Supreme Court directly tackled the question of dominant firm conduct and left 4 enduring marks: 1. The Court treated Standard’s 90 percent share of refinery output as proof of monopoly 2. The Court established the “rule of reason” as the basic method of antitrust analysis. By this standard, judges would assess conduct on a case by case basis, although especially harmful behaviour still might be condemned by per se rules. 3. The Court began classifying some behaviour as unreasonably exclusionary. It ruled that Standard Oil’s selective, below-cost price cuts and buyouts of rivals illegally created and maintained the firm’s dominance. 4. The Court broke the firm into 34 parts. - Standard Oil became known as one of the government’s finest hours, but Congress didn’t see it that way in 1911. Congress feared that the Supreme Court’s apparent softening of the law, by reading the Sherman Act’s ban on “every” trade restraint to bar only “unreasonable” restraints, foreshadowed continuing efforts by conservative judges to narrow the state unduly. This concern inspired the 1914 enactment of the Clayton Act and Federal Trade Commission Act. - The Clayton Act reduced judicial discretion by specifically prohibiting certain tying arrangements, exclusive dealing agreements, interlocking dir
More Less

Related notes for ECON 308

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.