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The U.S. Antitrust Law and Economics


The US antitrust law is a set of laws governing the business industry (Hyton 2003). The goal of these laws is to enhance reasonable competition through agreements among customers, suppliers, or competitors (Hyton 2003). These laws thus protect all the parties involved in business activities from unfair competition, violation of ethical standards in business and other illegal or unlawful practices that are likely to hurt the customers, the business managers or both (Posner 2001). In addition, the antitrust laws are used by the government agencies in collaboration with private agencies or litigants to prevent customers from market failure (Posner 2001). There are different principal federal laws that govern the conduct that include “the Sherman Act, the Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act” (Hyton 2003). These federal laws formulate and set the rules and policies to regulate trade and federal antitrust through restraining trade, monopoly, any attempts to monopolize, discrimination in pricing, and any unfair competition (Posner 2001). Furthermore, the laws prohibit illegal acquisitions, mergers and joint ventures deemed to affect competition (Hyton 2001).

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These laws are only good depending on the mechanisms through which they are enforced. The procedures and substance are therefore continuum of the institutional and legal laws, mechanisms and practices that work in conjunction to protect customers’ efficiency and welfare (Hyton 2001). This paper brings together the antitrust laws and economics by addressing several questions that need the understanding and application of the antitrust laws in the business field and the legal field. The paper addresses the legal injunctions of some business ventures that in one way or another have violated the antitrust laws, gives the means of their defense and finally gives the rulings of the judges on the matters before the court.

AAA Company

According to antitrust laws, unfair competition and illegal means of business activities are prohibited (Jentz & Miller 2009). The AAA behavior indicates a sign of illegal behavior between the company and the metropolis. The issues to be investigated in this case are the owners of the AAA Company, the relationship between AAA and the metropolis and the means of operation of the AAA. This is to give an understanding of the changes in bidding when there was competition. Price fixing according to Cross, Jentz Miller & (2010) is one way of the business engaging in unfair competition. AAA low pricing bidding was deemed to outdo Rainbow Towing in order successfully to win the franchise. In addition, the bidding agreements and terms between AAA and the metropolis need to be investigated to give a clear picture of the means, and the agreed terms such as payments between the two parties. Further, AAA and metropolis bank accounts should be investigated under the consent of the court to give an oversight of all the transactions that take place between the two parties and whether they meet the required terms of agreed payments.

AAA’s franchise with metropolis is exclusive in that there are several towering companies but it’s only AAA that usually bids for the contract. This indicates that the means through which metropolis advertises its bids are planned in a way that excludes other companies from the bidding except for AAA. The ways through which the metropolis would achieve the exclusive bidding is by putting high standards of requirements like tendering fees, and requirements that most of the other Towering companies do not meet (Cross, Jentz & Miller 2010). In addition, they organize with AAA who might not have met the requirements to place their tender due to the relationship between them and the metropolis (Jentz & Miller 2009). Lack of competition gives AAA the advantage of getting the tender. Similarly, for the metropolis to exclude other towering companies in their advertisements, they give poor payments that other companies may find not worth for them to involve in the activities (Jentz & Miller 2009). The companies may consider the terms and feel they are not worth operating in the activities and that causes them to opt not to place the tender to avoid the risks of making losses in the future. However, through special arrangements between AAA and the metropolis, they change the terms once the tendering process is over to avail terms that are worth for AAA to operate with so that they would make profits. Metropolis may also inform AAA of the tenders available before advertisement that gives AAA room for preparation. Metropolis then gives a short tendering process period and many requirements that other companies cannot comply with within the given time span (Jentz & Miller 2009). This excludes other companies through the advertisement that may seem to have been carried out in the right manner.

AAA dropped its bid sharply when there was a competition that indicates price fixing in order for it to win the bid. Further, it dropped the bid to discourage Rainbow Towering and other companies from bidding in the future. Similarly, the rise of the bid again was due to a lack of competition in the next bid (Cross, Jentz & Miller 2010). According to antitrust law, it is illegal for a business venture to engage in any affair business act or behaviour deemed to causing an unfair competition. AAA uses price-fixing in this situation to eliminate other competitors. AAA Towing having had many bids from metropolis in the previous year might have realized a tremendous growth in finances that other towering companies may have not achieved. The company thus uses its financial advantage to outdo the other companies that it was confident could not meet its dropped bidding price due to financial challenges that would lead them to losses. AAA thus uses price-fixing to gain all the advantages of recapturing the bid. Similarly, the raising of bidding prices when there was no competition by AAA might have been dictated by the aim of AAA to raise back its resources spent during the prices bid when they dropped their prices. This is a method used by business venture to win bids. The first lowers the bid prices when there is competition to discourage competition in future and then raises the bid prices once they have achieved their objective. During this high bid price franchise, the companies work towards regaining the lost resources during the low price bid. Similarly, the dropping of the bid prices might have been an arrangement with the metropolis for AAA to recapture the tender. Once their objectives had been achieved, metropolis and AAA may have agreed on the change of bidding prices. If AAA tendering prices during the Rainbow competition period time were genuine and not meant to provide unfair competition then the company would have maintained the prices. The raising of price after when there were no competition is clear evidence that price drop was to offer unfair competition. Further, to ensure that this was not a cartel between AAA and metropolis, an investigation of the terms and agreements was essential. In addition, an investigation of the two parties’ bank accounts would help in understanding the trends and behavior of the bids.

According to antitrust laws, any business venture that violates the competition laws deserves legal action. AAA in my view had violated Sherman Act section 1 which calls for fair competition and thus deserves legal action. Similarly, metropolis also having granted AAA the bid aware of the methods used also violated antitrust laws and deserve legal action.

Sherman Act

Sherman Act section two restrains any attempts by an individual, business venture or collaboration between individuals or business ventures to monopolize the market. The Act indicates that whoever is found guilty of any attempt to monopolize the market is punishable according to the law. Sherman act case two prohibits attempts by any person to monopolize the markets in order to have their own benefits. Dyco feels uncomfortable with the introduction of orange growers which is a competitor to Dyco products in the market. To handle the competition, Dyco’s has to deal with independent jobbers and distributors who would raise its operations cost that consequently affects price change. The market to which orange growers were introduced accounts for a high percentage of sales that makes Dyco uncomfortable and ventures in attempts to sustain and retain the market. The agricultural channels further make Dyco’s attempt to change prices for its products almost impossible. Dyco opts to deal with change of quality of the products to the photographic sector that is unresponsive to price changes but maintains the quality of the agricultural sector products due to the existence of agricultural channels that look into the prices and quality of the markets goods. The efforts by Dyco are meant to achieve the monopoly of operating in markets by making great profits from the photographic market through the production of low-quality products but at high prices. These prices would create a gap in the production of products for agricultural market. In relation to Sherman case two, the act of Dyco is illegal as the production and distribution cost on its products and those of X, Y and Z are not different but want to have monopoly through unlawful business practices and behaviours. According to the antitrust laws, consumers are protected from exploitation by business ventures that produce low quality products and offer them at high prices. The strategy of Dyco in offering unfit products for photographic use is illegal. The attempt of Dyco to have a competitive advantage over X, Y and Z using photographic market will create a gap of profit and losses in the two markets. Its attempt is to exclude X, Y, and Z, so that it can enjoy the monopoly. In addition, Dyco having established itself in the market for a long period gives it the advantage to remain in the market even though its prices are equal to those of other products.

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Sherman Antitrust Act

Sherman Antitrust Act section states that “every contract, combination in the form of trust or otherwise, conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal and is a felony punishable by a fine and/or imprisonment” (Jontz & Miller 2009). In this case, Sweet Co. has violated the act through conspiracy by involving itself in the price-fixing to gain an advantage over the customers.

As the general counsel for litigation and antitrust at Sweet Co., after receiving summon from the court of law, I should prepare an answer to the court over the complaint. However, having the idea from the previous case and understanding the allegation before the company, I would give a clear reply to the court indicating clearly the impossibility of the allegations from the plaintiff by giving evidence and theories to indicate that the previous matter was different from the current complaint. The first thing is to let the court understand that the plaintiffs of the three cases filed the cases not because they had the evidence but due to the previous allegation by the government over Sherman antitrust section violation. Further, the court should understand that the charges in the first case between Sweet Co. and the government were generally because of the company’s denial of the violation of the laws. In addition, I would request the court to let us settle the matters outside the court using arbitration and mediation approaches. With this method, we would discuss the matters with the plaintiff to find a possible solution or come to an agreement. However, I should be prepared with the findings from the other party on which they have based their claims to court so that I can prepare the company’s defense team. The team should comprise of people who have the knowledge to law governing businesses and a well understanding of the Sherman antitrust act so that they can defend the company to their best. I would also request the court to allow me to investigate more from the plaintiffs’ point of view, the reasons behind the allegation. I would carry out a comprehensive study based on the allegations and seek from the court the right to interrogate the plaintiffs and their witnesses during the court’s hearings. I should plan my answers depending on the study I carried out, the type of the person am dealing with and the nature of the allegation that the plaintiff has before the court against the company. Further, we should be prepared to defend the company if the evidence of the plaintiffs tends to be valid.

During the trial time, as the general counsel, I should appoint a team of counsels who have dealt with such cases in the different kinds of courts in previous years to join me. I should plan for the counsels to interrogate and those to answer the questions in defensive of the company. First, during this trial our first intention is to proof that the company is not guilty of any of the complaints brought to the court. We should do this with provision of documents that clearly illustrate our mode of business operation; the prices change on our products to all our customers and give the reason in reference to such changes. Further, I should let my team to be in a position to answer any question that may arise from any change of pricing in our products and with proper tabling of the documents. These documents extensively cover any changes in the raw materials used in production of sweet stuff that may have affected the change in prices during the time referred in the allegations. The documents should also comprise any change in the company that brought about the changes in prices and the market trends that may have affected the change in prices. In this, our intension would be to provide the court with extensive proof of the innocence of the company in relation to the allegations.

As the general counsel, I should prepare the company for the outcomes of the trials. The first outcome would be that if the court finds the company innocent of the allegations there would be no charges or punishment is imposed on the company. The other possibility of the court’s ruling would be finding the company guilty. If the company was found guilty, the court would charge the company with violation of Sherman antitrust law section one that is punishable through fines or imprisonment or both. However, being a company not an individual the charges to the case would be fines or paying of the plaintiffs losses for the period they experienced price fixing or abolition of trading license or a combination of this charges.

Being a member of the Sweet Co. counsel, as other counsels defending their defendants I would be optimistic that we would be able to provide enough evidence over the allegation and have the court dispose of the allegation without trial. Otherwise, any ruling by the court if it finds the company guilty should adhere to.

Sherman Antitrust Act section states that “every contract, combination in the form of trust or otherwise, conspiracy, in restraint of trade or commerce among the several state, or with foreign nations, is hereby declared to be illegal and is felony punishable by a fine and/or imprisonment” (Jontz & Miller 2009). The banks usually classify customers according to two classes’ namely low risk and high-risk customers. These classifications are mainly done according to the customers’ place of residents or place of operation for a business. Classification into these classes is done with the help of the banks to understand the nature of the customer or business they are dealing with. The banks refusal to lend to the tavern was due to the risks associated with the business due to the level of crime in its place of operation. The tavern owner filing a case to a court of law was his right depending with the allegation on the banks as the reason for not lending to him. He alleges the banks with race discrimination by saying that the banks refused to lend to him because the blacks patronize the part of the town where he operates the business. However, the banks operate to give the customers financial support as they consequently benefit from the customers from the interests charged to money borrowed. The banks on the other hand have the right to evaluate whether the customers they lend to would be in a position to repay the money they borrow. After the evaluation of this person, the agency on behalf of the bank indicated that there was a risk of lending to the tavern owner due to the risks associated with him that would affect him from settling the loan. In reference to the Sherman antitrust law section 1, the banks have not in any case violated the law as they have acted according to their rules and regulation based on risk classification. However, if the bank’s refusal to lend to the customer were racially motivated, then the bank and the agency would be guilty of a violation of Sherman antitrust law section 1.

The tavern allegations need investigation to understand the real cause of the bank not lending to him. First, everyone has a right to borrow from a financial institution whether the white or the black patronize the operational area of his or her business. Secondly, the banks have the right to lend or not lend to customers depending on the classification of the area his/her business operates. The refusal of other banking institutions in the state does not lend to the tavern owner was due to the information circulated by the agency. The agency was therefore responsible for the outcomes of the results of loan application. On the other hand, receiving a loan from an outside state’s bank over a high-interest rate might have been caused by two reasons. One, the bank may not have done a thorough analysis on the customer qualification to enable them to clearly classify the tavern owner either to high-risk or low risk customer. Secondly, the bank may have found that the customer was not eligible to qualify for a loan even after a thorough research to evaluate his/her creditworthy.

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The prevailing of the plaintiff before the court depends on the finding of the court from the two banks. In case one, if the banks in the state refused to give the tavern owner the loan due to the circulated information by the agency that the plaintiff alleges was racially motivated, the case would prevail. In case two, if the banks refused to give the tavern owner the loan due to the risks associated with the business that would make him/her unable to settle the loans then the case would not prevail.

For case one, if the case prevails, the court should find the bank and the agency guilty of conspiracy and restrain an individual from trading by denying him/her the finances through disqualification from the loan application. Secondly, the bank and the agency should be charged of violating the laws due to racism. The third charge would be on the exposure of the tavern owner to exploitation by an out of state bank that lends the money to the tavern owner but on high interests rates than the prevailing state banks rates. In relation to this case, the court should require the bank to pay the tavern owner the expenses incurred through the loan from of state bank. Similarly, the agency firm should be fined, partner with the bank on settling the expenses incurred by the tavern owner and their operating license abolished due to racisms. The charges on the bank would be due to lack of their own investigation body and overreliance on the agent information and restrain of tavern owner from trading through loan denial. On the other hand, the agency firm has charges to answer due to the practice of racism, the spread of false information and restriction of the tavern owner from trading by making the banks deny his finances.

Clayton Act section 7

Clayton Act section 7 prohibits acquisition or merger of business ventures deemed at substantially less competition or found to create a monopoly in the market (Martin 1959). The initial reason of the O’Connor and Blackstone merger seemed genuine but afterward they used their ability to get books in large quantities to lessen the competition. The Department of justice would therefore challenge the purchasing of 25% interest in O’Connor. Basing its foundation on the Clayton Act Section 7, the Department of Justice would realize that Blackstone and O’Connor were using their merger to restrain other bookstores from operating through their attempt to monopolize the market (Martin 1959). Their aim of lowering the prices on the books according to the Blackstone bookstore manager was to capture the market in New York and its surroundings. This is use of mergers to interfere with other business ventures. This is due to the knowledge of the merging parties that the other bookstore would not be able to challenge or meet their prices.

The filing of the action by the Justice Department would force Blackstone to raise a defense to defend them against the allegation. However, according to Clayton act section 7, it is clear that any merger or acquisition should not have an intense of lessening the competition or creating a monopoly in the market (Martin 1959). The address of the Blackstone bookstore to the O’Connor bookstore manager gives evidence of their intention of capturing the market, which would make Blackstone’s defence to fall. The evidence being from a first-person who is Blackstone bookstore manager’s information means the bookstore would not have any evidence to table before the court to prove their innocence.

Wright’s bookstore had the right to file a case over the merger of Blackstone and O’Connor. Wright bookstore being right across Blackstone means that the change in prices and the mergers affected them. Further, the merger restrained the competition thus destroying the Wright bookstore’s market environment through an attempt to monopolize the markets. The court should therefore find the Blackstone-O’Connor merger guilty and responsible for Wright’s bookstore losses. The court should thus charge the merger parties with violation of antitrust laws and punish the parties for the losses incurred by Wright bookstore (Martin 1959). The court should thus order the Blackstone-O’Connor merger to pay Wright’s losses in profits and case filing and trial expenses but not to the demands of Wright’s bookstore. Rather it should be according to the charges the court will find worth to the offense committed or according to what the law stipulates.

If the Department of Justice had prevailed in their merger action, Wright’s bookstore would benefit, as they would be able to table their evidence according the findings and evidence tabled by the department. Wright bookstore will further benefit from the fact that the court will already have the information of the merger and they will use the ruling or proceeding of the previous case to hurry up the Wright’s case. This will give Wright bookstore an advantage to have their compensation done without waiting for long periods. In addition, the merger may be abolished or their trading licenses abolished and that would give Wright bookstore an opportunity to regain its market.

Croton’s law books like other bookstores have the right to bring their action against the merger. The allegation of Croton’s law books that the sales at 25% discount were predatory pricing was genuine. The reason for the merger ordering the books from the publishers was to have a competitive advantage that would allow it to capture more markets. The merger was therefore using its ability to order books in large quantities as a means of outdoing its competitors in the market.

The customers have a right to file the violation of antitrust laws. Brenda Bracton thus had a right to sue the law book publisher on price-fixing and seek a court injunction for the publisher to pay her all the overcharges she has incurred since she started buying their books. At the same time, the court should charge and punish the publisher if found guilty in accordance with the stipulation of the law of pricing fixing crimes.

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Cross, F, Jentz, G & Miller, R 2010, Essentials of the legal environment (third edition), Cengage Learning, Inc. USA.

Hyton, K 2003, Antitrust law, economic, theory and common law evolution, Cambridge University Press, UK.

Jentz, G & Miller, R 2009, Business law today, The essentials, Cengage Learning, Inc. USA.

Martin, D 1959, Mergers and the clayton act, University of California Press, U.S.A.

Posner, R 2001, Antitrust law, The University of Chicago Press, Ltd, London.

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