Global Antitrust CHPT 1 2d Ed FINAL PDF
Global Antitrust CHPT 1 2d Ed FINAL PDF
by
EINER ELHAUGE
Petrie Professor of Law, Harvard University
DAMIEN GERADIN
Partner, Covington & Burling
Professor of Competition Law & Economics, Tilburg University
Cook Global Law Professor, University of Michigan Law School
This publication was created to provide you with accurate and authoritative information concerning the
subject matter covered; however, this publication was not necessarily prepared by persons licensed to
practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other
professional advice and this publication is not a substitute for the advice of an attorney. If you require legal
or other expert advice, you should seek the services of a competent attorney or other professional.
Nothing contained herein is intended or written to be used for the purposes of 1) avoiding penalties imposed
under the federal Internal Revenue Code, or 2) promoting, marketing or recommending to another party
any transaction or matter addressed herein.
a 2007 THOMSON/REUTERS, Einer Elhauge and Damien Geradin
a 2011 By THOMSON REUTERS/FOUNDATION PRESS, Einer Elhauge and Damien Geradin
1 New York Plaza, 34th Floor
New York, NY 10004
Phone Toll Free 18778881330
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Printed in the United States of America
ISBN 9781599417479
Mat #40881197
iii
P R E F A C E T O T H E F I R S T E D I T I O N (2007)
No one would think of writing a casebook on Massachusetts Antitrust
Law. It has long been too obvious that such a book would be parochial in at
least two senses. First, markets (not to mention legal practices) generally
span regions far larger than any state. Second, antitrust analysis has a
common methodology applicable across the states, and thus does not
benefit from a state-centric focus.
Yet antitrust casebooks continue to be parochial in the sense that they
focus on the antitrust and competition law of only one nation. That
perspective is rapidly becoming as outmoded as a state-centric approach
would be. Markets are increasingly becoming global or at least multinational. A typical merger between large U.S. corporations must get approval not
just in the United States but also by the European Community (the EC),
for their activities often affect both markets. Likewise for large European
corporations. Cartels in one nation affect supply in others. And countries
are increasingly entering into treaties with each other about the content or
enforcement of competition laws. Thus, businessmen, lawyers, and lawmakers can no longer content themselves with understanding only the
antitrust and competition law of their nation. They must also understand
the other regimes that form part of the overall legal framework that
regulates competitive behavior.
Modern antitrust law is thus global antitrust law. (We shall use
antitrust law to refer to what other nations generally call competition
or anti-monopoly law.) Modern antitrust law also differs from traditional
antitrust law in that it now reflects the dominance of the economic model
of analyzing antitrust and competition policy. This is a shift that has
occurred both in the U.S. and EC, where legal models that once included
political, formalistic, corporatist, or autonomy-based notions of competition have embraced an exclusively economic methodology based on maximizing consumer welfare, and have done so in a way that is common to the
diverging political viewpoints in each. There remain important differences
between the U.S. and EC, and differing political viewpoints, but they no
longer have as much to do with different values as with different presumptions about how to resolve theoretical or empirical ambiguities raised by a
common framework of antitrust economics. The same is true for most other
developed nations, as well as for the developing nations that increasingly
borrow from the antitrust frameworks of the U.S. or EC.
These two key aspects of modern antitrust law are highly related, for
the common economic methodology used in the U.S. and EC means both
are amenable to analysis by a common body of scholarship that speaks an
increasingly common language of antitrust economics. It differs from pure
economics in that it must crucially concern itself with the administrability
and implementation of economic concepts in a world where information is
limited, decision-makers are imperfect, adjudication is lengthy and costly,
v
vi
PREFACE
TO THE
FIRST EDITION
ACKNOWLEDGEMENTS
American Law Institute, Restatement of the Foreign Relations Law of
the United States, Third, Copyright a 1987 by The American Law Institute. Reprinted with permission of The American Law Institute.
Elhauge, Defining Better Monopolization Standards. A full version of
this work previously appeared in the Stanford Law Review at 56 Stan. L.
Rev. 253 (2003). When possible and appropriate, please cite to that version.
Elhauge, Why Above-Cost Price Cuts to Drive out Entrants Do Not
Signal Predation or Even Market Powerand the Implications for Defining
Costs. This excerpt is derived from an Article previously published in The
Yale Law Journal. See 112 Yale Law Journal 681 (2003).
Damien Geradin and Nicolas Petit, Price Discrimination under EC
Law: Another Doctrine in Search of Limiting Principles. This excerpt is
derived from an Article previously published in The Journal of Competition
Law and Economics. 2 J. Competition L. & Econ. 479 (2005).
Damien Geradin and Nicolas Petit, Article 230 EC annulment proceedings against competition law decisions in the light of the modernisation
process. This excerpt is derived from an Article previously published in
Barry Hawk, Ed., International Antitrust Law & Policy: Fordham Corporate Law 2005.
Damien Geradin and Michel Kerf, Levelling the Playing Field: Is the
World Trade Organization Adequately Equipped to Prevent Anti Competitive Practices in Telecommunications?. This excerpt is derived from an
Article previously published D. Geradin and D. Luff, Eds., The WTO and
Global Convergence in Telecommunications and Audio Visual Services 130
62 (Cambridge University Press 2004).
Einer Elhauge would like to thank his wife Julia, and his children
Dash, Kristina, and Nicholas, for their love and patience while this book
took precious time away from them. He would also like to thank all the
research and administrative assistants who provided so much help in the
preparation of this book, especially in researching antitrust laws outside
the US and EU.
Damien Geradin would like to thank his wife Mercedes and his
daughters Ana and Emma for their love and unquestioning patience and
support during the writing of this book. He would also like to thank his
colleague Nicolas Petit for his invaluable research assistance.
vii
SUMMARY
OF
CONTENTS
Introduction MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
1
11
12
49
70
73
73
73
77
84
85
121
140
153
154
CHAPTER 3
162
180
225
249
265
265
270
273
276
277
283
291
335
344
344
353
ix
SUMMARY
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CONTENTS
399
404
415
476
494
500
IntroductionMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
Exclusive DealingMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
Tying MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
Loyalty and Bundled DiscountsMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
512
516
562
629
807
830
842
843
856
884
MergersMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 913
SUMMARY
CHAPTER 8
A.
B.
C.
D.
E.
F.
OF
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Introduction MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
CHAPTER 2
1
11
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70
72
73
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77
84
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87
88
96
98
106
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109
110
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270
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283
286
289
291
291
298
304
315
317
319
321
xv
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353
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512
514
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524
525
526
526
532
533
535
538
541
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CHAPTER 6
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MergersMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 913
922
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936
941
941
948
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A. Horizontal MergersContinued
4. Efficiencies & Weighing the EquitiesMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 989
U.S. DOJ/FTC, Horizontal Merger Guidelines MMMMMMMMMMMMMMMMMMMMMMMM 989
EU Guidelines on the Assessment of Horizontal Mergers MMMMMMMMMM 991
Questions on U.S. and EU Guidelines MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 993
Merger Efficiencies and Total v. Consumer WelfareMMMMMMMMMMMMMMMMM 994
Commissioner of Competition v. Superior Propane Inc. MMMMMMMMMMMM 995
Note and Questions on Superior PropaneMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1003
Consumer Trusts and Other Coasian Solutions to the Total v.
Consumer Welfare Debate MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1004
Other Nations Treatment of EfficienciesMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1005
FTC v. Staples, Inc. MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1006
Note and Questions on StaplesMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1009
FTC v. H.J. Heinz Co. MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1009
Questions on FTC v. Heinz MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1015
How to Balance the Equities in Merger CasesMMMMMMMMMMMMMMMMMMMMMMMMM 1015
5. The Failing Firm Defense MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1016
International Shoe v. FTC MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1016
Note and Questions on International Shoe v. FTCMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1018
Citizen Publishing v. United States MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1019
Note and Questions on Citizens Publishing MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1021
U.S. DOJ/FTC, Horizontal Merger Guidelines MMMMMMMMMMMMMMMMMMMMMMMM 1022
Note and Questions on Merger Guidelines on the Failing Firm Defense MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1023
Joined Cases C68/94 and C30/95, French Republic and Societe commerciale des potasses et de lazote (SCPA) and
Entreprise mini`ere et chimique (EMC) v. Commission (Commission v. France) MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1024
Questions on Kali und Salz/Commission v. FranceMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1025
Commission Decision 2002/365, BASF/Eurodiol/Pantochim MMMMMM 1026
EU Guidelines on the Assessment of Horizontal Mergers MMMMMMMMMM 1026
Questions on BASF/Pantochim/Eurodiol and the Commission Guidelines on the Assessment of Horizontal Mergers MMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1027
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A. Horizontal MergersContinued
c. Should Buyer Views Alter Assessments of Mergers Between
Sellers? MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1043
Commission Decision 1999/641/EC, Enso/Stora MMMMMMMMMMMMMMMMMM 1043
Questions on Enso Stora MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1043
U.S. DOJ/FTC, Horizontal Merger GuidelinesMMMMMMMMMMMMMMMMMMMM 1043
Buyer Noncomplaints MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1045
B. Vertical Mergers MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1048
U.S. DOJ, 1984 Merger Guidelines MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1050
Note and Questions on U.S. Vertical Merger GuidelinesMMMMMMMMMMMMMMMMMMMMMMMMMM 1053
In the Matter of Cadence Design Systems, Inc. MMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1054
Questions on Cadence MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1061
T210/01, General Electric v. Commission MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1063
Questions on Vertical Merger Issues in GE v. Commission MMMMMMMMMMMMMMMMMMMMMM 1066
EU Guidelines on the Assessment of NonHorizontal Mergers
Under the Council Regulation on the Control of Concentrations
Between Undertakings (2008)MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1067
Question on the EU Guidelines on NonHorizontal Merger Guidelines MMMMM 1078
Vertical Mergers in Other Nations MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1079
C. Conglomerate MergersMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1080
U.S. DOJ, 1984 Merger Guidelines MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1083
U.S. DOJ/FTC, Horizontal Merger GuidelinesMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1085
Note and Questions on U.S. Guidelines on Mergers Affecting Potential
Competition MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM 1086
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TABLE OF CASES
Principal cases are in bold type. Non-principal cases are in roman type. References are to
Pages.
American Column & Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66
L.Ed. 284 (1921), 858
American Express Travel Related Services
Co. v. Visa U.S.A.., 2005 WL 1515399
(S.D.N.Y.2005), 549
American Needle, Inc. v. National FootU.S.
, 130 S.Ct.
ball League,
2201, 176 L.Ed.2d 947 (2010), 816
American Soc. of Mechanical Engineers, Inc.
v. Hydrolevel Corp., 456 U.S. 556, 102
S.Ct. 1935, 72 L.Ed.2d 330 (1982), 49
American Tobacco Co. v. United States,
328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575
(1946), 77, 265, 266, 345, 506, 863
American Tobacco Co., United States v., 221
U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663
(1911), 345, 1141
American Vision Centers, Inc. v. Cohen, 711
F.Supp. 721 (E.D.N.Y.1989), 813
AMR Corp., United States v., 335 F.3d
1109 (10th Cir.2003), 366, 395
Anaconda Co. v. Crane Co., 411 F.Supp. 1210
(S.D.N.Y.1975), 917
Anacor Pharmaceuticals Inc, 2010 WL
5630995 (S.E.C. S.S.R.2010), 949
Appalachian Coals v. United States, 288 U.S.
344, 53 S.Ct. 471, 77 L.Ed. 825 (1933),
139
Arizona v. Maricopa County Medical
Soc., 457 U.S. 332, 102 S.Ct. 2466, 73
L.Ed.2d 48 (1982), 74, 98
Arnold, Schwinn & Co., United States v., 388
U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249
(1967), 774
Arthur S. Langenderfer, Inc. v. S.E. Johnson
Co., 729 F.2d 1050 (6th Cir.1984), 365
Aspen Skiing Co. v. Aspen Highlands
Skiing Corp., 472 U.S. 585, 105 S.Ct.
2847, 86 L.Ed.2d 467 (1985), 265, 344,
345, 346, 415, 425
Aspen Title & Escrow, Inc. v. JeldWen, Inc.,
677 F.Supp. 1477 (D.Or.1987), 813
Associated General Contractors of California,
Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74
L.Ed.2d 723 (1983), 19
Associated Press v. United States, 326
U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013
(1945), 166
xxvii
xxviii
TABLE
OF
CASES
TABLE
ClampAll Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478 (1st Cir.1988), 366
Coast Cities Truck Sales, Inc. v. Navistar
Intern. Transp. Co., 912 F.Supp. 747
(D.N.J.1995), 813
Columbia, City of v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 111 S.Ct. 1344,
113 L.Ed.2d 382 (1991), 35
Columbia River Packers Assn v. Hinton, 315
U.S. 143, 62 S.Ct. 520, 86 L.Ed. 750
(1942), 45
Commercial Solvents and Others v.
Commission (6 & 7/73), [1974] E.C.R.
223, 449
Commission Decision 88/138/EEC, EurofixBauco v. Hilti, O.J. 1988, L65/19,
610
Commission of the European Communities v.
Anic Partecipazioni SpA (C49/92 P), 1999
WL 1800075 (ECJ 1999), 842
Commission of the European Communities v. Tetra Laval BV (C12/03 P),
2005 WL 366937 (ECJ 2005), 1105
Community Communications Co., Inc. v. City
of Boulder, Colo., 455 U.S. 40, 102 S.Ct.
835, 70 L.Ed.2d 810 (1982), 35
Compagnie Maritime Belge Transps. SA
v. Commission (T24/93, T25/93, T
26/93 & T28/93), 1996 E.C.R. II (CFI),
384
Compagnie Maritime Belge Transps. SA
v. Commission (C395/96 P), 2000 WL
571326 (ECJ 2000), 386, 1223
Concord Boat Corp. v. Brunswick Corp.,
207 F.3d 1039 (8th Cir.2000), 366, 645,
663
Connell Const. Co., Inc. v. Plumbers and
Steamfitters Local Union No. 100, 421
U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418
(1975), 45
Consolidated Laundries Corp., United States
v., 291 F.2d 563 (2nd Cir.1961), 266
Container Corp. of America, United
States v., 393 U.S. 333, 89 S.Ct. 510, 21
L.Ed.2d 526 (1969), 891
Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8
L.Ed.2d 777 (1962), 17, 35, 1143, 1219
Continental T. V., Inc. v. GTE Sylvania
Inc., 433 U.S. 36, 97 S.Ct. 2549, 53
L.Ed.2d 568 (1977), 701
Cooper Corporation, United States v., 312
U.S. 600, 61 S.Ct. 742, 85 L.Ed. 1071
(1941), 40
Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752, 104 S.Ct. 2731, 81
L.Ed.2d 628 (1984), 154, 807
Cost Management Services, Inc. v. Washington Natural Gas Co., 99 F.3d 937 (9th
Cir.1996), 40
Covad Communications Co. v. BellSouth
Corp., 374 F.3d 1044 (11th Cir.2004), 483
Covad Communications Co. v. BellSouth
Corp., 299 F.3d 1272 (11th Cir.2002), 447,
495
Credit Suisse Securities (U.S.A.) LLC v. Billing, 551 U.S. 264, 127 S.Ct. 2383, 168
L.Ed.2d 145 (2007), 39
OF
CASES
xxix
xxx
TABLE
OF
CASES
TABLE
Hampton Audio Electronics, Inc. v. Contel
Cellular, Inc., 966 F.2d 1442 (4th Cir.
1992), 774
Hartford Fire Ins. Co. v. California, 509
U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612
(1993), 42, 1143, 1146
Health Care Equalization Committee of the
Iowa Chiropractic Soc. v. Iowa Medical
Soc., 851 F.2d 1020 (8th Cir.1988), 42
Holmes v. Securities Investor Protection
Corp., 503 U.S. 258, 112 S.Ct. 1311, 117
L.Ed.2d 532 (1992), 19
Hood v. Tenneco Texas Life Ins. Co., 739
F.2d 1012 (5th Cir.1984), 812
Hoover v. Ronwin, 466 U.S. 558, 104 S.Ct.
1989, 80 L.Ed.2d 590 (1984), 34
Humana Inc. v. Forsyth, 525 U.S. 299, 119
S.Ct. 710, 142 L.Ed.2d 753 (1999), 43
Hutcheson, United States v., 312 U.S. 219, 61
S.Ct. 463, 85 L.Ed. 788 (1941), 45
Hydrogen Peroxide Antitrust Litigation, In
re, 702 F.Supp.2d 548 (E.D.Pa.2010), 1171
IBM Corp., In re, 687 F.2d 591 (2nd Cir.
1982), 30
Icon Indus. Controls Corp. v. Cimetrix, Inc.,
921 F.Supp. 375 (W.D.La.1996), 33
Ideal Dairy Farms, Inc. v. John Labatt, Ltd.,
90 F.3d 737 (3rd Cir.1996), 446
Ill., ex rel. Burris, State of v. Panhandle
Eastern Pipe Line Co., 935 F.2d 1469 (7th
Cir.1991), 447
Illinois Brick Co. v. Illinois, 431 U.S. 720, 97
S.Ct. 2061, 52 L.Ed.2d 707 (1977), 20
Illinois Corporate Travel, Inc. v. American
Airlines, Inc., 889 F.2d 751 (7th Cir.1989),
774
Illinois Tool Works Inc. v. Independent
Ink, Inc., 547 U.S. 28, 126 S.Ct. 1281,
164 L.Ed.2d 26 (2006), 278, 412, 572, 574,
595
Image Technical Services, Inc. v. Eastman
Kodak Co., 125 F.3d 1195 (9th Cir.1997),
448, 449
Imperial Chemical Industries (ICI) Ltd
v. Commission of the European Communities (48/69), 1972 WL 38095 (ECJ
1972), 866
IMS Health GmbH & Co. OHG v. NDC
Health GmbH & Co. KG (C418/01),
2004 WL 58649 (ECJ 2004), 457
Independent Service Organizations Antitrust
Litigation, In re, 203 F.3d 1322 (Fed.Cir.
2000), 448
In re (see name of party)
Instructional Systems Development Corp. v.
Aetna Cas. and Sur. Co., 817 F.2d 639
(10th Cir.1987), 365
Intel Corp. v. Advanced Micro Devices,
Inc., 542 U.S. 241, 124 S.Ct. 2466, 159
L.Ed.2d 355 (2004), 1234
Interface Group, Inc. v. Massachusetts Port
Authority, 816 F.2d 9 (1st Cir.1987), 446
Intergraph Corp. v. Intel Corp., 195 F.3d
1346 (Fed.Cir.1999), 447
International Assn of Machinists and Aerospace Workers, (IAM) v. Organization of
OF
CASES
xxxi
xxxii
TABLE
OF
CASES
Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327,
84 L.Ed.2d 274 (1985), 14
Maryland and Virginia Milk Producers Assn
v. United States, 362 U.S. 458, 80 S.Ct.
847, 4 L.Ed.2d 880 (1960), 41
Masimo Corp. v. Tyco Health Care Group,
L.P., 2006 WL 1236666 (C.D.Cal.2006),
549
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106
S.Ct. 1348, 89 L.Ed.2d 538 (1986), 18,
845, 1143
McGahee v. Northern Propane Gas Co., 858
F.2d 1487 (11th Cir.1988), 365
MCI Communications Corp. v. American Tel.
and Tel. Co., 708 F.2d 1081 (7th Cir.
1983), 365, 447
McKenzie v. Mercy Hosp. of Independence,
Kansas., 854 F.2d 365 (10th Cir.1988),
447
McKesson & Robbins, Inc., United States v.,
351 U.S. 305, 76 S.Ct. 937, 100 L.Ed. 1209
(1956), 774
McLain v. Real Estate Bd. of New Orleans,
Inc., 444 U.S. 232, 100 S.Ct. 502, 62
L.Ed.2d 441 (1980), 47
McLean Trucking Co. v. United States, 321
U.S. 67, 64 S.Ct. 370, 88 L.Ed. 544 (1944),
38
Metro Industries, Inc. v. Sammi Corp., 82
F.3d 839 (9th Cir.1996), 1160
Metro SB Grosmarkte GmbH & Co. KG v.
Commission of the European Communities (No.2) (C75/84), 1985 WL 444766
(ECJ 1985), 286
Microsoft Corp., United States v., 56 F.3d
1448 (D.C.Cir.1995), 30
Microsoft Corp., United States v., 253
F.3d 34 (D.C.Cir.2001), 27, 284, 517, 542,
601, 631, 663
Microsoft Corp. v. Commission of the
European Communities (T201/04),
2007 WL 2693858 (CFI 2007), 462
MidTexas Communications Systems, Inc. v.
American Tel. and Tel. Co., 615 F.2d 1372
(5th Cir.1980), 446
Midwestern Waffles, Inc. v. Waffle House,
Inc., 734 F.2d 705 (11th Cir.1984), 774
Minnesota Mining and Mfg. Co. v. Appleton
Papers, Inc., 35 F.Supp.2d 1138 (D.Minn.
1999), 549
Mississippi Power & Light Co. v. Mississippi
ex rel. Moore, 487 U.S. 354, 108 S.Ct.
2428, 101 L.Ed.2d 322 (1988), 40
Mitchael v. Intracorp, Inc., 179 F.3d 847
(10th Cir.1999), 812
MM Global Services, Inc. v. Dow Chemical
Co., 329 F.Supp.2d 337 (D.Conn.2004),
1171
Monosodium Glutamate Antitrust Litigation,
In re, 477 F.3d 535 (8th Cir.2007), 1171
Monsanto Co. v. SprayRite Service
Corp., 465 U.S. 752, 104 S.Ct. 1464, 79
L.Ed.2d 775 (1984), 831
Monument Builders of Greater Kansas City,
Inc. v. American Cemetery Assn. of Kansas, 891 F.2d 1473 (10th Cir.1989), 266
TABLE
Morgan v. Ponder, 892 F.2d 1355 (8th Cir.
1989), 365
Motive Parts Warehouse v. Facet Enterprises, 774 F.2d 380 (10th Cir.1985), 815
Nader v. Allegheny Airlines, Inc., 426 U.S.
290, 96 S.Ct. 1978, 48 L.Ed.2d 643 (1976),
38
NASD, Inc., United States v., 422 U.S. 694,
95 S.Ct. 2427, 45 L.Ed.2d 486 (1975), 38
Nash v. United States, 229 U.S. 373, 33 S.Ct.
780, 57 L.Ed. 1232 (1913), 15
Nashville Milk Co. v. Carnation Co., 355 U.S.
373, 78 S.Ct. 352, 2 L.Ed.2d 340 (1958),
16
National Assn of Real Estate Bds., United
States v., 339 U.S. 485, 70 S.Ct. 711, 94
L.Ed. 1007 (1950), 45
National City Lines, United States v., 186
F.2d 562 (7th Cir.1951), 266
National City Lines, Inc., United States v.,
337 U.S. 78, 69 S.Ct. 955, 93 L.Ed. 1226
(1949), 33
National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas City,
452 U.S. 378, 101 S.Ct. 2415, 69 L.Ed.2d
89 (1981), 38
National Petroleum Refiners Assn v. F.T.C.,
482 F.2d 672 (D.C.Cir.1973), 13
NCAA v. Board of Regents of University
of Oklahoma, 468 U.S. 85, 104 S.Ct.
2948, 82 L.Ed.2d 70 (1984), 19, 74, 121,
279, 572
Nederlandsche
BandenIndustrie
Michelin v. Commission (322/101)
(Michelin I), [1983] E.C.R. 346, 666
New Wrinkle, Inc., United States v., 342
U.S. 371, 72 S.Ct. 350, 96 L.Ed. 417
(1952), 230
Nippon Paper Industries Co., Ltd., United
States v., 109 F.3d 1 (1st Cir.1997), 1160
N.L.R.B. v. Health Care & Retirement Corp.
of America, 511 U.S. 571, 114 S.Ct. 1778,
128 L.Ed.2d 586 (1994), 45
Northeastern Tel. Co. v. American Tel. and
Tel. Co., 651 F.2d 76 (2nd Cir.1981), 365,
366
Northern Pac. Ry. Co. v. United States, 356
U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958),
74, 571
Northwest Wholesale Stationers, Inc. v.
Pacific Stationery and Printing Co.,
472 U.S. 284, 105 S.Ct. 2613, 86 L.Ed.2d
202 (1985), 75, 170
Novatel Communications, Inc. v. Cellular
Telephone Supply, Inc., 1986 WL 15507
(N.D.Ga.1986), 812
Nurse Midwifery Associates v. Hibbett, 927
F.2d 904 (6th Cir.1991), 815
NYNEX Corp. v. Discon, Inc., 525 U.S.
128, 119 S.Ct. 493, 142 L.Ed.2d 510
(1998), 266, 776
Oahu Gas Service, Inc. v. Pacific Resources,
Inc., 838 F.2d 360 (9th Cir.1988), 447
OF
CASES
xxxiii
xxxiv
TABLE
OF
CASES
TABLE
Texas Industries, Inc. v. Radcliff Materials,
Inc., 451 U.S. 630, 101 S.Ct. 2061, 68
L.Ed.2d 500 (1981), 25
Theatre Enterprises, Inc. v. Paramount
Film Distributing Corp., 346 U.S. 537,
74 S.Ct. 257, 98 L.Ed. 273 (1954), 843
Thompson Everett, Inc. v. National Cable
Advertising, L.P., 57 F.3d 1317 (4th Cir.
1995), 549
Thomsen v. Cayser, 243 U.S. 66, 37 S.Ct. 353,
61 L.Ed. 597 (1917), 1141
324 Liquor Corp. v. Duffy, 479 U.S. 335, 107
S.Ct. 720, 93 L.Ed.2d 667 (1987), 36
Tiftarea Shopper, Inc. v. Georgia Shopper,
Inc., 786 F.2d 1115 (11th Cir.1986), 815
Timberlane Lumber Co. v. Bank of America,
N.T. and S.A., 549 F.2d 597 (9th Cir.
1976), 1143, 1145
TimesPicayune Pub. Co. v. United States,
345 U.S. 594, 73 S.Ct. 872, 97 L.Ed. 1277
(1953), 345, 571, 573, 574
Topco Associates, Inc., United States v., 405
U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515
(1972), 74, 774
Total Ben. Services, Inc. v. Group Ins. Admin., Inc., 1993 WL 15671 (E.D.La.1993),
812
Town of (see name of town)
Tracinda Inv. Corp., United States v., 477
F.Supp. 1093 (C.D.Cal.1979), 917
Trenton Potteries Co., United States v.,
273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700
(1927), 85
Tunis Bros. Co., Inc. v. Ford Motor Co., 763
F.2d 1482 (3rd Cir.1985), 812
Twin City Sportservice, Inc. v. Charles O.
Finley & Co., Inc., 676 F.2d 1291 (9th
Cir.1982), 548
Twin Laboratories, Inc. v. Weider Health &
Fitness, 900 F.2d 566 (2nd Cir.1990), 446
Union Labor Life Ins. Co. v. Pireno, 458 U.S.
119, 102 S.Ct. 3002, 73 L.Ed.2d 647
(1982), 42
United Brands Co. v. Commission
(27/76), 1977 WL 160644 (ECJ 1977), 319
United Brands Co. and United Brands
Continental B.V. (27/76) v. Commission of the European Communities,
[1978] E.C.R. 207, 405
United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14
L.Ed.2d 626 (1965), 36
United Shoe Machinery Corp., United States
v., 391 U.S. 244, 88 S.Ct. 1496, 20 L.Ed.2d
562 (1968), 27, 28
United Shoe Machinery Corp., United States
v., 110 F.Supp. 295 (D.Mass.1953), 345
United Shoe Machinery Corporation v. United States, 258 U.S. 451, 42 S.Ct. 363, 66
L.Ed. 708 (1922), 18, 585, 662
United States v.
(see opposing
party)
United States Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589 (1st Cir.1993),
549
OF
CASES
United States Postal Service v. Flamingo Industries (U.S.A.) Ltd., 540 U.S. 736, 124
S.Ct. 1321, 158 L.Ed.2d 19 (2004), 40
United States Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610, 97 S.Ct. 861, 51
L.Ed.2d 80 (1977), 279
Uranium Antitrust Litigation, In re, 617 F.2d
1248 (7th Cir.1980), 25
U.S. Gypsum Co., United States v., 438
U.S. 422, 98 S.Ct. 2864, 57 L.Ed.2d 854
(1978), 15, 897
Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540
U.S. 398, 124 S.Ct. 872, 157 L.Ed.2d 823
(2004), 265, 344, 346, 404, 415, 438, 496
Victorian House, Inc. v. Fisher Camuto Corp.,
769 F.2d 466 (8th Cir.1985), 815
Viho Europe BV v. Commission of the
European Communities (C73/95 P),
1996 WL 1093651 (ECJ 1996), 813
Virgin Atlantic Airways Ltd. v. British Airways PLC, 257 F.3d 256 (2nd Cir.2001),
496, 1137
Virginia Academy of Clinical Psychologists v.
Blue Shield of Virginia, 624 F.2d 476 (4th
Cir.1980), 42
Virginia Vermiculite, Ltd. v. W.R. Grace &
Company- Connecticut, 156 F.3d 535 (4th
Cir.1998), 17
Vollrath Co. v. Sammi Corp., 9 F.3d 1455
(9th Cir.1993), 366
Volvo Trucks North America, Inc. v.
ReederSimco GMC, Inc., 546 U.S. 164,
126 S.Ct. 860, 163 L.Ed.2d 663 (2006),
794
Vons Grocery Co., United States v., 384 U.S.
270, 86 S.Ct. 1478, 16 L.Ed.2d 555 (1966),
916
Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172,
86 S.Ct. 347, 15 L.Ed.2d 247 (1965), 38
Weyerhaeuser Co. v. RossSimmons
Hardwood Lumber Co., Inc., 549 U.S.
312, 127 S.Ct. 1069, 166 L.Ed.2d 911
(2007), 399, 1029
White Motor Co. v. United States, 372 U.S.
253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963),
774
Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82,
87 L.Ed. 122 (1942), 48
William Inglis & Sons Baking Co. v. ITT
Continental Baking Co., Inc., 668 F.2d
1014 (9th Cir.1981), 365
Willman v. Heartland Hosp. East, 34 F.3d
605 (8th Cir.1994), 447, 815
W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp., Intern., 493
U.S. 400, 110 S.Ct. 701, 107 L.Ed.2d 816
(1990), 1214
Yellow Cab Co., United States v., 332 U.S.
218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947),
266
xxxv
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OF
CASES
GLOBAL ANTITRUST
LAW AND ECONOMICS
CHAPTER
INTRODUCTION
A. THE FRAMEWORK OF LEGAL ISSUES RAISED BY BASIC
ANTITRUST ECONOMICS
How the Basic Economics Explains the Core Legal Concerns. In a world
of perfect competition, life is good. Firms can enter and exit markets
instantly and without cost, products are homogeneous, and everyone is
perfectly informed. Firms are so numerous that none of them is large
enough to influence prices by altering output and all act independently.
Supplier competition for sales thus drives prices for products and services
down to the costs of providing them. (Costs here should be understood to
include capital and risk-bearing costs, and thus incorporates a normal
profit that reflects the capital market rate of return necessary to induce
investment in firms given the risk level.) Any firm that tried to charge
more than costs would be undercut by another firm that would charge less
because they would gain sales whose revenue exceeded costs. Lower cost
producers would thus underprice and displace higher cost producers. Their
output would be purchased whenever market buyers found that the value
of the product to them exceeded its price/cost but not otherwise.
If demand increased or costs decreased so that suppliers would earn
supranormal profits if their output remained constant, then the existence
or prospect of those supranormal profits would induce supplier expansion
or entry, increasing supply until it drove prices back down toward costs. If
demand decreased or costs increased so that suppliers would earn substandard profits if their output remained constant, then they would contract or exit the market, shifting any moveable capital to more profitable
ventures and reducing supply until prices rise to meet costs. The nice result
is to allocate societal resources towards those markets where they can best
provide value to buyers. Even nicer, it does not have to be the case that
suppliers are omniscient, or even know what theyre doingthe market
will winnow out those who guess wrong regardless.
In the real world, life is regrettably imperfect. Entry, exit or expansion
are costly and take time. Products vary by brand or attributes and
information is imperfect. Economies of scale mean many markets cannot
sustain a large enough number of firms to leave each without any incentive
to consider the effect of its decisions on market prices. But despite such
unavoidable realities, typical markets are workably competitive in the sense
that they produce results that are fairly close to perfect competition, at
least in the long run. In any event, perfect competition provides an
aspiration and useful benchmark that helps identify the sort of interferences with market mechanisms that should most concern antitrust law.
The economic literature analyzing such issues can be frightfully complicat-
CHAPTER 1
INTRODUCTION
A.
THE FRAMEWORK
OF
LEGAL ISSUES
expansion and entry that would drive down prices toward more competitive
levels. So does a firm that, while not yet dominant, thinks such anticompetitive conduct will help it obtain dominance. Because a firm that obtains or
maintains monopoly or dominant market power can exploit it unilaterally,
it also has incentives to engage in such anticompetitive conduct unilaterally, rather than requiring agreement or coordination with rivals. Chapter 3
will address how the law seeks to identify such unilateral anticompetitive
conduct and distinguish it from procompetitive unilateral conduct.
Firms with market power might likewise have incentives to enter into
agreements with suppliers or buyers to try to exclude rivals, diminish their
efficiency, or impede their expansion or entry. Because these agreements
are up or down the supply chain, they are generally called vertical
agreements, in contrast to the horizontal agreements entered into by
rivals at the same level. They thus involve concerted action but also involve
firms who use such vertical agreements to obtain or maintain single firm
market power. Chapter 4 addresses these sets of cases.
Firms might also engage in unilateral conduct or vertical agreements
that antitrust law fears will impede competition among downstream firms.
One form of unilateral conduct that some laws seek to condemn on this
score is price discrimination among buyers that distorts their ability to
compete downstream. Similar concerns have been raised about vertical
agreements to restrain resale by buyers, including agreements to fix the
prices that distributors can charge downstream, or to limit where or to
whom they can sell. As we will see, legal liability for such conduct or
agreements has been the subject of strong economic critique, based mainly
on the observation that firms typically have little incentive to impede
competition among downstream firms. Such issues will be addressed in
Chapter 5.
Chapter 6 then addresses how to prove the existence of an agreement,
and addressed a third concern: that some markets have few enough firms
that each has an influence on prices and output. and can notice and
respond to the actions of each other. If so, then even without an explicit
agreement, such firms may be able to coordinate to restrict output and
raise prices. This is called oligopolistic coordination. The big difficulty this
raises is whether such coordination can be condemned without proof of an
agreement, especially when oligopolistic firms cannot avoid knowing that
their pricing and output decisions will affect the behavior of other firms.
The final major concern, addressed in Chapter 7, is that rivals might
merge or combine into one firm. Horizontal mergers can have anticompetitive effects if the resulting firm has monopoly or dominant market power,
or the structure of the rest of the market means the merger will create an
oligopoly or exacerbate its ability to coordinate on higher prices. The
difficulty is determining when this is the effect of a merger and whether
the merger is justified by any greater efficiencies it might create. Vertical
mergers between firms up and down the supply chain raise issues similar to
vertical agreements that might exclude or impair rival competition. Mergers between firms that are not related horizontally or vertically are called
conglomerate mergers, which raise issues if they eliminate potential hori-
CHAPTER 1
INTRODUCTION
A.
THE FRAMEWORK
OF
LEGAL ISSUES
CHAPTER 1
INTRODUCTION
A.
THE FRAMEWORK
OF
LEGAL ISSUES
CHAPTER 1
INTRODUCTION
A.
THE FRAMEWORK
OF
LEGAL ISSUES
10
CHAPTER 1
INTRODUCTION
B.
B.
11
12
CHAPTER 1
INTRODUCTION
2.
3.
B.
been cabined by a 1994 amendment, which provides that the FTC cannot
deem conduct unfair unless the act or practice causes or is likely to cause
substantial injury to consumers which is not reasonably avoidable by
consumers themselves and not outweighed by countervailing benefits to
consumers or to competition.7 The FTC Act is not enforceable by private
suits, nor by the DOJ, nor by any retroactive penalties.8 Instead, it is
enforceable only by the FTC itself, whose only remedy is to issue a
prospective order to cease and desist the activity, which is in turn subject to
review by the federal courts of appeals.9 The FTC can also go to court to
seek a preliminary injunction pending a final resolution by itself and the
courts.10 Although the FTC may have authority to adopt prospective rules
defining the conduct it regards as an unfair method of competition, it has
not exercised such authority as a matter of practice.11
The FTC does not have jurisdiction to enforce Sherman Act violations,
see 15 U.S.C. 21, but this is of little practical importance in cases seeking
injunctive relief because anything that violates the Sherman Act could also
be deemed an unfair method of competition actionable under FTC Act
7.
15 U.S.C. 45(n).
8. See 15 U.S.C. 12 (defining antitrust laws enforceable in those ways to exclude the
FTC Act); 15 U.S.C. 56(a) (vesting the FTC with exclusive enforcement authority over the
FTC Act with limited exceptions).
9.
10.
11. The legal issue is surprisingly unsettled. Before 1973, it was seriously doubted that
the FTC Act gave the FTC authority to issues substantive rules. See K. DAVIS, ADMINISTRATIVE
LAW TEXT 130 (3d ed. 1972); Marinelli, The Federal Trade Commissions Authority to
Determine Unfair Practices and Engage in Substantive Rulemaking, 2 OHIO N.U.L. REV. 289,
29596 & n.75 (1974). Then, in National Petroleum Refiners Assn v. FTC, 482 F.2d 672, 673
78 (D.C.Cir. 1973), Judge Skelly Wright interpreted 15 U.S.C. 46(g) to give the FTC
authority to adopt substantive rules defining unfair methods of competition and unfair
and deceptive trade practices. But that was a debatable interpretation because 46(g) could
be read to just authorize creating procedural rules for carrying out the FTCs cease and desist
powers. It was also dicta as applied to rules defining unfair methods of competition because
the case was actually about a rule defining an unfair and deceptive trade practice, namely
the failure to disclose octane levels on gas pumps. The House initially passed a bill that said
the FTC had authority to enact rules defining deceptive trade practices but not unfair
methods of competition; however, the House compromised with the Senate on a statute that
did the former but did not purport to alter whether or not authority existed to enact rules
defining unfair methods of competition. See 15 U.S.C. 57a(2); H.R. Rep. No. 1107, 93d
Cong., 2d Sess. 4950 (1974), reprinted in 4 U.S. Code Cong. & Ad. News 7702, 7727 (1974); S.
Rep. No. 1408, 93d Cong., 2d Sess. 32 (1974) (conference report), reprinted in 4 U.S. Code
Cong. & Ad. News 7755, 7764 (1974). Thus, it appears there were insufficient legislative votes
for either the proposition that the FTC could enact rules defining anticompetitive practices or
the proposition that it could not. The FTC rules on its rulemaking procedure seem to carefully
limit its rulemaking to deceptive practices (Rule 1.7) or special areas where it has express
statutory authority to adopt rules, such as defining whether certain conduct constitutes illegal
price discrimination (Rule 1.231.24) unless the reference in Rule 1.2.1 to unlawful trade
practices is intended to cut more broadly. The only substantive rule related to competition
that the FTC ever enacted was pursuant to its special authority to define price discrimination
under 15 U.S.C. 13(a), and has since been rescinded. See 58 Fed. Reg. 3590701. The FTC
does not appear to have adopted any substantive rule that purported to define unfair
methods of competition that were not deceptive nor any procedural rule that claims general
authority to enact rules defining unfair methods of competition that are not deceptive.
13
14
CHAPTER 1
INTRODUCTION
5.12 Thus, the DOJ and FTC effectively have concurrent jurisdiction over
most industries when seeking injunctive relief. However, especially for
mergers, they have adopted a practice of informally dividing their jurisdiction by concentrating on different industries, though an effort to adopt a
written agreement that would more precisely define this division was
withdrawn in the face of Congressional opposition.13
Federal courts have exclusive jurisdiction over federal antitrust
claims.14 Antitrust cases brought by anyone other than the FTC (or special
agency) are brought in the U.S. federal district courts for a trial to
adjudicate the facts and determine the relevant law,15 and citations to their
opinions are marked F. Supp. Appeals from decisions of the district
courts are generally first brought to the U.S. Courts of Appeals (noted
F.2d or F.3d in citations), which are often called the circuit courts
because there is a different one for each region of the country. Most are
numbered (e.g., 1st Cir. is New England, 9th Cir. comprises certain
West Coast states) except for the D.C. Circuit, which sits in Washington,
D.C. and tends to handle appeals from federal agency decisions. Appeals are
on questions of law, though this can include such legal questions as
whether there was sufficient evidence to support the factual findings and
whether those findings suffice to meet the legal standard. Losing parties
can then seek review before the U.S. Supreme Court (marked U.S. in
citations), but although that Court was formerly obligated to take any
appeal that presented a substantial federal question, it now has discretion to decide when to take a case (called taking certiorari), which it
generally does only when the circuit courts are split on an important
relevant legal issue.16
In addition, many states have their own antitrust statutes. These
statutes tend to be less vigorously enforced, in part because they generally
borrow U.S. antitrust standards and are usually brought as ancillary claims
to U.S. antitrust claims that can be brought only in federal court. Plus,
state antitrust enforcement is usually left to the understaffed offices of
state attorneys general. However, state antitrust law is free to prohibit
12.
13. See Baer, Feinstein & Shaheen, Taking Stock: Recent Trends in U.S. Merger
Enforcement, 18 ANTITRUST 15, 2021 (Spring 2004).
14.
(1985).
See Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 379
15. At the FTC, the general procedure is instead (1) the five commissioners issue a
complaint, (2) that complaint is adjudicated by an administrative law judge (ALJ) within the
FTC, (3) that ALJ decision is appealed to the five commissioners who decide whether to issue
the cease and desist order, and (4) that FTC decision is appealed directly to the Courts of
Appeal, and from there to the Supreme Court where appropriate. See 15 U.S.C. 21, 45. The
exception is that the FTC must bring a claim for a preliminary injunction to a federal district
court, 15 U.S.C. 53(b), which generally must be done in merger cases to prevent the merger
from occurring. At any step along the way, the FTC (like the DOJ) can instead settle with the
parties and enter into a consent decree limiting their conduct or merger in some way, which is
in fact how the bulk of cases are ultimately handled.
16. Historically, there were special statutes that provided for antitrust trials by 3 judge
district courts and direct appeal to the U.S. Supreme Court, which was true in some of the
cases in this book. But today direct appeal from district court to the U.S. Supreme Court is
exceedingly rare, though possible in extreme cases. See 15 U.S.C. 29.
B.
conduct that federal antitrust law allows,17 and in the rare cases where it
does so, it can have important effects. And occasionally the state attorneys
general indicate a willingness to pursue a case beyond where the federal
authorities think is appropriate even under the same antitrust standards,
as happened in the Microsoft case where some states did not agree to the
U.S.s settlement and thus continued to pursue the states claims.
i. Criminal Penalties. The criminal penalties for violating the
Sherman Act have changed over time, and currently provide for punishment by fine not exceeding $100,000,000 if a corporation, or, if any other
person, $1,000,000, or by imprisonment not exceeding 10 years, or by both
said punishments, in the discretion of the court. See 15 U.S.C. 12. In
addition, general U.S. criminal law allows for an alternative fine equal to
twice the defendants pecuniary gain or the victims pecuniary loss. See 15
U.S.C. 3571(d).
The Supreme Court has held that defendants can be criminally liable
even for rule of reason offenses.18 However, proving a criminal violation of
the Sherman Act requires proving a criminal intent (called mens rea),
which necessitates proof that the conduct either (1) had anticompetitive
effects and was undertaken with knowledge of its probable consequences or (2) had the purpose of producing anticompetitive effects TTT,
even if such effects did not come to pass.19 Thus, criminal violations
require proof either of an anticompetitive intent or of knowledge that
anticompetitive effects were probable and in fact ensued. The Supreme
Court has explained that the reason for adding these elements in a criminal
suit, even though the same elements would not be required in civil suit
alleging a violation under the very same statutory language, was the
concern that, compared to civil penalties, criminal penalties would produce
greater overdeterrence of procompetitive conduct lying close to the
borderline of impermissible conduct.20
The Department of Justice (DOJ) brings criminal prosecutions, and
indeed most of the DOJs cases are criminal cases. The DOJ Manual
generally limits enforcement to conduct that is clearly unlawful, known to
be unlawful, intended to suppress competition, or a repeat offense.21 The
DOJ does not limit its enforcement to per se violations, and indictments
have even been sustained against agreements that other district courts
found legal under the rule of reason.22 But as a matter of practice, virtually
all the criminal prosecutions are for patently per se illegal horizontal
agreements like price-fixing between unrelated competitors. These cases
thus tend to raise few interesting legal issues in their adjudication. More
interesting are the enforcement policy implications arising from the facts
that the size of criminal penalties and number of criminal cases have both
17.
See California v. ARC America Corp., 490 U.S. 93, 10405 (1989).
18.
19.
United States v. United States Gypsum, 438 U.S. 422, 444 & n.21 (1978).
20.
Id. at 441.
21. II PHILLIP E. AREEDA, ROGER D. BLAIR, & HERBERT HOVENKAMP, ANTITRUST LAW 303, at 29
(2d ed. 2000).
22.
15
16
CHAPTER 1
INTRODUCTION
increased over time, that these cases are increasingly focused on foreignbased conspirators, and that the DOJ has had increasing success by
offering leniency to the first conspirator who reveals the conspiracy or
implicates the other conspirators.
ii. Treble Damages. The most distinctive feature of U.S. antitrust
enforcement is that it provides actions for treble damages that mean
government enforcement is supplemented, and in many areas dominated,
by private suits. [A]ny person who shall be injured in his business or
property by reason of anything forbidden in the antitrust laws can sue the
violator for three times their damages plus litigation costs, including
reasonable attorney fees.23 The requirement of an injury to business or
property excludes claims for physical injury but includes any claim of
monetary injury.24 If a court concludes the defendant has improperly
delayed the antitrust suit, it can also award interest covering the period
from the time the plaintiff filed suit to the time of judgment.25
Treble damages often sound excessive because, at first cut, single
damages should be adequate to deter any conduct whose harm exceeds its
benefits. However, in fact treble damages are not as draconian as they
sound because they are reduced by the fact that: (a) plaintiffs cannot collect
pre-suit interest and usually cannot collect prejudgment interest, (b) plaintiffs have difficulty proving harm from the fact that the anticompetitive
overcharge caused them not to buy the product at all (that is, the deadweight loss triangle usually cannot be collected), and (c) in many courts,
plaintiffs cannot recover damages for the harmful umbrella effect an
overcharge causes by increasing the prices of rivals or substitutes. It has
been calculated that the combination of these three factors reduces treble
damages to single damages on average.26 Further, single damages are likely
to underdeter anticompetitive conduct because it is often difficult to detect
or prove. Some conduct (like a cartel) is hard to detect, but once detected is
easy to prove to be anticompetitive. Other conduct may be easier to detect,
but harder to prove it is anticompetitive, such as a tie of some computer
software to other software. High litigation costs may also deter many
claims. Because expected damages will be the actual damages times the
odds of detection and adjudicated punishment, they may well be less than
the gains of conduct that inflicts greater costs than benefits.
Damage claims can be brought not only by private parties but by
governments injured in their own business or property, though foreign
governments are limited to single damages unless they themselves were not
eligible for foreign sovereign immunity from antitrust claims because they
23. See 15 U.S.C. 15. Antitrust laws are defined to include the Sherman and
Clayton Acts (as amended by later acts) but not the FTC Act or RobinsonPatman Act 3. See
15 U.S.C. 12; Nashville Milk v. Carnation Co., 355 U.S. 373, 37879 (1958). The former is
enforceable just by injunctive claims by the FTC and the latter just by criminal actions by the
DOJ, which are rarely brought.
24.
25.
26.
(2006).
See Robert H. Lande, Five Myths About Antitrust Damages, 40 U.S.F. L. Rev. 651
B.
29.
30.
31. Zenith Radio Corp. v. Hazeltine Research, Inc. (Zenith I), 395 U.S. 100, 114 & n.9
(1969) (It is enough that the illegality is shown to be a material cause of the injury; a plaintiff
need not exhaust all possible alternative sources of injury in fulfilling his burden of proving
compensable injury.); Continental Ore v. Union Carbide, 370 U.S. 690, 702 (1962) (enough
that violation materially contributed to the harm).
32. II AREEDA
ET AL.,
33. Catlin v. Washington Energy Co., 791 F.2d 1343, 1347 (9th Cir.1986); see also
Virginia Vermiculite, Ltd. v. W.R. Grace & Co.Conn., 156 F.3d 535, 539 (4th Cir. 1998);
Advanced HealthCare Servs., Inc. v. Radford Community Hosp., 910 F.2d 139, 149 (4th Cir.
1990).
17
18
CHAPTER 1
INTRODUCTION
&
36. Brunswick Corp. v. Pueblo BowlOMat, 429 U.S. 477, 489 (1977) (emphasis in
original).
37. See Los Angeles Memorial Coliseum v. NFL, 791 F.2d 1356, 1364 (9th Cir. 1986)
([T]he Brunswick standard is satisfied on a showing that the injury was caused by a
reduction, rather than an increase, in competition flowing from the defendants acts. )
38.
See Brunswick; Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986).
39. Matsushita Electric v. Zenith Radio, 475 U.S. 574, 586 (1986); Atlantic Richfield v.
U.S.A Petroleum, 495 U.S. 328 (1990).
B.
does suffer antitrust injury and has standing to sue.40 Indeed, even a
plaintiff that voluntarily agreed to an anticompetitive restraint can bring
an antitrust claim, if the plaintiff was injured by the anticompetitive
aspects of that restraint or by its enforcement against the plaintiff and if
the plaintiff was not equally responsible for the restraint.41
This antitrust injury doctrine provides an enormously useful function:
it screens out those plaintiffs whose anticompetitive motives make litigation unlikely to benefit consumer welfare. This not only saves litigation
costs but also lowers the risk that antitrust courts will mistakenly impose
liability that deters procompetitive conduct. Thus, like the mens rea requirement in criminal cases, this doctrine is an important part of reducing
the overdeterrence of procompetitive conduct that antitrust law inevitably
creates given errors or difficulties in distinguishing such conduct from
anticompetitive conduct.
(3) Proximate Causation. An antitrust plaintiff seeking damages must
also show that its injury was sufficiently direct or proximate. This generally, but not always, precludes antitrust claims by a plaintiff that claims the
antitrust violation harmed an intervening party that passed the harm on to
it. For example, if an antitrust violation harms a corporation, then its
shareholders, employees and creditors cannot bring an antitrust suit.
However, the Supreme Court has held that whether it terms an injury
direct or indirect turns not on formalisms, such as whether an
intervening party exists but rather on the application of three policy
factors.42 Those factors are: (1) whether a more directly injured party could
bring the same cause of action to vindicate the interest in statutory
enforcement; (2) whether allowing suit by the indirect party would require
complicated apportionment of damages to avoid duplicative damages; and
(3) whether indirectness makes the causal inquiry too speculative.43 The
Court interprets these factors to foster, rather than frustrate, enforcement
by concentrating the antitrust claim in the hands of the private party with
the best incentives to vigorously enforce the statute.44 The goal is to pick
the best plaintiff, not to bar all plaintiffs.
40.
41. See Perma Life Mufflers v. International Parts Corp., 392 U.S. 134, 138141 (1968);
id. at 14348 (White, J., concurring). Because Justice White was the fifth vote for the Court
opinion, his concurring opinions would seem to limit language in the Court opinion that
suggested a plaintiff could sue even if it were equally responsible.
42. Associated General Contractors of Cal. v. California State Council of Carpenters, 459
U.S. 519, 536 n.33 (1983) (rejecting the directness of the injury test, stating that instead
courts should analyze each situation in light of the factors set forth in the text); Holmes v.
SIPC, 503 U.S. 258, 272 n.20 (1992) (interpreting the antitrust standard for incorporation to
RICO cases and concluding, Thus, our use of the term direct should merely be understood
as a reference to the proximate-cause enquiry that is informed by the concerns set out in the
text.)
43.
Associated General, 459 U.S. at 53845; Holmes, 503 U.S. at 269, 273 n.20.
44. See Associated General, 459 U.S. at 542 (noting that the Court does not deny
standing when that is likely to leave a significant antitrust violation undetected or unremedied and inquiring into existence of an identifiable class of persons whose self-interest
would normally motivate them to vindicate the public interest in antitrust enforcement.);
Kansas v. UtiliCorp, 497 U.S. 199, 214 (1990) (our interpretation of [Clayton Act] 4 must
promote the vigorous enforcement of the antitrust laws.).
19
20
CHAPTER 1
INTRODUCTION
46.
Id. at 54142.
47.
48.
49.
Id. at 483.
50.
51.
B.
54.
Id. at 736.
55. See also California, 490 U.S. at 102 n.6 (Illinois Brick TTT was concerned TTT that
at least some party have sufficient incentive to bring suit. Indeed, we implicitly recognized as
much in noting that indirect purchasers might be allowed to bring suit in cases in which it
would be easy to prove the extent to which the overcharge was passed on to them.).
56.
57.
Id. at 10405.
21
22
CHAPTER 1
INTRODUCTION
J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 565 (1981).
59. J. Truett, 451 U.S. at 566 (Our willingness to accept a degree of uncertainty in
these cases rests in part on the difficulty of ascertaining business damages as compared, for
example, to damages resulting from a personal injury or from condemnation of a parcel of
land.); Zenith I, 395 U.S. at 123 (damages resulting from a partial or total exclusion from a
market TTT are rarely susceptible of the kind of concrete detailed proof of injury which is
available in other contexts.)
60. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931)
(there is a clear distinction between the measure of proof necessary to establish the fact that
petitioner had sustained some damage, and the measure of proof necessary to enable the jury
to fix the amount. The rule which precludes the recovery of uncertain damages applies to such
as are not the certain result of the wrong, not to those damages which are definitely
attributable to the wrong and only uncertain in respect of their amount.).
61. Bigelow v. RKO Radio Pictures, 327 U.S. 251, 265 (1946) (The most elementary
conceptions of justice and public policy require that the wrongdoer shall bear the risk of the
uncertainty which his own wrong has created.); Story Parchment, 282 U.S. at 563 (Where
the tort itself is of such a nature as to preclude the ascertainment of the amount of damages
with certainty, it would be a perversion of fundamental principles of justice to deny all relief to
the injured person, and thereby relieve the wrongdoer from making any amend for his acts);
Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 379 (1927) (a defendant
whose wrongful conduct has rendered difficult the ascertainment of the precise damages
suffered by the plaintiff, is not entitled to complain that they cannot be measured with the
same exactness and precision as would otherwise be possible.); J. Truett,, 451 U.S. at 566
(Any other rule would enable the wrongdoer to profit by his wrongdoing at the expense of his
victimTTTT [I]t does not come with very good grace for the wrongdoer to insist upon specific
and certain proof of the injury which it has itself inflicted.); Zenith I, 395 U.S. at 124 (same).
62. Story Parchment, 282 U.S. at 563; J. Truett, 451 U.S. at 56566; Zenith I, 395 U.S. at
123; Bigelow, 327 U.S. at 264.
63.
B.
forward with (a) evidence showing that it suffered the sort of injury that
the proven antitrust violation tends to create and (b) some rough method of
approximating the amount of damages it suffered. Although this burden
does not require the plaintiff to disprove the possibility that other causal
factors also contributed to the injury, the defendant then has an opportunity (and burden) to prove that the other causal factors in fact created all or
some portion of the alleged injury. In the typical case involving injured
firms claiming lost profits, antitrust defendants usually employ various
blame the victim arguments that the injured firm would have lost profits
anyway because it was poorly managed, poorly located, had a bad product,
or was less efficient than other firms in some other way. In cases claiming
inflated prices, the defendants will typically argue either that prices actually went down or would have increased anyway because of increased costs or
other market factors.
Under this rough-approximation-of-damages standard, the Supreme
Court has approved awarding lost profits damages based on assumptions
that, absent the antitrust violation, the plaintiff would have (1) acquired
the same market share as it had in another nation, (2) made the same
profits as another firm, (3) made the same profits as it made in the past, or
(4) enjoyed the same prices as it enjoyed in the past.64 One cannot really
know whether, absent an antitrust violation, a firm would have done as
well as another or as it did in a different nation, nor that past profits or
prices will continue into the future. But such crude assumptions are
permitted to deal with the uncertainty caused by defendants antitrust
violation.
Thus, the typical method allowed is to pick some contemporaneous or
past baseline where or when markets or firms were not affected by the
anticompetitive conduct and assume that any difference between the baseline and reality was caused by the anticompetitive conduct. Unfortunately,
contemporaneous or past baselines may be inaccurate because of different
costs or demand, because they were also affected by the same anticompetitive conduct, or because the firms in those baselines differ in their efficiency or other features. The past can also be a poor baseline in the typical case
where a monopolist is engaging in anticompetitive conduct precisely to slow
down the inevitable erosion of a monopoly power it initially earned.65 In
such cases, using a past baseline may falsely suggest the conduct caused no
damages even though the conduct did anticompetitively make prices higher
than they would have been in the but-for world without that conduct.
Plaintiffs thus often must base their cases on expert projections about
what prices or profits would have been but for the anticompetitive conduct
in a way that accounts for differences between the but-for world and the
posited baseline. One possible method is to run a regression analysis that
correlates various features of the market and firms with prices or profit
levels to predict what prices or profits would have been but for the
anticompetitive conduct, in a way that accounts for differences in market
64. Zenith I, 395 U.S. at 12425; Bigelow, 327 U.S. at 25965; Kodak, 273 U.S. at 379;
Story Parchment, 282 U.S. at 56266.
65. Einer R. Elhauge, Defining Better Monopolization Standards, 56 STAN. L. REV. 253,
33739 (2003).
23
24
CHAPTER 1
INTRODUCTION
features or firms.66 Where the claim involves future lost profits, a present
value calculation must also be conducted to reduce the stream of future lost
profits into a current damage amount.67
Often, it is attractive to build a model of how prices are set in the
relevant industry, and then use it to predict what but-for prices would have
been absent some change caused by the conduct. This can lead to conflicting results because models with different assumptions can lead to quite
different results. One promising modern approach, called the New Empirical Industrial Organization (NEIO) approach, is to use empirical analysis to
estimate the conduct parameters rather than assume them.68 In particular,
with empirical estimates of (1) the relevant demand-elasticities, (2) seller
concentration levels, and (3) producer price-cost margins, one can calculate
(4) the extent to which firms in the market act competitively (the conduct
parameter).69 One could then use such data to calculate the extent to
which that conduct parameter changed with the relevant conduct and how
much that change affected prices. Or one might calculate the extent to
which changes in seller concentration levels might alter prices if the
conduct parameter remained constant. Or one might be able to assume, say
66.
II AREEDA
67.
Id. 392c.
ET AL.,
68. See, e.g., Timothy F. Bresnahan, Empirical Methods for Industries with Market
Power, in 2 HANDBOOK OF INDUSTRIAL ORGANIZATION (Richard Schmalensee & Robert Willig eds.,
North Holland 1989); Timothy F. Bresnahan & Valerie Y. Suslow, Oligopoly Pricing with
Capacity Constraints, 15/16 ANNALES DECONOMIE ET DE STATISTIQUE 26789 (1989); Jonathan B.
Baker & Daniel L. Rubinfeld, Empirical Methods in Antitrust Litigation: Review and Critique,
1 AM. L. & ECON. REV. 386, 42729 (1999).
69. For example, as we shall see in Chapter 7, the Cournot Model of competition predicts
that (without any collusion or coordination), (PMC)/P = HHI/e, assuming the products are
homogeneous and marginal costs are constant, where P is price, MC is marginal cost, HHI is
the sum of squares of the market shares of the firms, and e equals the absolute value of the
marketwide demand elasticity. In contrast, the Bertrand Model predicts that prices will equal
marginal cost even in a duopoly. Finally, monopoly models predict that a cartel (or perfectly
coordinating oligopoly) would set prices at (PMC)/P = 1/e. Rather, than assuming a
particular model is true, one could simply set (PMC)/P = HHI(1vk)/e, where k is the
conduct parameter, which could vary from 1 (where the Bertrand prediction holds) to 0 (if
Cournot holds) or to positive numbers (where collusion or coordination is true) up to k = (1
HHI)/HHI (where collusion or coordination is perfect). With a conduct parameter calculated
from data rather than assumed by model, one could then calculate what the change in conduct
parameter must have been between two periods if one has the data on price, cost, market
shares and demand elasticity in the two periods, and then calculate what effect that change in
conduct parameter had given current prices, costs and market shares. Or, if one wants to
calculate the effects of a merger, one might calculate the current conduct parameter,
conservatively assume that it would not be any higher after the merger (i.e., that the merger
would not increase the degree of oligopolistic coordination), and then calculate what the
change in market prices would be.
Other models can be used to calculate the predicted price effects of a merger if one instead
assumes Bertrand competition on differentiated markets. Assuming the merged firms are
closest to each other in the relevant product space, one need simply calculate the crosselasticities of demand between the firms and the aggregate elasticity of the alleged product
space using current price-output data, and then (with varying assumptions about the shape of
the demand curve) predict the prices that the merged firm would charge, and thus the extent
to which those prices would be higher than premerger levels. Using this method, one can even
calculate the extent to which a posited decrease in marginal costs would offset any tendency
toward increased prices.
B.
in a cartel case, that the conduct parameter was at maximum anticompetitive levels, and then calculate one of the other missing variables.
Where a plaintiff can show that prices were inflated by the defendants
anticompetitive conduct, it is entitled to recover the amount of the price
overcharge times the quantity it purchased.70 Notwithstanding arguments
that business purchasers should be limited to the lost profits that more
accurately measure their injury, they are entitled to recover for the full
overcharge because the Illinois Brick doctrine concentrates the antitrust
claim in their hands rather than allowing indirect purchasers to sue for any
overcharge that was passed on downstream. However, this does seem to
undercompensate for the total harm inflicted by the violation, which will
include not only this overcharge but the deadweight loss caused because
the price increase will diminish output and crowd some purchasers out of
the market. In theory, a plaintiff should be able to satisfy the requisite
standards on causation and damages by showing that it would have bought
a greater amount but for the antitrust violation, or (if it purchased
nothing) that it would have been a direct purchaser but for the antitrust
violation. But proof of that will usually be difficult. This undercompensation problem is to some extent offset by trebling damages.
(5) Allocating Damages Among Defendants. When multiple firms engage in a conspiracy that causes anticompetitive harm, their liability is
joint and several.71 This means that, although a plaintiff can sue all the
defendant co-conspirators, the plaintiff also has the option to sue just one
(or some) of the defendant co-conspirators for the entire amount of the
injury resulting from the conspiracy.72 The plaintiff need not even name the
co-conspirators in its complaint,73 though in some cases specificity might be
necessary to adequately allege the conspiracy. The fact that the plaintiff
actually did not buy from the defendant does not matter as long as the
price at which the plaintiff bought was fixed by the conspiracy.74 Indeed, if
the defendant and his co-conspirators fixed prices in a way that caused
market prices to rise generally, a plaintiff should be able to recover even if
the plaintiff did not buy from a co-conspirator at all, on the ground that the
illegal conspiracy did materially contribute to the higher prices the plaintiff
paid in a way that directly flowed from the anticompetitive aspects of the
conduct. However, the cases are somewhat split on this last point.75
70.
See Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 396 (1906).
71.
See Texas Industries v. Radcliff Materials, 451 U.S. 630, 646 (1981).
72. See Burlington Indus. v. Milliken & Co., 690 F.2d 380, 392 n.8 (4th Cir. 1982);
MacMillan Bloedel Limited v. Flintkote Co., 760 F.2d 580, 58485 (5th Cir. 1985); In re
Uranium Antitrust Litigation, 617 F.2d 1248, 1257 (7th Cir. 1980).
73. See Texas Industries, 451 U.S. at 63233 (plaintiff complaint allowed to proceed that
did not even name who defendants horizontal co-conspirators were).
74. See Chattanooga Foundry, 203 U.S. at 396 (upholding antitrust verdict against
horizontal co-conspirator of actual seller, even though actual seller was not sued). Thus, a
plaintiff who alleges it paid retail prices that were fixed by an illegal vertical price-fixing
agreement between a manufacturer and dealer can elect to sue just the manufacturer or just
the dealer or both. See II AREEDA ET AL., supra note 21, at 346h, at 369; VII AREEDA, ANTITRUST
LAW 1459b4, at 18687 (1986).
75.
See II AREEDA
ET AL.,
25
26
CHAPTER 1
INTRODUCTION
The Supreme Court has also held that a defendant cannot even seek
contribution from its co-conspirators for their share of the damages
caused.76 This does not mean that a plaintiff can get double recovery by
separately suing each defendant for the full amount of its loss. Rather, each
defendant is entitled to a defense of payment for any amount previously
paid by other co-conspirators.77 However, the non-contribution rule does
create incentives for plaintiffs to settle early with some co-defendants for
less than their pro-rata share of damages in order to fund the rest of the
litigation and minimize the downside risk, confident that the remaining codefendants are still on the hook for all other damages. It also creates
corresponding incentives for co-defendants to settle early to avoid being the
nonsettling defendant left exposed to a disproportionate share of the
liability risk.
iii. Injunctive Relief. Claims for injunctive relief to prevent Sherman or Clayton Act violations can be brought not only by the Department
of Justice, but also by private parties injured by those violations.78 The FTC
can also seek or impose injunctive relief as noted above for Clayton and
FTC Act violations.79 In a Government case the proof of the violation of
law may itself establish sufficient public injury to warrant relief.80 In
contrast, a private plaintiff must prove threatened loss or damage, in
other words that the violation threatens to have a material causal link to
an injury that would constitute antitrust injury.81 Thus, two of the elements necessary to prove damages have parallels in private injunctive
claims. The other two do not. A private plaintiff seeking injunctive relief
need not prove that any causal link is proximate because an injunction
poses no danger of duplicative or speculative damages.82 And obviously the
plaintiff seeking injunctive relief need not prove the amount of its damages.
Rather, it must generally show the opposite: that damages do not provide it
an adequate remedy, which is true whenever some portion of its injury is
too difficult to quantify in damages.83 Thus, a private plaintiff will typically
seek damages and injunctive relief in the alternative because denial of the
former supports the latter. Often a plaintiff will be able to quantify past
76.
77. See Zenith Radio Corp. v. Hazeltine Research, Inc. (Zenith II), 401 U.S. 321, 348
(1971); Burlington Indus., 690 F.2d at 39192.
78.
79.
80. See California v. American Stores, 495 U.S. 271, 295 (1990). However, as shown
below, if the government is not simply seeking injunctive relief to prevent or undo the
anticompetitive conduct, but also seeks affirmative injunctive relief to undo the anticompetitive effects or force disgorgement of anticompetitive gains, it must show a material causal link
between the defendants conduct and those anticompetitive effects or gains.
81. See id.; 15 U.S.C. 26; Cargill, 479 U.S. at 111 (private plaintiff seeking injunction
must prove antitrust injury); Zenith I, 395 U.S. at 130 (injunctive remedy is characteristically
available even though the plaintiff has not yet suffered actual injury; he need only demonstrate a significant threat of injury from an impending violation of the antitrust laws or from a
contemporary violation likely to continue or recur to show the requisite causal connection); II
AREEDA ET AL., supra note 21, at 337b, 31013.
82. Cargill, 479 U.S. at 110111 n.6.
83.
See Blue Cross v. Marshfield Clinic, 152 F.3d 588, 591 (7th Cir.1998) (Posner, J.).
B.
but not future damages, in which case it should get a damage award for the
past, and injunctive relief for the future. Subject to the above limitations,
private parties have the same right to seek extraordinary injunctive relief
like divestiture as the government does, though district courts are not
obligated to order such remedies in every case where the government could
obtain it.84 If a private party substantially prevails on a claim for
injunctive relief, it is also entitled to have the defendant reimburse its
litigation costs and reasonable attorneys fees.85
Injunctive relief should be awarded not only (1) to prevent or undo the
anticompetitive conduct but also (2) to undo any anticompetitive effects the
conduct had on the market and (3) to deny the defendant the fruits of its
antitrust violations.86 Thus, injunctive relief need not be limited to either
prohibiting illegal conduct nor to returning the market to the status quo
ante, but can include more affirmative relief to undo anticompetitive effects
or gains.87 District courts have considerable discretion to fashion remedies
to achieve these goals, including orders requiring firms to: divest or create
companies, share access to physical or intellectual property, enter into
contracts or modify them, or refrain from certain businesses or practices
even though they are normally legal.88
Injunctive relief cannot be punitive in the sense of seeking to inflict
hardships on the defendant that are unnecessary to accomplish the above
three goals, but it is also true that defendant hardships cannot relegate the
plaintiff to injunctive relief that is less effective at accomplishing those
three goals.89 When the injunctive relief sought does not simply seek to
prevent or undo antitrust violations, a material causal connection must
generally be shown between the anticompetitive conduct and the anticompetitive effects it seeks to undo or the fruits it seeks to take away, even in a
suit brought by the government.90
Injunctions to undo the conducts anticompetitive effects can include
conduct regulation designed to influence markets far into the future: in
Ford Motor the Supreme Court awarded injunctive relief designed to affect
how the market would look like ten years in the future, and stressed that
drafting an antitrust decree by necessity involves predictions and assump84.
85.
86. See United States v. Microsoft, 253 F.3d 34, 103 (D.C.Cir.2001) (en banc) ([A]
remedies decree in an antitrust case must seek to unfetter a market from anticompetitive
conduct [and] TTT deny to the defendant the fruits of its statutory violation TTT) (citing Ford
Motor v. United States, 405 U.S. 562, 577 (1972), and United States v. United Shoe, 391 U.S.
244, 250 (1968)); Schine Chain Theatres, Inc. v. United States, 334 U.S. 110, 12829 (1948)
(injunctive relief serves several functions: (1) It puts an end to the combination or conspiracy
when that is itself the violation. (2) It deprives the antitrust defendants of the benefits of their
conspiracy. (3) It is designed to break up or render impotent the monopoly power which
violates the Act.)
87. See Professional Engineers v. United States, 435 U.S. 679, 69798 (1978); United
States v. Loews, 371 U.S. 38, 53 (1962); Ford Motor, 405 U.S. at 573 n.8; American Stores,
495 U.S. at 28384.
ET AL.,
88.
See II AREEDA
89.
See United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 32627 (1961).
90.
27
28
CHAPTER 1
INTRODUCTION
tions concerning future economic and business events.91 Courts can also
modify injunctions many years after trial (whether or not the court
expressly retained jurisdiction in the original decree) if subsequent evidence indicates the earlier injunction was not completely effective.92
Injunctions to deprive the defendant of the fruits of its anticompetitive
conduct should include injunctions ordering the defendant to divest property:
if the property was acquired TTT as a result of practices which
constitute unreasonable restraints of trade. Otherwise, there
would be reward from the conspiracy through retention of its
fruits. Hence the problem of the District Court does not end with
enjoining continuance of the unlawful restraints nor with dissolving the combination which launched the conspiracy. Its function
includes undoing what the conspiracy achievedTTTT [T]he requirement that the defendants restore what they unlawfully obtained is
no more punishment than the familiar remedy of restitution.93
This language would appear broad enough to authorize the government to bring antitrust claims seeking the disgorgement of any supracompetitive profits causally related to antitrust violations.94 Although not yet
frequently sought as a remedy, the FTC has sought disgorgement as
injunctive relief and had its authority to do so upheld,95 as has the DOJ.96
Further, the Sherman Act gives the DOJ express authority to obtain
forfeiture of any property owned by or pursuant to any antitrust conspiracy
that crosses state or national boundaries.97 This can be done in a civil
action rather than criminal prosecution.98
Governments and private parties can also obtain preliminary injunctions to prevent conduct from occurring or continuing pending litigation
under the normal standards that balance the likelihood of ultimate success
on the merits, the harm the preliminary injunction would cause the
defendant, and whether any injury to the plaintiff or public from allowing
the conduct would be irreparable later.99 Such preliminary injunctions are
typically the remedy sought in the biggest area of antitrust practice: suits
to prevent mergers from occurring.
iv. Consent Decrees and the Interplay Between Public and
Private Enforcement. Treble damages compensate for the underdeterrence problems that might otherwise result because it is often hard to
91.
92.
93.
94. See II AREEDA ET AL., supra note 21, at 325a, at 245 (equity relief may include TTT
the disgorgement of improperly obtained gains); Elhauge, Disgorgement as an Antitrust
Remedy, 76 Antitrust L.J. 79 (2009).
95. See FTC v. Mylan Labs., 62 F. Supp. 2d 25, 3637 (D.D.C. 1999) (collecting cases
upholding authority of FTC to seek disgorgement as an injunctive relief).
96.
97.
98.
28 U.S.C. 2461(a).
99.
B.
detect antitrust violations and costly and risky to bring antitrust actions.
The regime is thus often said to enlist private attorneys general to aid
antitrust enforcement. This can result in tension because private parties
often pursue cases that government agencies view as wrongheaded. Further, private suits are an omnipresent factor in judicial interpretation
because courts interpreting a U.S. antitrust statute (other than the FTC
Act) know that they cannot simply adopt broad interpretations to give
disinterested government agencies authority to root out all possible undesirable conduct, confident that they will typically exercise their prosecutorial discretion to avoid bringing cases that involve overinclusive applications
of that interpretation. Instead, courts know that any such overinclusive
applications will be pursued by private litigants whenever it is profitable to
do so. The antitrust injury requirement helps reduce this overdeterrence
problem by barring suits by private plaintiffs that could not suffer any
injury unless the alleged conduct were procompetitive, but it remains a
serious problem given the difficulties of accurately sorting out procompetitive conduct. This makes courts inclined to interpret U.S. antitrust statutes
more narrowly than they might if the statutes authorized only government
suits.
However, government agencies also rely on private enforcement to
supplement their efforts. Indeed, sometimes agencies will decline to pursue
cases precisely because they believe that the incentives for private suit are
adequate, and thus the agencies conclude that they should allocate their
scarce resources to those areas where private suits are less likely. Agencies
also sensibly focus their energies on cases that have the most general
impact, leaving to private litigation issues that are of relevance to a more
limited set of parties. Thus, a governmental decision not to bring suit after
investigation does not create an adverse inference about private litigation
over the same matter. In contrast, if the government obtains a judgment
after obtaining testimony, then that judgment has preclusive effect in
subsequent private lawsuits, unless the judgment constitutes a consent
decree entered before testimony was obtained.100 The statute of limitations
for private suits is also suspended pending the government suit.101 And
even if the government loses its litigation, subsequent parties may be able
to benefit from the discovery the government collected. Accordingly, potential plaintiffs often lobby the government agencies to bring the cases first,
and defendants often enter into consent decrees in order to avoid adverse
effects on subsequent private suits.
To be effective, governmental consent decrees must be approved by
courts under the Tunney Act after others have had sixty days notice to
comment.102 The rather vague statutory standard is the court can approve
100. Although the antitrust statutes state that the prior government judgment only
constitutes prima facie evidence of a violation, see 15 U.S.C. 16(a), modern developments in
collateral estoppel law give prior litigated judgments (whether in public or private suits)
preclusive effect, effectively mooting this provision. See II AREEDA ET AL., supra note 21, 319c,
at 204.
101.
29
30
CHAPTER 1
INTRODUCTION
15 U.S.C. 16(e).
104.
See In re IBM Corp., 687 F.2d 591, 60003 (2d Cir. 1982).
15 U.S.C. 15b.
107.
See II AREEDA
108.
18 U.S.C. 3282.
109.
110.
See II AREEDA
111.
See Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997).
ET AL.,
ET AL.,
B.
er, although this doctrine allows the plaintiff to sue for conduct that began
more than four years ago, it can recover only for injuries suffered from
those acts that occurred within the last four years.112 To illustrate, if
defendants engage in a continuous course of horizontal price-fixing from
2000 to 2004, then a plaintiff can bring suit in 2006, even though it knew
the price-fixing began in 2000, because each sale at the fixed price restarts
the statute of limitations period. However, unless some other tolling
doctrine applied, the plaintiff could not recover for the inflated prices it
paid before 2002.
(3) The Speculative Injury Doctrine. Even if the misconduct and injury
have occurred, the statute does not begin to run until the injury becomes
sufficiently non-speculative to form the basis for reasonably ascertainable
damages.113 The logic is fairly straightforward: a plaintiff cannot be penalized for delaying suit if an earlier suit would have been barred on the
grounds that its damages had not yet become reasonably ascertainable. For
example, if the exclusionary conduct started producing injury to rivals in
2000, but the magnitude was not reasonably measurable until 2003, then
the limitations period would not start until 2003, and thus a lawsuit could
still be brought in 2006 for all injury since 2000.
vi. Class Actions. Antitrust cases are often particularly well-suited
for resolution by class action because antitrust aims to protect marketwide
competition, not individual firms or buyers, and therefore necessarily
requires resolution of issues that are marketwide and thus common to any
class of persons in that market. This includes market definition, market
power, market shares, foreclosure shares, characterization of the conduct,
whether the conduct had anticompetitive effects, whether it had procompetitive effects, whether there was less restrictive alternative, whether it
caused injury, whether that injury constituted antitrust injury, and what
the total damages were. Because those issues are all common to any class of
persons in that market, requiring separate litigation of those issues would
be greatly duplicative. Also, where there are many persons in the market,
each may lack a sufficient incentive to litigate given their individual stakes
and the large costs of antitrust litigation. These problems are worsened by
collective action problems that make every person in the market prefer to
have others bear the burden of litigation and free ride on those efforts
either by enjoying the benefits of an injunction for the market or through
later collateral estoppel in their own damages claim.
The main obstacle to class actions has been finding a common methodology for distributing those total damages among different persons in the
market who may have bought on varying terms or have varying preferences. These problems can be overstated because these variances exist not
only in the actual world but also in the but-for world without the anticompetitive conduct, so they generally cancel out using the method of rough
approximation allowed to calculate antitrust damages when a violation has
been proven.114 Still, problems with proving individual damages sometimes
112.
Id.
113.
114. Suppose, for example, that a monopolist has engaged in anticompetitive foreclosure
that has raised market prices, but each buyer pays somewhat different prices because they
31
32
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INTRODUCTION
116.
120. See Daniel v. American Bd. of Emergency Medicine, 428 F.3d 408, 42223 (2d Cir.
2005) (collecting the conflicting cases).
B.
123. See 28 U.S.C. 1404(a); United States v. National City Lines, 337 U.S. 78 (1949);
Capital Currency Exchange v. National Westminster Bank, 155 F.3d 603 (2d Cir. 1998).
124.
33
34
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INTRODUCTION
130. See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48,
57, 6061, 6263 (1985); Town of Hallie v. City of Eau Claire, 471 U.S. 34, 3840, 4647 &
B.
See City of Columbia, 499 U.S. at 37072; Elhauge, supra note 126, at 692.
133. Goldfarb v. Virginia State Bar, 421 U.S. 773, 776 & n.2, 78992 (1975) (state bar
enjoyed no antitrust immunity even though it was a statutorily designated state agency
exercising an authority granted by the state); Continental Ore Co. v. Union Carbide & Carbon
Corp., 370 U.S. 690, 703 n.11, 70607 (1962) (defendant enjoyed no antitrust immunity even
though the Canadian government had appointed the defendant its official agent and delegated
to it discretionary agency power to purchase and allocate to Canadian industries all
vanadium products.); see also Allied Tube & Conduit Corp. v. Indian Head, Inc. 486 U.S. 492,
501 (1988) (citing Goldfarb and Continental Ore for the proposition that persons with
economic incentives to restrain trade are not state actors who enjoy antitrust immunity);
Elhauge, supra note 126, at 68391.
134. See City of Columbia, 499 U.S. at 374, 379; City of Lafayette v. Louisiana Power &
Light Co., 435 U.S. 389, 40304 (1978); Elhauge, supra note 126, at 73233.
135.
136.
Fisher v. City of Berkeley, 475 U.S. 260 (1986); Elhauge, supra note 126, at 73435.
35
36
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INTRODUCTION
B.
could be deemed derivative of the state action immunity that applies to the
challenged restraint. By the same token, petitioning immunity clearly does
not apply to efforts to persuade a financially interested market participant
to impose an anticompetitive restraint that would not enjoy state action
immunity.146 Nor does petitioning immunity apply if a financially interested
market participant imposes the challenged market restraint in order to
coerce government action.147
The difficulty is with dual effect cases where the same private activity
both (a) indirectly helps procure government action and (b) directly restrains trade in a way that would cause anticompetitive effects whether or
not the government made a favorable substantive decision. Petitioners are
always immune for the former effects given state action immunity,148 and
are also immune for the latter direct effects when they are incidental to
genuine petitioning efforts that are valid by the standards of the relevant
governmental process.149 Immunity for the direct effects is thus denied if
the alleged input into public decisionmaking was a sham in the sense
that the activity was not genuinely designed to influence government
action,150 or if the direct effects were inflicted by a restraint that was in fact
separate from the valid effort to influence the government and thus was
not incidental to any such petitioning.151 Such cases are not true dual
effect cases because one of the effects is a sham or the duality does not
really exist because the effects are severable.
Even in true dual effect cases, immunity for the direct effects is also
denied if the restraint violates the prevailing standards for providing input
to the relevant government decisionmaking process.152 Under the no-holdsbarred standards for providing input to the political process, this can
protect even deceptive and unethical speech.153 Under the more stringent
standards for providing input into the adjudicative process, immunity can
be lost for the direct effects of conduct that violates the legal standards
applicable to litigation.154 This does not mean immunity is lost for the
146. See Allied Tube, 486 U.S. at 501; Continental Ore, 370 U.S. at 70708; Elhauge,
supra note 126, at 120003.
147. See FTC v. Superior Court Trial Lawyers Assn, 493 U.S. 411, 42125, 427 (1990);
Allied Tube, 486 U.S. at 503; Elhauge, supra note 127, at 120611, 123740.
148. See Allied Tube, 486 U.S. at 499; Noerr, 365 U.S. at 13536; City of Columbia, 499
U.S. at 37879; Elhauge, supra note 127, at 1213, 1220, 124042.
149. See Noerr, 365 U.S. at 14244; Elhauge, supra note 127, at 121337.
150. Professional Real Estate Investors v. Columbia Pictures Indus., 508 U.S. 49, 5861
(1993); City of Columbia, 499 U.S. at 380; Allied Tube, 486 U.S. at 500 n.4, 508 n.10; Noerr,
365 U.S. at 144.
151.
152.
153. See Noerr, 365 U.S. at 14041 & n.20 (stressing that the challenged activity was in
widespread use and apparently not prohibited by the laws applicable to lobbying); Elhauge,
supra note 127, at 122326.
154. See Allied Tube, 486 U.S. at 499500; California Motor Transp. Co. v. Trucking
Unlimited, 404 U.S. 508, 51213 (1972); Professional Real Estate, 508 U.S. at 6266 (judging
whether conduct constitutes an abuse of process under traditional litigation standards).
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38
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Silver v. NYSE, 373 U.S. 341, 357 (1963); Natl Gerimedical, 452 U.S. at 389.
159. See Gordon v. NYSE, 422 U.S. 659, 662, 683 (1975); United States v. NASD, 422
U.S. 694, 72628 (1975); Natl Gerimedical, 452 U.S. at 389.
160. See Natl Gerimedical, 452 U.S. at 38990; NASD, 422 U.S. at 72628; Georgia v.
Pennsylvania R.R., 324 U.S. 439 (1945); United States v. Borden, 308 U.S. 188 (1939); Nader
v. Allegheny Airlines, 426 U.S. 290, 301 (1976); McLean Trucking Co. v. United States, 321
U.S. 67 (1944). In addition, even without any implicit antitrust exemption, regulators are
sometimes held to have primary jurisdiction in the sense that antitrust courts should defer
their adjudications until the agency has had a chance to address the issue first, generally
either because the agency has an expertise advantage in determining the facts relevant to the
antitrust claim or because agency resolution might affect whether an antitrust exemption
existed. See id. at 30104; Ricci v. Chicago Mercantile Exch., 409 U.S. 289, 305, 307 (1973);
Carnation Co. v. Pacific Westbound Conf., 383 U.S. 213, 222 (1966); Far East Conf. v. United
States, 342 U.S. 570, 57475 (1952). However, other cases have somewhat inconsistently held
B.
In Credit Suisse, the Court held that federal securities law precludes
antitrust law when the two are clearly incompatible given (1) the
existence of regulatory authority under the securities law to supervise the
activities in question; (2) evidence that the responsible regulatory entities
exercise that authority; TTT (3) a resulting risk that the securities and
antitrust laws, if both applicable, would produce conflicting guidance,
requirements, duties, privileges, or standards of conduct, and that (4) TTT
the possible conflict affected practices that lie squarely within an area of
financial market activity that the securities law seeks to regulate.161 The
Court emphasized that the possible conflict need not be a present one: even
if the federal securities agency currently prohibits precisely the same
conduct that antitrust law prohibits, it suffices for an antitrust exemption
that, in the future: (a) the agency could create a conflict by choosing to
exercise its regulatory authority differently, or (b) the agency and antitrust
courts might interpret or apply their similar prohibitions differently.162
This test uses factors similar to those considered by prior implied
exemption cases, but goes beyond them to suggest an affirmative test of
when an antitrust exemption would be implied. If generalizable beyond
securities cases, it indicates that an implied antitrust exemption applies if:
(1) a federal non-antitrust agency has an exercised power to regulate the
relevant conduct, and (2) current or future agency choices about how to
exercise or apply that power might create a risk of a conflict with antitrust
standards on conduct that is squarely within the core area covered by the
non-antitrust law. Two features indicated, however, that the Court was
trying to cabin this implied exemption doctrine a bit. First, the limitation of
implied exemption to the core areas covered by non-antitrust laws indicated
a potential narrowing of implied exemption law. Second, the Court suggested in several places that the potential-conflict exemption test might be
unique to securities law.163
One can see why the Court might be worried about applying this
standard outside of securities cases. Given the extent of modern federal
regulation, it may well be the case that, in most of our economy, some
agency has an exercised power to regulate some conduct that might also
constitute an antitrust violation. If all such conduct were exempt from
antitrust scrutiny, there could well be little left to the antitrust laws.
Further, usually Congress has authorized the relevant agency to regulate
the conduct in some more limited way, or based on more limited standards
that are unrelated to competitive concerns. It seems implausible that in all
such cases that Congress really meant to oust antitrust review, or that
doing so would be socially desirable. Instead, Congress may well have
intended to express even more concern about the relevant conduct, by
that agencies should hold off until an antitrust court has addressed the relevant issue. See
California v. FPC, 369 U.S. 482 (1962). Perhaps the best resolution is that the latter was a
merger case brought a federal antitrust agency, which generally both requires a quick decision
(and thus makes deferring impracticable) and means the agency in the antitrust suit has an
equal or greater claim to expertise.
161.
162.
163.
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40
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See Square D Co. v. Niagara Frontier Tariff Bureau, 476 U.S. 409, 415420 (1986).
169. See Cost Management Service v. Washington Natural Gas, 99 F.3d 937, 94445 (9th
Cir. 1996); City of Kirkwood v. Union Elec. Co., 671 F.2d 1173, 1178 (8th Cir. 1982).
170. See United States Postal Service v. Flamingo Indus. (U.S.A) Ltd., 540 U.S. 736
(2004). An earlier case had held that the United States was not a person who could be an
antitrust damages plaintiff or defendant, see United States v. Cooper Corp., 312 U.S. 600, 607
09, 614 (1941), and Congress had responded with a statute that did not make the United
States a person who could sue and be sued, but rather simply gave the United States
standing to sue for antitrust damages, see 15 U.S.C. 15a.
B.
172. See United States v. Borden, 308 U.S. 188, 194, 205 (1939); Maryland & Va. Milk
Producers Assn v. United States, 362 U.S. 458, 46668, 47172 (1960).
173.
174.
See Flood v. Kuhn, 407 U.S. 258, 282 (1972); 15 U.S.C. 26b.
175.
176.
177.
178.
179.
180.
181.
182.
183.
12 U.S.C. 1828(c).
41
42
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INTRODUCTION
15 U.S.C. 1012(b).
B.
antitrust law for insurance practices that are regulated by state law.188
Still, the most recent Supreme Court opinion more accurately describes the
second clause as an exception to the first,189 suggesting that future courts
may instead follow the plain meaning of the statute and require a showing
of impairment. This would also be more consistent with the statutory
canon requiring narrow interpretation of any antitrust exemption, as well
as with the full legislative history.190
Leaving aside the possible future addition of this impairment test, the
traditional regulated-by state-law standard does not require proof that the
state effectively enforces its regulation of the practice as long as the state
authorizes enforcement through a scheme of administrative supervision.191 This element is also satisfied if the state regulator permits or
authorizes the relevant practice, like collective ratemaking, even though
the regulator does not substantively control those rates, as long as the
practice is open and supervised by the state regulator.192 Although the
188. See F.T.C. v. National Casualty Co., 357 U.S. 560, 563 n.3 (1958).
189. See Hartford Fire, 509 U.S. at 780. If it does, this would narrow the exemption
because, in non-antitrust cases, the Court has found such impairment only when the federal
claim would directly conflict with state regulation or frustrate a declared state policy. See
Humana Inc. v. Forsyth, 525 U.S. 299, 31112 (1999). The main difference is that, unlike the
regulated-by-state-law standard, the impairment standard does not preclude federal prohibitions of the same sort of conduct prohibited by state law. For example, state regulation of
deceptive insurance practices does not preclude RICO efforts to penalize such deception under
the impairment standard, id., but does preclude FTC efforts to penalize such deception under
the regulated-by-state-law standard. See National Casualty, 357 U.S. at 563.
One might wonder whether reading the second clause as an exception renders it superfluous on the ground that federal antitrust law could never impair state law when the matter is
not regulated by state law. But the impairment clause applies to any state law enacted for the
purpose of regulating insurance whether or not it actually does so. Thus, a plain meaning
interpretation would not create superfluity because under it the federal antitrust laws would
apply when they impair a state law that has the purpose of regulating insurance but does not
actually do so. It is unclear the extent to which such state laws actually exist, but it is not
superfluous for Congress to provide for the possibility. In any event, superfluous language in
statutes is in fact commonplace, and the canon against superfluous language is not followed
when it conflicts with the most sensible reading of statutory language.
190. Of the legislative history cited in National Casualty, the only part that actually
supports its statutory reading is that Senator McCarran did state that state regulation would
oust federal antitrust liability. See 91 Cong. Rec. 1443. However, given the context, he may
have simply been assuming a case where the antitrust liability would impair the state
regulation, especially since what the Senators mainly had in mind was state regulations
authorizing collective ratemaking by insurers subject to state supervision. See id. at 1444,
1481, 1484. Other Senators supporting the statute read the language to mere be a positive
declaration of when antitrust applied notwithstanding the impairment clause, see id. at 1444
(Sen. OMahoney), or stressed that state regulation would preclude antitrust liability only
when the state regulation was in conflict with antitrust law or affirmatively permitted
conduct that would otherwise violate antitrust law, id. at 1481 (Sen. Murdock), which is quite
similar to the impairment standard. None of the legislative history suggested that the
antitrust laws would be deemed inapplicable when they did not conflict with state law or some
declared state policy, and thus none of it conflicts with applying the impairment standard to
antitrust cases.
191. See St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 551 (1978); National
Casualty, 357 U.S. at 56465; Lawyers Title Co. v. St. Paul Title Ins. Corp., 526 F.2d 795, 797
(8th Cir. 1975).
192. Group Life, 440 U.S. at 223; St. Paul Fire, 438 U.S. at 548 n.21, 549; Pireno, 458
U.S. at 129; Ohio AFLCIO v. Insurance Rating Board, 451 F.2d 1178, 1181 (6th Cir. 1971).
43
44
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196.
B.
201. See AMA v. United States, 317 U.S. 519, 52627, 536 (1943) (physicians); United
States v. National Assn of Real Estate Boards, 339 U.S. 485, 489 (1950) (real estate brokers);
Columbia River Packers Assn v. Hinton, 315 U.S. 143 (1942) (fisherman). Those employees
who are considered managers, which generally includes professionals who have any supervisory responsibilities, are also not eligible to form labor unions and bargain collectively. See
NLRB v. Health Care & Retirement Corp., 511 U.S. 571 (1994) (licensed practical nurses);
FHP, Inc., 274 N.L.R.B. 1141, 114243 (1985) (physicians who were HMO employees).
202.
203. Connell Constr. Co., Inc. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S.
616, 622 (1975); see also Pennington, 381 U.S. at 662 (collecting cases); Allen Bradley Co. v.
Local Union No. 3, IBEW, 325 U.S. 797, 810 (1945) (the same labor union activities may or
may not be in violation of the Sherman Act, dependent upon whether the union acts alone or
in combination with business groups.).
45
46
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given that it is in fact implied from the statute. The Court has interpreted
this nonstatutory (implicit) labor exemption to extend even to horizontal
agreements among employers on the other side of the same collective
bargaining process about the terms they will offer as part of that process or
impose if the union does not agree, on the grounds that such immunity is
necessary to make multi-employer collective bargaining work.204 In short,
the labor exemption allows the competition model favored by antitrust to
be replaced with the model of bilateral collective bargaining between sellers
and buyers that is favored by labor law. In the latter type of case, the
process is policed by the National Labor Relations Board rather than by
antitrust courts.205
The nonstatutory (implicit) labor exemption is limited to activities that
are legitimately within the collective bargaining process about wages,
hours, and other employment terms. Even collective bargaining agreements
between union and businesses can lose their immunity when used to
suppress competition from a rival business206 or to restrain competition by
employers in their product markets.207 A fortiori, this doctrine offers no
immunity when a union and business impose a direct restraint on market
competition outside any collective bargaining agreement.208 Accordingly,
the courts have repeatedly held that alleged conspiracies between unions
and businesses to suppress competition from another business enjoy no
antitrust exemption.209 For example, Connell involved an agreement between a union and general contractor that the general contractor would
award subcontracts only to firms that had a contract with the union.210 The
Court held that this was not exempted because it involved a direct restraint
on a business market, rather than being part of a collective bargaining
agreement limited to the standardization of wages and working conditions.211 It did not matter that the unions only goal was the legal one of
organizing as many subcontractors as possible because the method violated
antitrust law.212 In Pennington, the allegation was that the union and large
coal operators conspired to exclude small coal operators from the market by
204.
See id. at 66263; Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676
208. See A.L. Adams Constr. Co. v. Georgia Power Co., 733 F.2d 853, 85556 (11th
Cir.1984) (no exemption if Agreement was not part of a collective bargaining relationship); C
& W Constr. Co. v. Brotherhood of Carpenters, 687 F.Supp. 1453, 1464 (D. Hawaii 1988)
(union-business refusal to deal that was outside any collective bargaining agreement was per
se outside the labor exemption).
209. See Connell Constr., 421 U.S. at 62326; Pennington, 381 U.S. at 66269; Allen, 325
U.S. at 809810; United States v. Employing Plasterers Assn., 347 U.S. 186, 190 (1954);
Philadelphia Record v. Manufacturing PhotoEngravers Assn., 155 F.2d 799, 803 (3d Cir.
1946); Gilmour v. Wood, Wire & Metal Lathers Intern., 223 F.Supp. 236, 248 (N.D. Ill. 1963).
210.
211.
Id. at 62326.
212.
Id. at 625.
B.
214.
Id. at 66569.
215.
216.
217. See Summit Health v. Pinhas, 500 U.S. 322, 32933 (1991); McLain v. Real Estate
Board of New Orleans, 444 U.S. 232, 23536; 24146 (1980).
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48
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INTRODUCTION
hard to know how one could ever fail to satisfy this requirement unless one
had an odd market where no sellers or buyers ever made interstate sales,
purchases, loans, or phone calls. Indeed, at least one prominent judge has
concluded that the requirement is so trivial that merely pleading the bare
conclusion that interstate commerce was affected should suffice.218 The
U.S. Supreme Court has held the interstate commerce requirement satisfied in a case where the defendants allegedly conspired to deny staff
privileges in a Los Angeles hospital to a single surgeon.219 The Court has
also interpreted the Sherman Act to extend to the furthest reaches of
congressional power to regulate interstate commerce,220 which itself covers
even a farmers decision to grow wheat for his farms own consumption.221
b. EFFECT ON U.S. COMMERCE. Unless it has a sufficient effect on U.S.
commerce or exporters, the U.S. antitrust laws do not cover restraints on
foreign soil or domestic restraints on export trade. Further, even with
sufficient effects on U.S. commerce, the reach of U.S. antitrust law may be
limited by principles of comity (where foreign law is in conflict) or by
sovereign immunity and the act of state doctrine (when the conduct
involves foreign governmental action). The complex set of rules on this
topic is addressed in Chapter 8, which generally deals with the problem of
coordinating antitrust jurisdictions on global markets.
c. EFFECT ON COMMERCE. To be covered by U.S. antitrust law, the
restraint or anticompetitive effect must be on commerce, which is to say
on some market that involves the sale of goods, services or property in
exchange for valuable consideration. A restraint on a donative activity,
such as an agreement between two charities that one will provide or solicit
donations in the eastern United States and the other in the western United
States, would not be a restraint on commerce.222 This does not mean that
charities or nonprofit entities are not covered by the antitrust laws. To the
contrary, nonprofits are covered whenever they restrain some commercial
market, such as providing medical care or college education in exchange for
money.223 Further, even noncommercial activities, like donations or promulgating safety standards, are restraints on commerce if their terms
218. Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 77879 (7th Cir. 1994)
(Posner, J.)
219.
220. Summit, 500 U.S. at 32829 & n.8, 33233; McLain, 444 U.S. at 241. Other cases
have held that the Clayton Act and RobinsonPatman Act did not go quite so far because they
did not apply to any conduct that affected interstate commerce but rather required that the
defendants and their activities be in interstate commerce, see United States v. American
Bldg. Maintenance Indus., 422 U.S. 271, 27584 (1975); Gulf Oil Corp. v. Copp Paving Co., 419
U.S. 186, 194203 (1974). However, Congress amended Clayton Act 7 to include persons and
conduct affecting interstate commerce, see 15 U.S.C. 15, and amended FTC Act 5 to
include conduct in or affecting commerce, see 15 U.S.C. 45, and the FTC has authority to
enforce the Clayton and RobinsonPatman Act. In addition, the Sherman Act likely covers any
anticompetitive conduct covered by Clayton Act 3,7, see infra Chapters 4, 7.
221.
222. See Dedication & Everlasting Love to Animals v. Humane Society, 50 F.3d 710, 712
(9th Cir. 1995).
223. See id. at 713; infra Chapter 2.
B.
226. See David J. Gerber, Law and Competition in Twentieth Century EuropeProtecting Prometheus, Clarendon Press Oxford, 1998 at p.340.
227. Commission Regulation 330/2010 of 20 April 2010 on the application of Article
101(3) of the Treaty on the Functioning of the European Union to categories of vertical
agreements and concerted practices, O.J. L 102/1.
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50
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B.
51
52
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237. See Guidelines on the application of Article 81 of the EC Treaty [now 101 of the
TFEU] to technology transfer agreements, O.J. 2004, C 101/2.
238. See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, O.J. 2004, C 31/5.
239. See Article 3(2) of Regulation 1/2003, Council Regulation (EC) No 1/2003 of 16
December 2002 on the implementation of the rules on competition laid down in Articles 81
and 82 of the EC Treaty [now articles 101 and 102 of the TFEU], O.J. 2003, L 1/1.
240.
Id.
241.
B.
53
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success). However, it is often the case that fees are not fully recoverable in
practice. Combined with the substantial costs of litigating antitrust issues,
this generates a clear disincentive for private parties to initiate judicial
proceedings.
On December 19, 2005, the European Commission published a Green
Paper on how to facilitate actions for damages caused by violations of EU
competition rules ban on restrictive business practices and abuse of
dominant market positions (Articles 101 and 102 respectively).244 The
Green Paper notes that violations of these rules, in particular by price
fixing cartels, can cause considerable damage to companies and consumers
but numerous obstacles can hinder actions for damages by injured parties
in national courts. The Green Paper identifies certain of these obstacles,
such as access to evidence and the quantification of damages, and presents
various options for debate for their removal. This Green Paper was followed up by a White Paper on Damages Actions for Breach of the EC
antitrust rules245 suggesting a new model for achieving compensation for
consumers and businesses who are the victims of antitrust violations.246
The White Paper comprises various suggestions to ensure that victims of
competition law infringements have access to truly effective mechanisms
for claiming full compensation for the harm they have suffered, whilst
ensuring respect for European legal systems and traditions. The model
outlined by the Commission is based on compensation through single
damages for the harm suffered. The White Papers other key recommendations cover collective redress, disclosure of evidence and the effect of final
decisions of competition authorities in subsequent damages actions. The
European Commission is now expected to propose directive on private
damages for breach of antitrust rules.
(4) Administrative RemediesActions by the Commission and the
NCAs
a. THE DIVISION OF COMPETENCIES BETWEEN THE NCAS AND THE COMMISSION. The NCAs and the Commission form an integrated network of
agencies (referred to as the European Competition Network). They act in
a complementary fashion and hold distinct duties.
On the low end of the network, the decentralized enforcement framework established by Regulation 1/2003 entrusts NCAs with the bulk of
Article 101 and 102 cases. As there are more than 25 NCAs in the EU, the
allocation of jurisdiction between national agencies may be a delicate issue,
in particular for practices affecting several Member States territories. In
principle, the NCA that should have jurisdiction to inquire into a specific
practice should prove that it is well placed to act. For a NCA to be well
placed, three conditions should be fulfilled.247 First, the agreement or
244. Green Paper, Damages actions for breach of the EC antitrust rules, 19 December
2005; Commission Staff Working Paper, Damages actions for breach of the EC antitrust rules,
COM (2005) 672 final, 19 December 2005.
245.
246. See Antitrust: Commission presents policy paper on compensating consumer and
business victims of competition breaches IP/08/515, 3 April 2008.
247. See Commission Notice on cooperation within the Network of Competition Authorities, O.J. C 101 of 27 April 2004, pp. 4353.
B.
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INTRODUCTION
suffering or likely to suffer injury or loss from the alleged infringement has
a legitimate interest for lodging a complaint before the Commission (party
to a terminated agreement, actual or potential competitors facing predatory
behavior, consumer associations, etc.). In addition, the potential plaintiff
can lodge informal or anonymous complaints to the Commission, the
main difference being the procedural duties bearing on the Commission.
When dealing with a formal complaint, the Commission is under a duty to
examine the complaint with vigilance (i.e. it has to consider attentively
all the matter of facts and law which the complainant brings to its
attention).253 Furthermore, it has to answer to the complaint within a
reasonable time frame, provide an opportunity to the complainant to be
heard (if the Commission envisions rejecting the application), and give
sufficiently precise and detailed reasons in case it actually rejects the
complaint.
(ii) Action on the basis of request or transfer of a NCA.Pursuant to
Article 11 of Regulation 1/2003, the Commission and NCAs cooperate with
each other through extensive exchange of information protocols. The information circulated by NCAs may trigger the initiation of proceedings by the
European Commission, in which case NCAs are relieved of their competence to apply Article 101 or 102 to a given practice.254
(iii) Initiation of proceedings by the Commission on its own motion.
The Commission can initiate proceedings on its own motion, on the basis of
any information which it considers sufficient to that end. The Commission
may open procedures when, for instance, the trend of trade between
Member States, the rigidity of prices or other circumstances suggest that
competition may be restricted or distorted within the common market.255
2.
256.
257.
See e.g., ECJ 241242/91, RTE and ITP v. Commission, [1995] ECR II1439.
B.
262. Id.
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264.
265. See Damien Geradin & David Henry, The EC Fining Policy for Violations of
Competition Law: An Empirical Review of the Commission Decisional Practice and the Case
Law of the European Courts, 1 European Competition Journal, 2005, 401.
266.
267. See Guidelines on the method of setting fines, O.J. C 9 of 14 January 1998.
268.
B.
273. See Damien Geradin and Nicolas Petit, Judicial Remedies under EC Competition
Law: Complex Issues arising from the Modernisation Process, Fordham Corporate Law
Institute, forthcoming 2005.
274.
275. See Commission Notice on informal guidance relating to novel questions concerning
Articles 81 and 82 of the EC Treaty [now Articles 101 and 102 TFEU] that arise in individual
cases, O.J. 2004, C 101/78, at 8.
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The Commission notice on guidance letters takes the view that the issuance
of a guidance letter does not prejudge its assessment of subsequent cases.276
However, it is clear that the Commission could be found to violate the
general principle of legitimate expectations if it ignored its pronouncements
with respect to a practice covered by a guidance letter. As far as NCAs and
national courts are concerned, the notice provides that they are not
formally bound by Commission guidance letters.277
c. REMEDIES BEFORE NCAS. The remedies which can be offered by NCAs
are provided for by national statutes adopted by the Member States. It
would be out of the scope of the present casebook to analyze in detail the
various remedies offered under national laws. Regulation 1/2003 seeks
nonetheless to ensure a minimal amount of homogeneity among national
remedies. It provides that, when applying Article 101 and 102 of the TFEU,
NCAs shall be able to take the following decisions:
requiring that an infringement be brought to an end; ordering
interim measures; accepting commitments; imposing fines, periodic penalty payments or any other penalty provided for in their
national law.278
(5) Judicial Remedies at the National Level. National courts can also
apply Article 101 and 102.279 In spite of the fact that they can neither act of
their own motion nor impose fines on companies infringing EU competition
law, the initiation of proceedings before national courts presents several
advantages over the system of administrative remedies described above.
First, national courts can award damages for losses incurred as a result of a
violation of Articles 101 or 102.280 Second, in complex litigation matters, the
initiation of proceedings before a national court enables plaintiffs to combine claims related to the application of national competition law with
claims based on EU competition provisions. Third, unlike the Commission
and competition authorities, national courts cannot drop complaints (or
refuse to launch an investigation) and are required to take a judgment on
the merits of the claims advanced before it.
The settings in which EU competition law is invoked before national
courts are generally twofold. A first setting (usually referred to as the
Euro-defense setting) arises when Articles 101 or 102 are invoked by a
defendant in a national procedure as a shield against a complainant seeking
to enforce an agreement/practice that infringes EU competition law.281 For
instance, a licensee may seek to escape the payment of royalties demanded
276.
Id. at 24.
277.
Id. at 25.
278.
279.
Id. at Article 6.
280.
Id. at Recital 7.
281. See ECJ, C453/99, 20 September 2001, Courage Ltd. v. Bernard Crehan and
Bernard Crehan v. Courage Ltd. and Others, [2001] ECR I6297 at 24 [TTT] any individual
can rely on a breach of Article 85(1) of the Treaty before a national court even where he is a
party to a contract that is liable to restrict or distort competition within the meaning of that
provision.
B.
286.
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B.
See Article 104(2) of the CFIs rules of procedures, supra note 281.
291. This provision states: [TTT] the Community shall, in accordance with the general
principles common to the laws of the Member States, make good any damage caused by its
institutions or by its servants in the performance of their duties.
292. See Case T342/99, Airtours v. Commission, [2002] ECR II2585; Case T310/01,
Schneider Electric v. Commission, [2008] ECR II4071; Case T5/02, Tetra Laval v. Commission, [2002] ECR II4381.
293.
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reason for the limited number of successful application for damages is that
the three conditions laid down in the case-law are very difficult to satisfy.
Holcim v. Commission amply demonstrates this. In this case the Commission fined various undertakings in its Cement decision for operating a
cartel. The decision eventually came before the GC. The latter partially
annulled the Commissions decision as a result of finding that two undertakings, Alsen and Nordcement, had not violated Article 101.294 These
undertakings, which had given bank guarantees in order not to pay the
relevant fine immediately, requested the Commission to reimburse the fees
paid to obtain these guarantees. After their request was rejected by the
Commission, the undertakings (which in the meantime had merged giving
rise to a new undertaking Holcim) lodged a fresh appeal for indemnity
before the GC. They claimed that the illegal Commission decision caused
them harm through having to pay bank fees. The GC carried out an
examination to see whether the three conditions had been fulfilled. It
considered that the first condition was not satisfied insofar as:
regard being had to the fact that Cement was a particularly complex
case, involving a very large number of undertakings and almost the
entire European cement industry, to the fact that the structure of
Cembureau made the investigation difficult owing to the existence of
direct and indirect members, and to the fact that it was necessary to
analyse a great number of documents, including in the applicants
specific situation, it must be held that the defendant was faced with
complex situations to be regulated. Last, it is necessary to take account
of the difficulties in applying the provisions of the EC Treaty in
matters relating to cartels. Those practical difficulties were all the
greater because the factual elements of the case in question, including
in the part of the decision concerning the applicant, were numerous.
On all of those grounds, it must be held that the breach of Community
law found in the Cement judgment as regards the part of the decision
concerning the applicant is not sufficiently serious.
The appeal was therefore rejected. The above passage reveals the
extremely cautious approach followed by the Court when dealing with
action for damages. In insisting on the difficulties of applying the provisions of the Treaty with respect to cartel agreements (which are amongst
some of the most clear and precise rules in the field of competition law), the
GC also casts serious doubt on the possibility to successfully lodge an
appeal for indemnity against an illegal Commission intervention in a field
as complex and speculative as, for example, merger control.
In its Schneider v. Commission ruling, the GC, however, found the
Commission liable for damages incurred as a result of its unlawful prohibition of a notified merger case. In 2001, the Commission had adopted a
decision declaring the merger of Schneider and Legrand as incompatible
with the common market. The Commission then adopted a further decision
ordering Schneider to divest Legrand. The parties, however, appealed this
decision and, in 2002, the GC annulled both of the Commissions decisions
on incompatibility and divestiture. The Commission then began a second
294.
B.
review of the transaction and closed its file after Schneider completed its
divestment of Legrand. Schneider agreed to sell Legrand to a third party at
a reduced price (because a long delay between signing and completion was
agreed). The GC ordered the EU to compensate Schneider for (i) the
expenses incurred by Schneider during the Commissions second review of
the transaction and (ii) the reduction in the sale price of Legrand.295
Although Schneider obtained compensation, the GCs judgment does
not reverse its traditionally reluctant approach towards indemnity applications in the field of competition law. In Schneider v. Commission, the Court
identified an egregious infringement of Schneiders rights of defence which
in turn had inflicted a serious damage to the applicant.296 The Court,
however, did not provide guidance on the thornier question of whether
substantive legal and economic errors made by the Commission in its
decision entitled the parties to obtain compensation. The GC merely
indicated that manifestly serious breaches vitiating the underlying economic analysis can in principle give rise to a right of damages.297 However,
it sounded a note of caution in recalling that the Commission must enjoy a
wide margin of discretion in its assessment of complex economic issues.
Subsequent to its Schneider judgment, the GC confirmed its cautious
approach with respect to actions for damages as it dismissed the claim for
damages against the European Commission brought by MyTravel. In 1999,
the Commission had prohibited the merger between MyTravel (then Airtours) and First Choice plc, on the basis that the transaction would create a
collective dominant position on the market for UK short-haul holiday
packages. MyTravel brought an appeal and in 2002 the GC annulled the
prohibition decision. MyTravel then initiated proceedings at the GC pursuant to which it claimed compensation from the Commission for the damage
it alleged to have suffered as a result of the overturned decision.
In its judgment, the GC recalled that [w]here the unlawfulness of a
legal measure is relied on as a legal basis for action for damages, that
measure, in order to be capable of causing the Community to incur noncontractual liability, must constitute a sufficiently serious breach of a rule
of law intended to confer rights on individuals.298 In this respect, the GC
stated that the annulment of the Airtours decision of the Commission due
to a series of errors of assessment could not be equated without further
analysis with a sufficiently serious breach of a rule of law.299 Otherwise
this would risk compromising the capacity of the Commission fully to
function as regulator of competition, a task entrusted to it by the EC
Treaty [now the TFEU], as a result of the inhibiting effect that the risk of
having to bear the losses alleged by the undertakings concerned might have
295. The ECJ, however, partly annulled the judgment of the GC on this point. It upheld
the CFIs order in respect to (i) above and annulled its order in respect to (ii). The ECJ ruled
that the reduction in the transfer price for Legrand was not a direct result of the Commissions procedural irregularity. See E.C.J., case C440/07 P, not yet reported.
296.
See 129.
297.
Id.
298.
Id. at 37.
299.
Id. at 4142.
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Id. at 42.
301.
Id. at 43.
302.
Id. at 80.
303.
Id. at 81.
304.
Id. at 82.
305.
Id. at 83.
306.
Id. at 84.
B.
See ECJ, C41/90, Hofner and Elser v. Macrotron GmbH, [1991] ECR I1979.
308.
See ECJ, C364/92, SAT Fluggesellschaft mbH v. Eurocontrol, [1994] ECR I43.
309. See D. Goyder, EC Competition Law, 4th ed., at p. 479. See ECJ, 240242, 260262,
268269/82, Stichting Sigarettenindustrie and others v. Commission, [1985] ECR 3831.
310. Through the initiation of infringements proceedings pursuant to Article 226 on the
basis of Article 10 of the Treaty (duty of loyal cooperation of Member States) combined with
either Article 81 or 82.
311. The only case in which the Commission acted on this basis being: ECJ, C35/96,
Commission v. Italy, ECR [1998] I3851.
312. See ECJ, C198/01, Consorzio Industrie Fiammiferi v. Autorit`
a Garante della
Concorrenza e del Mercato, [2003] ECR I8055.
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The Court concluded that the application of the then Article 10 of the EC
Treaty (now repealed) combined with Article 101 or 102 required NCAs to
declare inapplicable any piece of national legislation contrary to EU competition law. As a result, market operators facing legislation likely to violate
EC competition law may turn to their NCA to obtain confirmation that it is
indeed contrary to Article 101 or 102 and thus should not be applied.
(4) Limited Application of Competition Rules in Specific Sectors
a. AGRICULTURAL SECTOR AND COMMON AGRICULTURAL POLICY. The first
sector that falls only partly under EU competition rules is agriculture. The
belief that the agricultural sector fulfills special social and cultural functions in Europe led the drafters of the now defunct EC Treaty to include
Article 36 [now Article 42 TFEU] pursuant to which: The provisions of
the chapter relating to rules on competition shall apply to production of
and trade in agricultural products only to the extent determined by the
Council.
In accordance with Article 36 [now Article 42 TFEU], the Council
adopted Regulation 26/62, which made Articles 101 and 102 applicable to a
large number of agricultural products. However, this Regulation provided
that Article 101 would be inapplicable to agreements, decisions and practices that:
form an integral part of a national market organisation or are
necessary for attainment of the objectives set out in Article 39 of
the Treaty. In particular, it shall not apply to agreements, decisions and practices of farmers, farmers associations, or associations of such associations belonging to a single Member State
which concern the production or sale of agricultural products or
the use of joint facilities for the storage, treatment or processing of
agricultural products, and under which there is no obligation to
charge identical prices, unless the Commission finds that competition is thereby excluded or that the objectives of Article 39 of the
Treaty are jeopardised.313
The Commission enjoys exclusive jurisdiction to decide which agreements,
decisions and practices benefit from the above exception.314 Article 102 and
the EU Merger Regulation, however, apply in full to markets for agricultural products.
b. TRANSPORT. The fact that Title V of the now defunct EC Treaty laid
down a Common Transport Policy did not prevent the ECJ, in the
seminal Asjes case, from holding that absent explicit provisions enacting a
specific competition regime for the transport sector, the competition rules
of the Treaty could apply as such.315 However, as far as competition rules
313. See Council Regulation 26 applying certain rules of competition to production of
and trade in agricultural products, O.J. 1962, p. 993.
314. Id. at Article 2(2) (emphasis added).
315. See ECJ, Joined cases 209 to 213/84, Criminal proceedings against Lucas Asjes and
others, Andrew Gray and others, Andrew Gray and others, Jacques Maillot and others and Leo
Ludwig and others, [1986] ECR1425. Note that Regulation 1/2003 at Recital 36 repealed
Council Regulation 141 of 26 November 1962 exempting transport from the application of
Regulation 17/62, and led to the revision of the various procedural specificities laid down by
B.
are concerned, the transport sector has two distinctive features. First,
Regulation 1/2003 does not apply to:
(a) international tramp vessel services as defined in Article
1(3)(a) of Regulation 4056/86; (b) a maritime transport service that
takes place exclusively between ports in one and the same Member
State as foreseen in Article 1(2) of Regulation 4056/86; (c) air
transport between Community airports and third countries.
Second, the enforcement of the EU competition rules in the transport
sector is shared between DG COMP and the Directorate General for
Transport of the Commission. This, on some occasions, led to internal
conflicts.
c. DEFENSE INDUSTRY. In principle, EU competition rules apply to the
defense industry. However, Article 346 TFEU allows Member States to
refuse to disclose information if that disclosure could run contrary to the
essential interests of [their] security. In addition, Member States may
take measures that are considered necessary for the protection of the
essential interests of [their] security which are connected with the production of or trade in arms, munitions and war material. This provision thus
allows Member States to limit the application of EU competition rules
when they establish that it prejudices their security interests. Article TFEU
insists nonetheless on the fact that these exceptions shall be strictly limited
to products that are intended for specifically military purposes.316
In practice, this provision has only rarely been invoked by the Member
States. In the context of the Matra/Aerospatiale merger, the French authorities enjoined the parties to abstain from notifying the aspects of the
transaction relating to missiles and missiles system.317 The Commission
checked whether the conditions of Article 346 were fulfilled. It came to the
conclusion that the measures taken by the French authorities were necessary for the protection of the essential interests of its security and that they
did not encroach upon non military product markets.318
(5) Effect on Trade Between Member States. EU competition provisions
will only apply provided the agreement or abuse at hand may affect trade
between Member States. The purpose of this condition is to set out a
jurisdictional threshold for the prohibitions contained in Articles 101 and
102 to apply.319 Only those anticompetitive practices that are likely to
produce a cross-border effect fall within the scope of the TFEU. Absent an
effect on intermember trade, the practice is not necessarily left unchecked,
as it may fall within the jurisdiction of a national competition legislation.
and Regulations 1017/68 (rail, road and inland waterways), 4056/86 (maritime transport) and
3975/87 (air transport).
316. See Article 306 TFEU: [TTT] such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for
specifically military purposes.
317. See Commission Decision Matra/Aerospatiale of 28 April 1999, IV/M.1309.
318.
Id. at 16.
319. A similar effect is achieved, in the field of Merger Control, with the turnover
thresholds established by Regulation 139/2004 at Article 1(2) and 1(3).
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321. Case 56/65, Societe La Technique Mini`ere Ulm v. Maschinenbau, [1966] ECR 235,
249.
322.
B.
327. Japan Antimonopoly Act 2426 (2009); Japan Civil Code 709. Unlike in the
U.S., indirect purchasers can bring claims for damages in Japan. See Tokyo Toyu, 41 Minshu
No. 5, 785 (Japan Supreme Court July 2, 1987).
328. OECD, Competition Law and Policy in Latin America 210 (2006) (Chile); India
Competition Act 53N; Mexico Federal Economic Competition Law Art. 38; Peru Competition
Law 1034, Art. 49; Singapore Competition Act 86; South Africa Competition Act 65;
Turkey Competition Law Arts. 5758; Turkey 19th Chamber of Supreme Court of Appeals,
Decision 2007/10677.
329. Australia Trade Practices Act 8082; Brazil Antitrust Law 8884/94, Art.29;
China AntiMonopoly Law Art. 50; Taiwan Fair Trade Act Chpt. V; Saudi Arabia Competition
Law Art. 18; South Korea Fair Trade Act Art. 56 (allowing private damages); Case No. 2001
Gahap 60373, Seoul Central District Court Judgment, August 1, 2003 (disallowing private
injunctive relief). See also Argentina Competition Law Art. 51 (allowing private damages for
cartel violations).
330.
See, e.g., Israel Restrictive Trade Practices Law 50; Egypt Civil Code Art. 163.
331. India Competition Act 27(b); Taiwan Fair Trade Act Art. 32; Turkey Competition
Law Art. 58.
332. See Chapter 8.
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Class actions have so far been relatively rare in other nations, but China
and Israel authorize them, as do many Canadian provinces.333
Questions on Remedies
1. Should people go to prison for antitrust violations? Why cant they
be sufficiently deterred by damage claims? Is prison more likely to effectively deter corporate managers?
2. Should antitrust laws be enforced by private rights of actions? By
class actions? Why wouldnt government enforcement to protect markets
suffice? Do government enforcers have sufficient incentives? Are they likely
to know about all the violations private parties would know about? Do
injured private parties have enough incentives to complain without the
prospect of damages?
3. Should treble damages be used? If only single damages are imposed, wouldnt it be tempting to engage in anticompetitive conduct because you can keep the supracompetitive profits if you dont get caught and
just pay successful litigants out of those profits if you do? If the odds of an
antitrust violation being detected and successfully proven are 33%, arent
treble damages necessary to deter those violations? On the other hand,
wont treble damages deter conduct that might mistakenly be judged
anticompetitive but actually constitutes desirable aggressive competition?
333. See China Civil Procedure Law Art. 5455; ISRAEL RESTRICTIVE TRADE PRACTICES LAW
46A; ABA, COMPETITION LAWS OUTSIDE THE UNITED STATES at Canada 25 (First Supp. 2005).
Some European nations use forms of aggregate litigation that could be used in antitrust cases.
See Richard A. Nagareda, Aggregate Litigation Across the Atlantic and the Future of American
Exceptionalism, 62 Vand. L. Rev. 1. 2125 (2009) (Denmark, England, Finland, France, Italy,
Norway and Sweden).