U'S' Antitrust Policy: Cartels, Consumer Welfare and International Convergence University of La Roch

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U.S. Antitrust Policy Cartels, Consumer
Welfare and International ConvergenceUniversity
of La Rochelle 27 Janvier, 2006

• John S. Martin
• Fulbright Visiting Lecturer
• University of Toulouse
• johnsmartin_at_mac.com

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Purpose of U.S. Competition Law?

• Social/Political Most men are the servants of
  corporations . . . . By tyranny, as we now fight
  it, we mean control of the law, of legislation
  and adjudication, by . . . special bodies of
  capital and those who organize their use.
  (Woodrow Wilson (1914))
• Small business local control over industry and
  the protection of small business. Accept higher
  costs and prices that might result from . . .
  maintenance of fragmented industries and
  markets. (Brown Shoe (1962))
• Indecision I do not believe the debate over
  the purposes of antitrust laws has been settled
  yet. Rothery Van Lines (1986))
• Consumer welfare prevent the acquisition or
  exercise of market power (Kovacic (2002))

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Economic terms

• Market power -- ability to raise prices above
  competitive levels
• Consequences of market power
• Wealth transfer
• Allocative efficiency loss
• Output reduction
• Deadweight loss
• Not high profits but a quiet life

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Monopoly profits incentive to compete

• the successful competitor, having been urged to
  compete, must not be turned upon when he wins
  (Alcoa 1945)
• The opportunity to charge monopoly prices--at
  least for a short period--is what attracts
  "business acumen" in the first place (Trinko
  2004)

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When does the harm of market power outweigh its
incentive benefits?

• Collusion with no benefit
• Cartel
• Other conduct
• Horizontal merger
• If it creates market power without offsetting
  efficiencies
• Dominant position
• If it is achieved through anticompetitive conduct

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• Sherman Act Section 1 Every contract,
  combination . . . or conspiracy, in restraint of
  trade
• Clayton Act Merger whose effect is to
  substantially lessen competition or tend to
  create a monopoly
• Sherman Act Section 2 Every person who shall
  monopolize, or attempt to monopolize, or combine
  or conspire with any other person or persons, to
  monopolize

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Naked vs. Ancillary Collusion

• Naked Cartels, market allocation, agreement not
  to compete
• Ancillary Joint venture
• Cooperation is the basis of productivity. It is
  necessary for people to cooperate in some
  respects before they may compete in others, and
  cooperation facilitates efficient production.
  (Polk Brothers)

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EU/US Debates

• GE/Honeywell
• Microsoft
• Merger Guidelines Revisions (SLC v. SIEC)
• Civil Actions