I. Prohibitions of the antitrust laws Antitrust law is an effort to regulate the acquisition and exercise of market power.

The primary antitrust statutes are summarized below. A. The Sherman Act (1890) : The Sherman Act's prohibitions are contained in the first two sections. They are very short and should be re-read several times throughout the course. a. Section 1 makes it a felony to enter a "contract, combination . . . or conspiracy in restraint of trade." b. Section 2 makes felonies of monopolization, and of attempts, combinations or conspiracies to monopolize. Since restraints of trade are a broader category than monopolization, combinations and conspiracies are generally prosecuted under Section 1. Unilateral behavior cannot be prosecuted under Section 1. B. The Clayton Act (1914): Unlike the Sherman Act, the Clayton Act sets out specific prohibitions. As amended by the Robinson-Patman Act, a. Section 2 bans anticompetitive price discrimination that is not justified by cost differences or an effort to meet a competitor's equally low price. b. Section 3 prohibits leases and sales of commodities made on the condition that the buyer or lessee "not use or deal in the goods... of a competitor, where the effect... may be to substantially lessen competition." c. Section 7 prohibits mergers the effect of which "may be substantially to lessen competition;" the original Section 7 covered only stock transactions, but after the Cellar-Kefauver Act of 1950, this section now also covers asset purchases. d. Section 8 prohibits interlocking directorates among large competitors. C. The Federal Trade Commission Act (1914): Although the FTC Act is not part of "the antitrust laws," as defined in Clayton '1, broadly speaking it is an integral part of U.S. antitrust, or competition, law. a. Section 5 of the FTC Act bans "unfair methods of competition" and "unfair or deceptive acts or practices." The FTC has quasi-legislative authority to determine the meaning of these prohibitions. These prohibitions encompass all violations of the "antitrust laws," but despite dicta in several cases indicating that the ambit of section 5's prohibition of unfair methods of competition could extend considerably farther, it has never been clear what else section 5 covers; the second circuit declined the opportunity to include wholly unilateral restraints on competition in du Pont v. FTC 729 F. 2d 128 (1984). Section 5's prohibition of deceptive acts or practices extends to many behaviors that are not addressed by the Sherman and Clayton Acts. II. Enforcement 1. Violations of the Sherman and Clayton Acts are subject to both private and public

enforcement. 2. Under Clayton '4, private parties and state attorneys general can sue for treble damages plus the cost of the suit, including reasonable attorneys fees; private parties can also seek injunctive relief under '16 of the Clayton Act to prevent violations or further violations of the Sherman or Clayton Acts. 3. The Antitrust Division of the Justice Department can bring criminal suits under the Sherman Act and can sue in equity under both the Sherman and Clayton Acts (see Sherman Act '4, Clayton Act '15) . Criminal suits can seek fines or imprisonment and civil suits can seek fines or injunctions. 4. The FTC has exclusive authority to enforce the FTC Act. 5. Clayton Act '11 also gives the FTC the power to enforce sections 2,3,7, and 8 of the Clayton Act with cease and desist orders, except for particular industries where enforcement is given to their specific regulator. (The Secretary Of Transportation enforces these sections with respect to air carriers subject to the federal aviation act of 1958; the Board of Governors of the Federal Reserve System enforces with respect to banks, banking associations, and trust companies; and the Interstate Commerce Commission (now defunct) used to enforce with respect to common carriers.) 6. The Justice Department has the right to intervene and appear in proceedings subject to Clayton Act '11. (As mentioned above, Clayton Act '15 also gives the Justice Department the right to attack violations of the Clayton Act in the federal courts.) III. Interstate and Foreign Commerce 1. The prohibitions of the Sherman Act cover trade "among the several states, or with foreign nations". As the commerce power of the federal government expanded, so too did the scope of the Sherman Act -- it now covers all trade affecting interstate commerce. 2. However the "in commerce" language of the Clayton Act has been read more narrowly by the Supreme Court. For example, retail price discrimination is not generally covered by the Clayton Act, because once goods hit the retail shelves, they are no longer "in commerce." On the other hand, Clayton Act '7 has been amended to include "any activity affecting commerce," and the FTC Act has likewise been amended to embrace matters "in or affecting commerce." Hence, as Areeda and Kaplow point out, the FTC "is no longer confined to in commerce jurisdiction even when it applies the substantive standards developed under the Clayton and Robinson-Patman Acts using Section 5 of the FTC Act." (see &167, Antitrust Analysis, fifth edition, Areeda and Kaplow.) IV. Exemptions Section 6 of the Clayton Act exempts labor unions and agricultural organizations from

the Sherman and Clayton Acts. Certain ocean shipping organizations have exemptions. Other exemptions exist as well. V. Special Procedures The Hart-Scott-Rodino Antitrust Improvements Act of 1976 governs merger review under Clayton '7. Before any large merger, the parties must notify the FTC and the Justice Department of their intent to merge, provide information about the proposed merger, and wait a statutorily prescribed period. During this period, the antitrust enforcement authorities decide whether the merger poses a competitive threat. This period affords the enforcement authorities broad opportunities for discovery and the chance to seek a TRO blocking the merger until the issue is resolved by negotiated settlement, permanent injunction or otherwise. Several things should be noted: 1. First, firms cannot take control of the acquired assets or stock until after the statutory waiting period. 2. Second, although people sometimes speak loosely of the Justice Department or FTC approving a merger, technically, they have no such power; their decision is whether to challenge mergers. 3. Third, enforcement authorities are free to challenge a merger after the statutory period, but such delays waste the broad discovery and expedited hearings granted by HSR. VI. Statutes of Limitation Section 4 of the Clayton Act limits private parties to bring causes of action within four years of their injury. Noerr-pennington doctrine If competitors join in combination for the purpose of influencing government decision-making, their action is protected from antitrust challenge; even if their underlying intention is to restrain competition or gain an advantage over competitors. Defense is based on first amendment constitutional theory of the right to petition government. Eastern Railroad v. Noerr Motor Freight: o Railroads influenced legislation restricting competition from the trucking industry. o SC held that antitrust law does not apply to restraints that are the result of valid government action; only private restraints are regulated under the antitrust laws. o Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition; such conduct is

not illegal either standing alone or as a part of a broader scheme itself violative of the Sherman act. Court extended its protection for lobbying activities to include judicial and adjudicatory agencies. However, in Allied Tube, court held that no immunity existed for private standard setting bodies. Noerr has also been extended to include activities not necessarily part of the petitioning process, but reasonably incident or normally attendant to it (McGuire Oil). If efforts by competitors to influence the government are a sham, the defense is inapplicable. o In California Motor transport, SC held that concerted activities resulting in a pattern of baseless repetitive claims that attempted to bar a party from government access were in reality a SHAM to conceal an attempt to interfere with the commercial interest of the competition. o Sham exception only encompasses situations in which the persons use of governmental process as opposed to the outcome as an anticompetitive weapon. On the other hand, legitimate or genuine attempts to achieve an anti-competitive result , through the governmental process, is protected behavior. o Sham test focuses on whether there is a genuine attempt to gain a favorable result as opposed to merely an attempt to misuse the governmental process. o In Professional Real Estate Investors v. Columbia Pictures dealing with the issue whether a copyright infringement action was a sham, SC said, genuine attempt must be based on an objective reasonableness standard a sham will be determined by whether the petitioning was objectively reasonable; immunity applies unless the Ds conduct is objectively baseless. o Professional established the two tier test: (i) whether a reasonable participant could realistically expect success or a favorable outcome on the merits (ii) if challenged petition is found to be meritless, then the court will inquire whether the baseless petition conceals an attempt to interfere directly with the business realtionships of a competitor through the use of the governmental process as opposed to the outcome of the process. The second prong is subjective but it cannot play any part in determining the first prong, which is objective. Only if the courts find an objectively meritless petition and anticompetitive intent to injure a competitor will it conclude that the petition was a sham and, consequently, unworthy of Noerr-Pennington protection. In his concurrence, J. Stevens opined that the plaintiff in some cases might harbor a collateral purpose for the litigation, such

as imposing burdensome costs on the D in an attempt to weaken his financial position. Such would be the case in needlessly repetitive or drawn out litigation. In these cases, even those arguments that are possibly meritorious should not be given protection, according to J. Stevens. 9th ckt seems to have followed J. Stevens approach in recent cases. Conspiracy exception: Protection is not available if there were evidence of perjury, bribery, fraud, or conspiracy where a govt official participated. o However, court has narrowed the conspiracy exception since it is both inevitable and desirable that public officials often agree to do what one or another group of private citizens urges upon them. o Court directs those who engage in illegal or fraudulent actions should be prosecuted under the criminal laws, without a judicially created exception to immunity. o As a result, if the political conduct is aimed at political decisionmaking and outcomes and not merely the process of government, it remains protected political activity under Noerr-Pennington. Although circuit courts are split on this issue, some courts have created a commercial enterprise or market participant exception to the Noerr doctrine. o Governments frequently act in commercial capacities, and not acting as deliberative political body. (when buying goods, services, etc).