DOCSLIB.ORG

The Resale Price Maintenance Two-Step

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Resale Price Maintenance Two-Step COMMERCIAL LITIGATION Controlling Retail Prices The Resale Price Maintenance By Pat Pascarella, Anne Swoboda Cruz, Two-Step and Stephanie Rzepka Until anti-Leegin states permit companies simply to enter into pro- competitive resale price agreements, properly implemented and monitored policies can In 2007, the U.S. Supreme Court abolished the per se rule provide a fair amount against minimum resale price agreements and held that of price discipline, and they were to be judged instead under the more lenient rule pose marginal risk. of reason standard. Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 877 (2007). ance has placed manufacturers competing But 10 years later, the combined effect in nationwide markets in the unenviable of a disconnect between Leegin and cer- position of weighing the benefits of ratio- tain states’ laws and a lack of dispositive nalizing their retail distribution channels court decisions providing substantive guid- against unpredictable litigation risks. ■ Pat Pascarella is the chair the Tucker Ellis’ Antitrust Group. Before joining Tucker Ellis, he served with the U.S. Department of Justice, Antitrust Division in Washington D.C. and as chief in-house antitrust counsel to a Fortune-10 company. Anne Swoboda Cruz, a partner in Tucker Ellis’ Los Angeles office, is a trial attorney specializing in commercial litigation and antitrust. Ms. Cruz also is an active member of DRI, including the DRI Women in the Law Com- mittee. Stephanie Rzepka is an associate in Tucker Ellis’ Houston office. She represents businesses in antitrust, class action, and complex commercial litigation before state and federal courts and antitrust enforcement agencies. 20 ■ For The Defense ■ October 2017 © 2017 DRI. All rights reserved. The Problem A Word of Warning on Anti-Leegin Laws There are many pro- competitive reasons why a manufacturer might want to have With many antitrust violations, the prohibited conduct is obvious even to non-lawyers (e.g., some control over the retail pricing of do not agree on prices with competitors, do not allocate bids). This is because most antitrust its products. One commonly espoused rules are founded in rational economic reasoning. An anti-Leegin law banning RPM agree- rationale comes from manufacturers that ments outright does not fall under this umbrella. Rather, a law that bans RPM agreements in believe that to compete effectively in the any situation is economically irrational. Per the Leegin court, the prior per se treatment of mini- marketplace, their retailers must offer cer- mum resale pricing agreements was based on “formalistic legal doctrine” rather than “demon- tain customer services. This could come in strable economic effect.” Leegin, 551 U.S. at 887. In most cases, if a manufacturer is not a the form of a showroom, where customers monopolist, imposing a minimum resale price cannot possibly have an adverse effect on con- can view or try out the product, or some other form of customer support. Because sumers since they can simply switch to another supplier. And even if the manufacturer is a these services come at a cost, the manu- monopolist, a minimum resale price will not harm consumers because, in short, there is only facturer must assure that retailers can col- one monopoly rent (i.e., the amount a monopolist can charge for its products over and above lect a sufficient margin on their products what might be considered a competitive margin). But the monopolist has that with or with- despite providing these additional serv- out a minimum price restraint. It cannot increase that monopoly rent by imposing a minimum ices. That margin, however, can be eroded resale price on its retailers. if some retailers opt not to offer the requi- The point here is that because a ban on RPM agreements is irrational, conduct that could site services and instead attract customers support a finding that the ban has been violated likewise is not intuitively obvious. To an exec- via discount prices. The end result is that utive or director, such conduct may simply seem to be sound pro- competitive business prac- customers will tend to use the full-service tices. Accordingly, when implementing an RPM policy or MAPP, a manufacturer must take retailers to view or evaluate a product, then care to establish somewhat rigid guidelines and procedures to avoid these abstruse pitfalls. purchase the same product from the dis- For The Defense ■ October 2017 ■ 21 COMMERCIAL LITIGATION counter. Simply lowering wholesale prices Unfortunately, the key word here is “fed- ride-sharing is not “Uber’s product,” the is insufficient because it does not prevent eral.” Forty-nine states have their own case is readily distinguishable from most these discount retailers from proportion- antitrust statutes. And while most have RPM cases where there is no question that ally cutting their prices to attract price- federal harmonizing clauses (i.e., the laws the RPM policy applies to the manufactur- sensitive consumers. are interpreted consistently with their fed- er’s product. Manufacturers in this or similar posi- eral counterparts), at least two remain out tions will find it desirable to engage in some of sync. AfterLeegin , Maryland passed The Two-Step Solution form of resale price maintenance (RPM). anti-Leegin legislation, maintaining per In light of all of the above, a manufacturer The goal is to maintain resale (or retail) se treatment of resale price maintenance competing in a national market cannot rely agreements. And California courts have on the fact that an RPM agreement with continued to hold that such agreements are its retailers is pro- competitive (i.e., that it per se violations of the Cartwright Act (Cal- could pass the rule-of-reason test) to pro- After Leegin, Maryland ifornia’s antitrust statute). tect it from challenge. Instead, it must do A few other states also have been labeled the RPM two-step. This dance consists of passed anti-Leegin anti-Leegin by some commentators as implementing two mechanisms to discour- a result of actions brought, or consent age discounting while avoiding any “agree- legislation, maintaining per decrees entered, by their attorneys general. ment” on the resale price of the product However, closer scrutiny of those actions with the retailers. se treatment of resale price reveals that these states may, in fact, not • Step 1: Announce a suggested resale be anti-Leegin, as the matters challenged price policy (sometimes referred to as a maintenance agreements. tended to focus on evidence of horizon- unilateral pricing policy (UPP)), under tal agreements between manufacturers or which the manufacturer sets a suggested And California courts retailers rather than the presence of a ver- minimum resale price and ceases doing tical RPM agreement. (Even Leegin does business with distributors or retailers have continued to hold not give quarter to horizontal agreements that discount below that price. between competitors affecting price.) Add- • Step 2: Limit retailers’ ability to adver- that such agreements are ing to this uncertainty, many post-Leegin tise a discounted price via a minimum, opinions provide limited general guidance advertised pricing policy (MAPP). per se violations of the because they are either highly fact specific or were resolved too prematurely to rule Step One: Implementing a Suggested Cartwright Act (California’s dispositively on the antitrust issues. Retail or Uniform Pricing Policy Finally, there are at least two cases A suggested retail price policy is a bit of antitrust statute). involving the computer applications mar- a misnomer. While the lowest acceptable ketplace that contain some unfortunate retail price may be “suggested,” failure to language regarding the applicability of Lee- follow that policy will ultimately result in prices at or above a level that permits retail- gin. In United States v. Apple Inc., 791 F.3d the termination of the seller. Typically, a ers to earn a living wage, while at the same 290, 321 (2d Cir. 2015), the Second Circuit retail pricing policy sets out the products time investing in the customer services found that Leegin did not apply to the verti- covered and the “suggested” minimum that a manufacturer requires. Ten years ago cal agreements between Apple and certain prices, and advises that the company will the Supreme Court recognized that verti- book publishers, in part because the agree- not do business with resellers that price cal agreements between a manufacturer ments would not have been in the publish- below its suggested price. A well-drafted and its retailers to maintain minimum er’s own interest if acting independently. policy also will make it quite clear that resale prices were often pro- competitive And in Meyer v Kalanick, 174 F. Supp. 3d the manufacturer simply is announcing because the sacrifices to intrabrand com- 817 (S.D.N.Y. 2016), the court refused to the policy and is not seeking agreement or petition were more than offset by enhance- apply Leegin to Uber’s agreements with its affirmation regarding its policy from the ments to interbrand competition. Leegin, drivers that they would adhere to its pric- retailers. This is because the goal of a resale 551 U.S. at 877–78. Accordingly, the Court ing algorithm because “Uber is not selling pricing policy is to avoid any “agreement” mandated that vertical RPM agreements anything to the drivers that is then resold.” with the retailers since it is this “agree- should be judged under the rule of reason Id. at 826. While one cannot ignore these ment” that renders a resale price policy ille- test. Id. Thus, if a manufacturer has a pro- cases, neither is likely to alter materially gal under the anti-Leegin laws. competitive business rationale for con- how courts treat RPM policies. In Apple, trolling retail prices, it should be free to there was significant evidence alleged of a Unilateral Means Unilateral: enter into enforceable agreements about broader, more complex conspiracy as well Avoiding a Vertical Agreement the appropriate retail price with its distrib- as Apple’s role in orchestrating the con- A manufacturer should begin by announc- utors and retailers without running afoul of spiracy.
Load more

Recommended publications
  • Antitrust Enforcement and the Consumer
    Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most States have antitrust laws, and so does the Federal Government. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, U.S. Department of Justice resulting in higher prices for inferior Washington, DC 20530 products and services. This pamphlet was prepared to alert consumers to the existence and importance of antitrust laws and to explain what you can do for antitrust enforcement and for yourself. 1. What Do the Antitrust Laws Do for the Consumer? Antitrust Antitrust laws protect competition. Free and open competition benefits consumers Enforcement by ensuring lower prices and new and better products. In a freely competitive and the market, each competing business generally Consumer will try to attract consumers by cutting its prices and increasing the quality of its products or services. Competition and the profit opportunities it brings also stimulate businesses to find new, innovative, and more efficient methods of production. Consumers benefit from competition through lower prices and better products and services. Companies that fail to understand or react to consumer needs may soon find themselves losing out in the competitive battle. When competitors agree to fix prices, rig bids, or allocate (divide up) customers, consumers lose the benefits of competition. The prices that result when competitors agree in these ways are artificially high; such prices do not accurately reflect cost and therefore distort the allocation of society’s resources.
    [Show full text]
  • Competition Law
    COMPETITION LAW SIBERGRAMME 2/2012 ISSN 1606-9986 21 August 2012 Senior Editor ROBERT LEGH Head of the Competition Law Unit of Bowman Gilfillan Inc, Johannesburg This issue by LAUREN RICHARDS and KHOFOLO KRUGER Candidate Attorneys: Bowman Gilfillan Inc Siber Ink Published by Siber Ink CC, B2A Westlake Square, Westlake Drive, Westlake 7945. © Siber Ink CC, Bowman Gilfillan Inc This Sibergramme may not be copied or forwarded without permission from Siber Ink CC Subscriptions: [email protected] or fax (+27) 086-242-3206 To view Competition Tribunal judgments, see: http://www.comptrib.co.za/ Page 2 ISSN 1606-9986 COMPETITION LAW SG 2/2012 IN THIS ISSUE: ESSENTIAL MATTERS: A COMPARATIVE ASSESSMENT OF DIFFERENT APPROACHES TO THE ESSENTIAL FACILITIES DOCTRINE............................. 2 Introduction..............................................................................................................................2 South Africa .............................................................................................................................3 The United States (US).............................................................................................................10 The European Union (EU).......................................................................................................13 Comparison of the US and EU positions .................................................................................15 Conclusion ...............................................................................................................................17
    [Show full text]
  • Ruling Within Reason: a Reprieve for Resale Price Maintenance
    Agenda Advancing economics in business Ruling within reason: a reprieve for resale price maintenance As a result of the US Supreme Court’s recent overturning of the long-standing 1911 Dr Miles decision, which deemed minimum resale price maintenance unlawful per se, this practice is to be judged under the ‘rule of reason’ in the USA, as has been the case with other vertical restraints. Is it therefore time to change the European approach to vertical price fixing? In its June 2007 judgement in Leegin Creative Leather purposes of applying Article 81(1) to demonstrate Products, Inc. v. PSKS, Inc, the US Supreme Court ruled any actual effects on the market.5 that resale price maintenance (RPM) should be judged under the ‘rule of reason’.1 The Leegin ruling overturned In line with the Commission’s approach, in the UK the long-standing 1911 Dr Miles precedent, which held minimum RPM is considered a hard-core practice that that it is per se unlawful under Section 1 of the Sherman ‘almost inevitably’ infringes Article 81 or the Chapter I Act for firms to fix the minimum retail price at which prohibition under the Competition Act 1998.6 Indeed, the retailers may sell goods or services on.2 Office of Fair Trading (OFT) has brought a number of high-profile vertical price fixing cases in recent years, as The outcome of the Leegin case has relieved those who discussed below. support the view that, although under certain circumstances minimum RPM may result in sub-optimal In light of the Leegin judgement, is this the time for market outcomes, this risk is not sufficient to make the European competition policy to move towards an effects- practice illegal per se.
    [Show full text]
  • The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H
    University of Baltimore Law ScholarWorks@University of Baltimore School of Law All Faculty Scholarship Faculty Scholarship 2000 The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H. Lande University of Baltimore School of Law, [email protected] Howard P. Marvel Ohio State University, [email protected] Follow this and additional works at: http://scholarworks.law.ubalt.edu/all_fac Part of the Antitrust and Trade Regulation Commons, and the Law and Economics Commons Recommended Citation The Three Types of Collusion: Fixing Prices, Rivals, and Rules, 2000 Wis. L. Rev. 941 (2000) This Article is brought to you for free and open access by the Faculty Scholarship at ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of ScholarWorks@University of Baltimore School of Law. For more information, please contact [email protected]. ARTICLES THE THREE TYPES OF COLLUSION: FIXING PRICES, RIVALS, AND RULES ROBERTH. LANDE * & HOWARDP. MARVEL** Antitrust law has long held collusion to be paramount among the offenses that it is charged with prohibiting. The reason for this prohibition is simple----collusion typically leads to monopoly-like outcomes, including monopoly profits that are shared by the colluding parties. Most collusion cases can be classified into two established general categories.) Classic, or "Type I" collusion involves collective action to raise price directly? Firms can also collude to disadvantage rivals in a manner that causes the rivals' output to diminish or causes their behavior to become chastened. This "Type 11" collusion in turn allows the colluding firms to raise prices.3 Many important collusion cases, however, do not fit into either of these categories.
    [Show full text]
  • Resale Price Maintenance and Minimum
    Presenting a live 90-minute webinar with interactive Q&A Resale Price Maintenance and Minimum Advertised Pricing: Structuring to Minimize Antitrust Scrutiny State, Federal, and International Treatment of RPM Agreements and MAP Policies THURSDAY, FEBRUARY 28, 2019 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Michael A. Lindsay, Partner, Dorsey & Whitney LLP, Minneapolis William L. Monts, III, Partner, Hogan Lovells US, Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1. Tips for Optimal Quality FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-961-8499 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail [email protected] immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again. Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar.
    [Show full text]
  • Resale Price Maintenance After Monsanto: a Doctrine Still at War with Itself*
    RESALE PRICE MAINTENANCE AFTER MONSANTO: A DOCTRINE STILL AT WAR WITH ITSELF* TERRY CALVANI** AND ANDREW G. BERG*** In this article, two enforcement officials at the Federal Trade Com- mission reexamine resale price maintenance in light of the Supreme Court's recent decision in Monsanto Co. v. Spray-Rite Service Corp. Commissioner Calvani and Mr. Berg consider both antitrust law and economic policy in their review of the history of resale price mainte- nance; they point out the chronic inconsistencies to which this antitrust regime has been subject, and identify these same inconsistenciesat work in Monsanto. The authorsset forth three theses with respect to Mon- santo: first, that the Court intimated a willingness to reconsiderat some future time the per se standardof illegalityfor resale price maintenance; second, that the Court recognized the continuing vitality of the Colgate doctrine, which had been seriously questionedin recent years; and, third, that the Monsanto Court unsuccessfully attempted to delineate a work- able evidentiary standard applicable to communications between sellers and resellers when it is alleged that such communications constitute an illegal contract, combination, or consiracy under section one of the Sherman Act. The authorssuggest that, taken together, these elements in Monsanto display a doctrine at war with itself The authorsconclude by examining the possible implications of the Monsanto decisionfor the future direction of the law of resale price maintenance. Typically, antitrust issues do not generate widespread public inter- est; there is, however, a considerable amount of such interest in resale price maintenance,' as evidenced by numerous articles on the subject in newspapers and periodicals of general circulation.2 This high level of © 1984 Terry Calvani & Andrew G.
    [Show full text]
  • Resale Price Maintenance: Economic Theories and Empirical Evidence
    "RESALE PRICE MAINTENANCE: ECONOMIC THEORIES AND EMPIRICAL EVIDENCE Thomas R. Overstreet, Jr. Bureau of Economics Staff Report to the Federal Trade Commission November 1983 RESALF. PRICE INTF.NANCE: ECONO IC THEORIES AND PIRICAL EVIDENCE Thomas R. Overstreet, Jr. Bureau of Economics Staff Report to the Federal Trade Commiss ion November 1983 . FEDERAL TRDE COM~ISSION -f. JAMES C. ~ILLER, III, Chairman MICHAEL PERTSCHUK, Commissioner PATRICIA P. BAILEY, Commissioner GEORGE W. DOUGLAS, Commissioner TERRY CALVANI, Commi S5 ioner BUREAU OF ECONO~ICS WENDY GRA~, Director RONALD S. BOND, Deputy Director for Operations and Research RICHARD HIGGINS, Deputy Director for Consumer Protection and Regulatory Analysis JOHN L. PETE , Associate Director for Special Projects DAVID T. SCHEFF N, Deputy Director for Competition and Anti trust PAUL PAUTLER, Assistant to Deputy Director for Competition and Antitrust JOHN E. CALFEE, Special Assistant to the Director JAMES A. HURDLE, Special Assistant to . the Director THOMAS WALTON, Special Assistant to the Director KEITH B. ANDERSON, Assistant Director of Regulatory Analysis JAMES M. FERGUSON, Assistant Director for Antitrust PAULINE IPPOLITO, Assistant Director for Industry Analysis WILLIAM F. LONG, ~anager for Line of Business PHILIP NELSON, Assistant Director for Competition Analysis PAUL H. RUBIN, Assistant Director for Consumer Protection This report has been prepared by an individual member of the professional staff of the FTC Bureau of Economics. It rsfle cts solely the views of the author, and is not intended to represent the position of the Federal Trade Commission, or necessarily the views of any individual Commissioner. -ii - fI. ACKNOWLEDGMENTS I would like to thank former FTC Commissioner David A.
    [Show full text]
  • Price Fixing and Repeated Games
    9781405176323_4_014.qxd 10/19/07 8:12 PM Page 323 14 Price Fixing and Repeated Games In February 2007, the European Union Competition Directorate imposed their largest-ever fines on companies found guilty of colluding to fix prices. Five elevator manufacturers were fined a total of a992 million (approximately $1.4 billion) for operating a cartel that con- trolled prices in Germany, Belgium, Luxembourg and the Netherlands. ThuysenKrupp received the heaviest fine, of more than a479 million since it was judged to be a “repeat offender” by the Commission. Otis was fined a225 million, Schindler a144 million, Kone a142 million, and Mitsubishi’s Dutch subsidiary a1.8 million.1 The elevator case came just one month after another case involving gas insulated switch- gear projects in which the Commission imposed fines totally a750 million on 11 companies for their parts in a price-fixing cartel. In this case, the largest fine of a396.5 million was imposed on Siemens, Germany. This case is particularly interesting because it was broken open largely as a result of the Commission’s leniency policy. Under that policy, the first firm in a conspiracy to confess and “fink” on its co-conspirators gets a much reduced penalty. In fact, the finking firm in the switch-gear case, ABB Switzerland, was granted full immu- nity and paid no penalties in return for its confession and provision of information to the authorities. That reflects a considerable savings from the a215 million it would otherwise have had to pay as a repeat offender. Action to curb the activities of cartels has been equally active in the United States.2 The Department of Justice has recently imposed a total of more than $732 million on companies operating a cartel to control the pricing of dynamic random access memory (DRAM).
    [Show full text]
  • A Structured Outline for the Analysis of Horizontal Agreements
    A STRUCTURED OUTLINE FOR THE ANALYSIS OF HORIZONTAL AGREEMENTS by Thomas B. Leary* The antitrust principles applied to “horizontal” arrangements are difficult to summarize. The principles have evolved over an extended period of time and have been shaped by decisions that are often hard to reconcile. I do not claim that the structure outlined below is the only way to read cases or frame issues, but it is one that I believe is consistent with the most recent precedent and learning. I. Introduction An agreement between actual or potential competitors to restrain their rivalry in some respect is commonly called a “horizontal restraint.” This kind of agreement should be distinguished from so-called “vertical” restraints that govern the interface between supplier and customers (who may also be competitors in another capacity). The distinction is fundamental because horizontal and vertical restraints are analyzed in different ways.1 The most significant difference is that horizontal restraints are more likely to be deemed illegal per se and vertical restraints are more likely to be subject to the “rule of reason.” * Commissioner, Federal Trade Commission. This revision of a paper first presented a year ago has been prepared for distribution at The Conference Board 2004 Antitrust Conference (Mar. 3-4, 2004). I have benefitted from discussions with FTC Chairman Timothy Muris, General Counsel William Kovacic, and attorney advisors Thomas Klotz, Lisa Kopchik and Holly Vedova in the preparation of this outline, but it does not necessarily reflect their views or the views of anyone else in the Commission. 1 See, e.g., discussion in ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS 79-82 (5th ed.
    [Show full text]
  • When Does Buyer Power Become Monopsony Pricing?
    Antitrust , Vol. 27, No. 1, Fall 2012. © 2012 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. X+Y Company has a large percentage of purchases in the market; and X+Y Company has sufficient buyer When Does Buyer power to drive hard bargains and pay “low” prices to Power Become the farmers. X+Y Company’s downstream, sell-side market is nation - al, includes many competitors, and includes products Monopsony Pricing? beyond those made by X+Y Company. Competition is strong, and X+Y Company has a low market share and BY JOHN D. SHIVELY no ability to increase consumer prices or decrease qual - ity. Any harm from the price X+Y Company pays for inputs is felt directly by the farmers whose profits are HE STRUCTURE OF AGRICULTURAL depressed, but there is no increase in price, or decrease industries breeds monopsony claims, and conse - in quality, to consumers who ultimately buy X+Y quently, those industries are a major arena for Company’s product. conflicting schools of thought on monopsony pric - Ting. The 2 01 0 USDA-DOJ Agriculture Industry The key issue is how to determine whether X+Y Com - Work shops raised issues of buyer power and monopsony pany’s power to pay “low” prices to farmers is (1) buyer pricing by concentrated agribusiness to new prominence power that exists in all competitive markets 1 or (2) anticom - and encouraged the DOJ’s Antitrust Division to take more petitive monopsony power.
    [Show full text]
  • Antitrust Guidelines for Collaborations Among Competitors
    Antitrust Guidelines for Collaborations Among Competitors Issued by the Federal Trade Commission and the U.S. Department of Justice April 2000 ANTITRUST GUIDELINES FOR COLLABORATIONS AMONG COMPETITORS TABLE OF CONTENTS PREAMBLE ................................................................................................................................ 1 SECTION 1: PURPOSE, DEFINITIONS, AND OVERVIEW ............................................... 2 1.1 Purpose and Definitions .................................................................................................... 2 1.2 Overview of Analytical Framework ................................................................................ 3 1.3 Competitor Collaborations Distinguished from Mergers .............................................. 5 SECTION 2: GENERAL PRINCIPLES FOR EVALUATING AGREEMENTS AMONG COMPETITORS .................................................................................. 6 2.1 Potential Procompetitive Benefits .................................................................................. 6 2.2 Potential Anticompetitive Harms .................................................................................... 6 2.3 Analysis of the Overall Collaboration and the Agreements of Which It Consists ......................................................................................................... 7 2.4 Competitive Effects Are Assessed as of the Time of Possible Harm to Competition ..................................................................................
    [Show full text]
  • Regression Estimates of Damages in Price-Fixing Cases
    REGRESSION ESTIMATES OF DAMAGES IN PRICE-FIXING CASES MICHAEL 0. FINKELSTEIN* AND HANS LEVENBACHt In an antitrust price-fixing case, damages are measured by the difference between the prices paid by the plaintiff purchasers and the prices they would have paid in the absence of defendants' conspiracy. Even small variations in the deter- mination of these differences may become significant because plaintiffs are entitled by statute to receive three times their actual damages.' Moreover, in a class action there may be thousands of purchasers whose recoveries are based on an industry- wide overcharge formula. The difficulty of course lies in estimating the "but for" prices. An obvious idea is to assume that competitive prices during the conspiracy period would have been the same as they were before or after the conspiracy or in interludes of competition within the conspiracy period. Thus, the difference between the conspiratorial price and the actual price from other periods measures the damage. This estimate, however, meets the immediate objection that it is likely to be incorrect because changes in factors affecting price other than the conspiracy would have produced changes in competitive prices if there had been competition during the conspiracy period. These arguments may be illustrated by Ohio Valley Electric Corp. v. Genera/ Elecric 2 Co., one of the well-known antitrust cases involving electrical equipment manu- facturers. Plaintiffs contended that the purpose and effect of the manufacturers' conspiracy was to keep transaction prices for large steam turbines close to book prices; they proposed to measure damages by the difference between the average 11% discount during the conspiracy period and the average 25.33% discount that prevailed after the conspiracy had been terminated.
    [Show full text]