Antitrust Enforcement in California: How You Can Help

What Are the Antitrust ?

The antitrust laws are a system of California and federal laws that prohibit unwarranted restraints on free and open competition in commerce. These laws allow the Attorney Introduction General to bring civil and criminal legal actions against individuals and businesses Antitrust enforcement is an important acting in restraint of trade. District attorneys weapon in the consumer protection arsenal. can bring similar actions for antitrust Vigorous, competitive marketplaces help offenses centered in their respective consumers by ensuring fair for goods counties. Furthermore, the provides that and services, the availability of an array of anyone injured by an antitrust offense may products, and quality goods and services. recover from the wrongdoer three times the Diligent antitrust enforcement also helps damages suffered. businesses by protecting them from unfair competition and providing a level playing field on which to compete. Why Are the Antitrust Laws Important to You? This brochure is designed to help you better understand the sometimes complex nature of As a consumer or taxpayer antitrust violations. It contains a summary Antitrust offenses almost always raise the of antitrust laws and other relevant prices paid by consumers for goods or background information. services. Being forced to pay illegally high prices is the equivalent of having money At the Attorney General’s Office there is a stolen from your pocket. Even relatively sizeable group of attorneys, investigators, small increases can have tremendous and legal analysts devoted to antitrust overall effects statewide. California’s investigations and litigation. economy and consumers can suffer from the economic dislocations caused by antitrust There also is an important role to be played offenses. And when state or local by you. Antitrust violations are sometimes governments pay too much for goods or difficult to detect. Information from services because of antitrust violations, consumers, business people and government either taxes must be raised or government employees can be instrumental in law services must be reduced. enforcement efforts to uncover illegal activities. As a business owner The cost of doing business affects the a business will make. If the price of goods or services used by your business is raised by antitrust restraints, your cost of doing business will rise. Some antitrust offenses,

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Antitrust Enforcement in California: How You Can Help

such as boycotts, can make it impossible for illegal. Even a practice of exchanging price you to do business. information with competitors, where this practice affects prices, violates the antitrust As a businessperson or an employee of a laws. Even an attempt at price-fixing can be business illegal. Antitrust violations are not just ways of doing business – they are serious crimes for Example: The owners of three major which the penalties are severe. If anyone appliance stores meet informally and agree inside or outside your company asks you to that the retail prices of refrigerators are too violate the antitrust laws, they are asking low. They promise to notify one another you to commit a felony for which you could before deviating from their established go to prison. Additionally, a business prices. From then on, they offer consumers violating the antitrust laws is liable to its fewer price reductions on refrigerators. The victims for three times the amount that the store owners have engaged in horizontal victims are injured. price-fixing.

As a government employee Bid-rigging Government agencies, large and small, rely Bid-rigging occurs when business on competitive bidding for their significant competitors agree in some way to affect the purchases. Competitive bidding programs outcome of competitive bids. Submission of are particularly susceptible to antitrust identical bids, if done pursuant to an violations. As a governmental employee agreement of the bidders, is one form of bid- who can detect antitrust violations, you are rigging. Agreements among bidders to take the first-line defense against antitrust losses turns in winning bids, to allocate for the public treasury and for the citizenry. opportunities to bid, or simply not to bid on certain contracts, are other examples of bid- rigging and all are illegal. What To Look For Example: A number of office machine It is not possible to give a complete list and distributors agree that, in bidding for description of possible antitrust offenses in a government purchases of photocopying- publication of this size. However, the scanning machines, the distributors will take following discussion will identify the most turns discounting from their list prices. important activities of which you should be Each distributor will bid at a discount only aware. when it is his or her turn. These distributors have rigged bids. Horizontal price-fixing It is illegal for business competitors to have Other agreements among competitors any agreement to raise, stabilize or In addition to price-fixing and bid-rigging, otherwise affect prices. The agreement need any other agreement among business not be in writing or otherwise formalized. competitors which restrains competition is Even an informal understanding between usually illegal. For example, boycotts competitors concerning prices is illegal. (agreements by competitors not to sell to The agreement need not set specific prices; particular customers or not to buy from any agreement affecting price levels is particular suppliers), market or customer

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Antitrust Enforcement in California: How You Can Help

allocations (agreements among competitors is offering discounts in order to make the affecting to whom or where each will sell), sale. The manufacturer forbids one of the and output limitations (agreements among wholesalers to sell to the store. The competitors to limit overall quantities manufacturer may have placed an unlawful marketed) are almost always illegal, restriction on that wholesaler. regardless of justification. Joint ventures undertaken by competitors can be legal, within certain limits. A seller sometimes requires a buyer to purchase a product that the buyer does not Example: Two shoe manufacturers agree to want in order to be allowed to buy a product stop selling to a discount shoe store because that the buyer does want. Such requirements its retail prices are deemed too low. The are called tying arrangements. Tying is manufacturers have engaged in an illegal generally illegal if the seller has some boycott. degree of control over the market for the product that the buyer wants. Vertical price-fixing () Example: The owner of the only mobile Any agreement between a seller and a buyer home park in a county requires anybody regarding the price at which the buyer who wants to lease a space in the park to resells a product is illegal. purchase a mobile home exclusively from a select group of dealers, which have financial Example: A manufacturer of light bulbs relationships with the park owner. Other complains to a hardware store because the brands of mobile homes are banned at the store is selling bulbs to consumers below the park. This arrangement constitutes tying suggested retail price. The store promises under the antitrust laws. that it will in the future keep its light bulb price within 10 percent of the suggested retail price. The manufacturer and the store A business may not unfairly keep others have engaged in vertical price-fixing. from competing with it. Businesses may and should compete vigorously to obtain and Other seller-buyer agreements to retain customers. Growth through While agreements between a buyer and a superior ability and efficiency is not illegal. seller that affect prices are always illegal However, a business with significant market under California law, agreements that in power may not, without legitimate business other ways restrict the buyer’s freedom to justification, take actions that exclude or resell products can also be illegal. These handicap its competitors. agreements include restrictions on where and to whom the buyer may resell the Example: The owner of three of the four ski product. Such restraints are illegal areas in a popular resort town stops whenever they harm competition more than participating in a popular joint marketing they help it. plan to offer lift tickets that are good at any of the four ski areas, including the one Example: A furniture manufacturer operated by a small competitor. The owner discovers that two of its wholesale of the three ski areas is monopolizing that distributors are trying to sell its products to market, if there is no legitimate business the same retail store and that each distributor Page 3

Antitrust Enforcement in California: How You Can Help

justification for the any What the Attorney General Can longer with the smaller competitor. Do

Mergers The Attorney General vigorously enforces Under federal statutory law, businesses may the antitrust laws and acts upon any not merge with or acquire other businesses information indicating antitrust violations when the effect may be substantially to that affect the California public. Such lessen competition. The purpose of this actions can include investigations, and, statute is to stop at early stages the when necessary, court actions. In some anticompetitive effects of increasing cases, the Attorney General’s Office might industrial concentration or . be able to advise you that your inquiry Such may result in should be directed to an appropriate federal higher prices for consumers and other agency, local district attorney or private buyers. Mergers between competitors are counsel. (The Attorney General cannot act more likely to raise antitrust concerns, but as a lawyer for, or give legal advice to, mergers between companies in other private individuals or businesses.) relationships, such as supplier and customer, may also be illegal. The Attorney General’s Office stands ready to protect California’s citizens, and the Example: An isolated county has three economy on which they rely, from illegal hospitals. Two hospitals are large and restraints of trade. This effort can be greatly provide a wide range of medical services. enhanced by concerned citizens helping to The third hospital is smaller and provides identify violations of law. fewer services. Because of driving distances, it is very unlikely that patients in To report a possible antitrust violation or to the county will go to hospitals outside of the request additional copies of this publication, county. It is also very unlikely that any new contact: hospitals will be built in the county in the foreseeable future. If the two large hospitals Antitrust Law Section merge, the transaction will violate the law. Attorney General’s Office 300 S. Spring St., Ste. 1702 What You Can Do Los Angeles, CA 90013 Tel.: (213) 269-6567 or (800) 952-5225

Fax: (213) 620-6005 California is a large state with a vast E-mail: [email protected] economy, and law enforcement agencies rely upon concerned citizens to help detect Attorney General’s Internet Site: crime. This reliance is particularly acute in https://oag.ca.gov the field of antitrust law, where subtle restraints might never come to light unless alert citizens help point them out. If you have reason to believe that any of the violations discussed in this publication are being committed, please contact the Attorney General’s Antitrust Section.

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