Risk Management

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Competition

Objectives

• Sherman Act

• Price fixing

• Market divisions

• Monopolies

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Sherman Act

“The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

- US Supreme Court

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993).

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Contracts and Combination

• Horizontal agreements

• Vertical agreements

Price Fixing

• Sherman Act per se violations

• Horizontal price fixing – Competitors setting minimum prices

– Setting terms of sale

– Setting quantity or quality of goods to be made available for sale

• Bid rigging

• Jail time!

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Other Violations

• Market divisions – Illegal even if intended to give smaller players a

platform to compete

• Group boycotts

• Subject to rule of reason

Monopolies

• Market power

• Smaller companies can use Sherman Act to require larger companies to compete fairly

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Summary

• Competition is good for consumers and the law is designed to protect competition

• Restrictions on trade and competition

• Agreements and communications with competitors should comply with competition law