Antitrust Laws Agreements

The Sherman Act § 1 prohibits ”contracts, combinations in the form of trust or any other conspiracy to restrict trade or commerce”. [17] This applies to two or more different companies that cooperate in a way that harms third parties. It does not cover decisions of a single economic entity or entity, although the form of an entity may be two or more separate legal persons or companies. In Copperweld Corp. vs. Independence Tube Corp[18], it was found that an agreement between a parent company and a 100% subsidiary could not be subject to anti-cartel rules, as the decision was taken within a single economic entity. [19] This reflects the view that, if the company has not acquired a monopoly position (as an economic entity) or if it has significant market power, there is no prejudice. The same justification has been extended to joint ventures in which company shareholders make a decision about a new entity they create. In Texaco Inc. v. Dagher,[20] the Supreme Court unanimously ruled that a price set by a joint venture between Texaco and Shell Oil was not considered an illegal agreement. Thus, the law ”fundamentally distinguishes between concerted action and independent action.” [21] Multi-company behaviour tends to be considered more likely than single-company behaviour, in order to have a clearly negative effect and to be ”judged more strictly”.

[22] In general, four broad categories of agreements are defined. First, some agreements, such as price agreements or market sharing, are automatically illegal or in themselves illegal. Second, because the law does not attempt to prohibit any type of agreement that interferes with freedom of contract, it has developed a ”common sense rule” in which a practice could limit trade in a way that is considered positive or beneficial to consumers or society. Thirdly, there are considerable problems in detecting and identifying faults when companies do not establish personal contact or simply exchange only information, but seem to act together. The tacit cartel, particularly in concentrated markets with a small number of competitors or oligopolists, has given rise to significant controversies as to whether or not antitrust authorities should intervene. Fourth, vertical agreements between an enterprise and an ”upward” or ”downstream” supplier or buyer raise concerns about the exercise of market power, but are generally subject to a more flexible standard, under the ”rule of reason”. Sixth, M&A transactions in the defense sector are often subject to further scrutiny by the Department of Justice and the Federal Trade Commission. [46] The antitrust environment of the 70s was dominated by the case of the United States…

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