Standards, Public Welfare Defenses, and the Antitrust Laws
Michael Goldenberg, 42(3): 629–74 (May 1987)
The more than 400 private standards organizations can affect the fortunes of businesses and the welfare of consumers when their standards prevent products or services from reaching the market. Standards decisions that exclude products from the market raise an important, but as yet unresolved, issue for antitrust enforcement: When can a restraint on competition be defended on the ground that the restraint is needed to protect purchasers or the public from goods or services alleged to be unsafe or of poor quality? This Article examines the competitive and antitrust implications of exclusionary standards, analyzes the merits of an antitrust defense based upon protecting public welfare, and proposes a methodology for analyzing exclusionary standards cases under the rule of reason.
Arbitration of Antitrust Claims: Opportunities and Hazards for Corporate Counsel
Donald I. Baker and Mark R. Stabile, 48(2): 395–436 (Feb. 1993)
Since 1985, the U.S. Supreme Court has eliminated the federal district court as the sole forum for trying antitrust and other federal statutory claims. The Court has created the opportunity for parties to arbitrate the types of antitrust disputes that have been such a prolific source of conflict in distribution, licensing, franchising, and joint venture relationships. In so doing, the Court also has created the new risk that a party can be forced to arbitrate an antitrust dispute under an old arbitration clause that was never designed for this purpose. In this Article, the authors emphasize that arbitration is a creature of contract. They urge prompt review of existing arbitration clauses and suggest that any arbitration clause either exclude antitrust claims from its coverage or provide procedures suitable for resolution of future antitrust disputes.
FTC v. Ticor Title Insurance Company: More Confusion than Guidance
T. Bruce Godfrey, 48(2): 779–87 (Feb. 1993)
FTC v. Ticor Title Insurance Co., 504 U.S. 621 (1992), the Supreme Court concluded that a mere veto power over the price-fixing practices of a private title insurers' rate bureau, held but not exercised by a state, was insufficient to provide the members of such a bureau with immunity to federal antitrust actions. This Note explores the history of the state action defense to antitrust actions and discusses the alternatives to the strict requirements set forth in the Ticor majority opinion. It also analyzes the dissenting opinions of Chief Justice Rehnquist and Justice O'Connor, weighing their criticisms of the risks and burdens that the majority imposed on private market participants and on state regulators. The Note concludes that although the Ticor majority's analysis is coherent in light of current antitrust law, the decision provides scant guidance concerning the future direction of antitrust regulation.
Refusals to Deal in the Context of Network Joint Ventures
William H. Pratt, James D. Sonda, and Mark A. Racanelli, 52(2): 531–57 (Feb. 1997)
Networks of all shapes and sizes, from automated teller machine networks to credit card networks, are becoming an increasingly integral part of modern life and an increasingly important way of doing business for companies involved in joint ventures. This Article focuses on the issue of how antitrust laws should assess and ultimately judge the particular type of efficiencies exhibited by network joint ventures— so-called network efficiencies. Network efficiencies are those that a joint venture is capable of producing over and above ordinary economies of scale generated by joint ventures. Unlike certain types of joint ventures, such as those for research and development, network ventures generate more efficiencies as more firms join the venture. The Article concludes that the accepted way that antitrust courts view and analyze collateral restraints adopted by joint ventures must be tailored when the subject of the courts' scrutiny is a network joint venture in order to take into account the network's ability to generate network efficiencies.
Systemcare, Inc. v. Wang Laboratories Corp.: Evaluating Unilateral Behavior in the Tenth Circuit
Michael R. Barnett, 53(3): 851–70 (May 1998)
In 1996, the U.S. Court of Appeals for the Tenth Circuit decided Systemcare, Inc. v. Wang Laboratories Corp ., 85 F.3d 465 (10th Cir. 1996). This decision affirmed the controversial position that a plaintiff and a single defendant seller, as the only parties in a coerced vertical tying arrangement, cannot form the requisite combination in violation of section 1 of the Sherman Act. Further, the court effectively expanded this position and found that a coerced vertical agreement between a third party and a single defendant seller cannot constitute the combination required by section 1. Fortunately, in June 1997, an en banc proceeding vacated the 1996 decision, overturned inconsistent precedent, and recognized these types of coerced vertical conspiracies. Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137 (10th Cir. 1997).
Vertical Mergers: Recent Learning
M. Howard Morse, 53(4): 1217–48 (Aug. 1998)
After more than a decade of government inactivity, the Federal Trade Commission and the Antitrust Division of the Department of Justice have proven in recent years that businesses contemplating mergers and acquisitions need to consider vertical as well as horizontal antitrust risks of proposed transactions. With no recent court decisions, firms must look to the more than one dozen consent agreements entered by the antitrust enforcement agencies in the last few years for guidance. This Article discusses relevant U.S. Supreme Court precedents, economic theory, and government guidelines relevant to vertical mergers as well as the recent government enforcement actions.
The Overlooked Corporate Finance Problems of a Microsoft Breakup
Lucian Arye Bebchuk and David I. Walker, 56(2): 459 (Feb 2001)
This Article identifies problems with the ordered breakup of Microsoft that appear to have been completely overlooked by the government, the judge, and the commentators. The breakup order prohibits Bill Gates and other large Microsoft shareholders from owning shares in both of the companies that would result from the separation. Given this prohibition, this Article shows dividing the securities in the resultant companies among the shareholders is not as straightforward as the government has suggested. Any method of distributing the securities that would comply with this mandate would either (i) impose a significant financial penalty on Microsoft's large shareholders that is not contemplated by the order or (ii) create a risk of a substantial transfer of value between Microsoft's shareholders. In addition to identifying the difficulties and costs involved in the two distribution methods that would comply with the cross-shareholding prohibition, this Article examines how the breakup order could be refined to reduce these difficulties and costs. The problems identified should be addressed if a breakup is ultimately to be pursued and should be taken into account in making the basic decision of whether to break up Microsoft at all.
Hart-Scott-Rodino Merger Investigations: A Guide for Safeguarding Business Secrets
Robert S. Schlossberg and Harry T. Robins, 56(3): 943 (May 2001)
To keep the world's markets competitive during the present worldwide merger wave, antitrust enforcers in the United States and abroad will continue to scrutinize closely transactions that appear to affect the competitive status quo. As regulatory review increases worldwide, so do the risks to the individual firm that an investigating agency may disclose the business secrets it discovers in the course of its investigation. In this atmosphere, the business lawyer must be vigilant in safeguarding a client's business secrets. This Article focuses on confidentiality issues in merger investigations brought under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). Specifically, this Article: (i) outlines the various statutes, agency rules, and agency practices that safeguard the sensitive information that agencies examine during the HSR Act investigation; (ii) discusses the circumstances and laws under which the agencies share information with state and foreign governments; and (iii) addresses important issues that counsel should consider in seeking to prevent unwanted disclosures during an HSR Act investigation.
Joint Ventures and the Supreme Court's Decision in Texaco, Inc. v. Dagher: A Win for Substance Over Form
James H. "Hart" Holden, 62(4): 1467—1478 (August 2007)
In the summer of 2004, the Court of Appeals for the Ninth Circuit issued its opinion in Dagher v. Saudi Refining, Inc., holding that the decision of a legitimate joint venture between two former competitors to charge a single price its products could constitute per se illegal price fixing under Section I of the Sherman Act. This ruling generated significant antitrust uncertainty as to what joint ventures can and cannot do in operating their business. The Supreme Court unanimously reversed the Ninth Circuit, and in so doing helped to clarify this important but murky area of business law. This paper details the Court's Dagher decision, and the guidance that can be taken from it.
United We Stand: Antitrust Aspects of Collaboration Among Corporate Bondholders
Ali M. Stoeppelwerth, 67(2): 393 - 404 (February 2012)
Many observers over the years have commented on the various tactics employed by issuers of corporate debt seeking to restructure or repurchase their securities and the potentially coercive effects of these actions on bondholders. In response to issuer actions of this sort, large bondholders of a particular security often band together in groups or committees to try and negotiate collectively with the issuer and obtain more favorable terms. In some circumstances, these collaborations bring together firms that may be considered competitors in some aspects of their businesses and have on occasion been challenged as unlawful price-fixing agreements or group boycotts under Section 1 of the Sherman Act. This article reviews the opinions in those cases and discusses the antitrust implications of collective action by bondholders or their representatives in dealings with a common issuer.
The Rule of Reason Re-Examined
Edward D. Cavanagh, 67(2): 435 - 470 (February 2012)
This article analyzes the application of the Rule of Reason as articulated by Justice Brandeis in Chicago Board of Trade v. United States, 246 U.S. 231 (1918) to alleged restraints of trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. It argues that the Brandeis formulation, which requires courts to consider a broad range of economic factors and then weigh precompetitive benefits against anticompetitive effects, has proven unwieldy in the hands of trial judges. Because the Brandeis formulation provides little guidance as to how these factors should be weighed, courts have struggled to develop clear, predictable and consistent standards under section 1. This article considers several alternatives to the Brandeis formulation and recommends that courts can revitalize the Rule of Reason by using the highly structured approach of the D.C. Circuit in the Three Tenors case to develop antitrust rules that are clear, predictable and administrable.