Avoiding Antitrust Issues

Aug 10, 2005

The Interface of America's Antitrust and Intellectual Property Laws

The Antitrust Laws

Congress passed the Sherman Antitrust Act in 1890.1 Since then, America's antitrust laws have sought to protect the integrity of our free enterprise syst8em by outlawing various restraints of trade that threaten "free and unfettered competition."2 (p5) In discussing the objectives of the Sherman Act, the US Supreme Court has explained, "the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest national progress."3 Today, America's basic antitrust statutes include the Sherman Act (1890), the Clayton Act (1914)4 and the Federal Trade Commission Act (1914),5 and the Robinson-Patman Act (1936).6

Restraints of trade that are potentially illegal under Section 1 of the Sherman Act include price fixing, boycotts, and market allocations by horizontal competitors, as well as some potentially anticompetitive agreements among companies in vertical relationships, including price-fixing, exclusive dealings, and boycotts.1 According to the American Bar Association (ABA), "Violations of §1 may be enjoined pursuant to §16 of the Clayton Act . . . and persons injured in their business or property by reason of a violation may recover treble damages under §4 of the Clayton Act."7(p1) While Section 1 of the Sherman Act requires concerted action, 2(p9) Section 2 forbids attempts to monopolize and actual monopolization by single persons or companies, as well as combinations and conspiracies to monopolize.

The Clayton Act regulates additional potentially anticompetitive acts, such as tying arrangements, exclusive dealing agreements, and requirements contracts. 2(p11) Section 3 of the Clayton Act generally forbids sales or leases of goods "on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce." The Clayton Act also regulates mergers and acquisitions. Section 7 of the Clayton Act generally forbids stock or asset acquisitions. (While pharmaceutical company mergers are subject to Clayton Act review, a full discussion is beyond the scope of this chapter.)8 In addition, the Clayton Act regulates interlocking directorates and officers (Section 8).2(p25) The Robinson-Patman Act of 1936 was designed in part to amend and supplement the Clayton Act. "In general, the [R-P] Act makes it unlawful . . . to discriminate in price, services, or facilities, when the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce." 2(p25)

The Robinson-Patman Act is generally referred to as Section 2 of the Clayton Act, (that being the specific section that the R-P Act amends).

The Federal Trade Commission Act of 1914 established the Federal Trade Commission (FTC), which today has the sole responsibility for enforcing the FTC Act and shares responsibility with the Justice Department's Antitrust Division for enforcing the Clayton and Robinson-Patman Acts. The ABA states, "[A]lthough the Federal Trade Commission may not directly enforce the Sherman Act, it may prohibit as an unfair method of competition under Section 5 of the FTC Act conduct that violates the Sherman Act. Thus, the scope of Section 5 is at least as broad as that of the combined Sherman, Clayton and Robinson-Patman Acts."7(pp727, 607) Section 5 of the FTC Act broadly prohibits "unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."5(§45)