A Brief Overview of Antitrust Laws
The antitrust laws are a patchwork of state and federal statutes and decisions centered on the Sherman Act of 1890. They are designed to protect competition, which yields better quality, selection, and price. Antitrust laws have been described as the “Magna Carta of free enterprise.” United States v. Topco Assocs., Inc., 405 U.S. 596, 610 (1972).
Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies in restraint of trade. See 15 U.S.C. § 1 (“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”). Cartel activities such as price fixing, bid rigging, and divisions of markets by competing firms are examples of § 1 violations.
Section 2 of the Sherman Act prohibits monopolization, attempted monopolization, and conspiracy to monopolize. See 15 U.S.C. § 2 (“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a felony. …”).
The board game Monopoly teaches aspiring monopolists the concept of building and maintaining monopolies so they can collect higher “monopoly rents.” Such conduct in the real world is generally prohibited by § 2.
The Florida Antitrust Act of 1980 includes provisions that parallel § 1 and § 2 of the Sherman Act. See Fla. Stat. § 542.18 (“Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful”); Fla. Stat. § 542.19 (“It is unlawful for any person to monopolize, attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of trade or commerce in this state”).
Those provisions are to be construed in a manner consistent with federal decisions interpreting corresponding provisions of the Sherman Act. Fla. Stat. § 542.32.
Elements of a § 1 Violation
Many antitrust actions are brought under § 1 of the Sherman Act. The elements of a § 1 violation are: 1) “a contract, combination, or conspiracy which constitutes 2) an ‘unreasonable’ restraint of trade having 3) an impact on interstate commerce.” GTE New Media Servs., Inc. v. Ameritech Corp., 21 F. Supp. 2d 27, 42 (D. D.C. 1998). See also, Fla. Stat. § 542.31 (the Florida Antitrust Act also applies to intrastate commerce).
Generally, “[c]ompetitors are permitted by the antitrust laws. . . to engage in cooperative behavior, under trade association auspices or otherwise, provided they don’t reduce competition among themselves. . . or help their suppliers or customers to reduce competition.” In re Brand Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 784–85 (7th Cir. 1999).
A conspiracy is a “conscious commitment to a common scheme designed to achieve an unlawful objective … or a meeting of minds in an unlawful arrangement.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (citations and internal quotations omitted). Unilateral conduct cannot constitute a violation of § 1, it requires concerted action. See, e.g., Fisher v. City of Berkeley, 475 U.S. 260, 266–67 (1986) (“Even where a single firm’s restraints directly affect prices and have the same economic effect as concerted action might have, there can be no liability under §1 in the absence of agreement”).
In many cases, however, the existence of an agreement is a central issue. However, where the existence of an agreement (i.e., a “contract, combination. . . , or conspiracy”) is undisputed, the analysis centers mainly on the anticompetitive economic effects of the agreement. See Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (bar association’s rule prescribing minimum fees for legal services violated § 1); Nat. Soc’y of Prof’l. Eng’rs v. United States, 435 U.S. 679 (1978) (association’s canon of ethics prohibiting competitive bidding by its members violated § 1).
“Per Se” § 1 Violations
Some kinds of § 1 violations can be proven without a showing of anticompetitive effects; such effects are presumed. These are known as “per se” violations. See Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332, 335–36 (1982) (holding that certain “agreements among competing physicians setting, by majority vote, the maximum fees that they may claim in full payment for health services provided to policyholders of specified insurance plans” constituted price fixing and were unlawful per se); Greenberg v. Mount Sinai Med. Ctr. of Greater Miami, Inc., 629 So. 2d 252, 258 n.1 (Fla. 3d DCA 1993) (“A per se violation is one which requires no proof of anti-competitive effect”).
“Horizontal” price fixing which includes, agreements, among otherwise competing firms, “formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing” the prices at which they will buy or sell goods or services, constitutes a “per se” § 1 violation. See State Oil Co. v. Khan, 522 U.S. 3, 11 (1997) (citations and internal quotations omitted).
“Vertical” price fixing, where an upstream seller, such as a manufacturer, dictates the price a downstream seller, such as a retailer, may charge, can also constitute a “per se” § 1 violation. See, e.g., United States v. AnchorShade, Inc., 1996 WL 760285, at 5 (S.D. Fla. 1996) (final consent judgment).
Horizontal market-allocation agreements, which include agreements among competitors to divide geographic markets, services offered, or customers served, constitutes a “per se” § 1 violation. See, e.g., Palmer v. BRG of Ga., Inc., 498 U.S. 46, 50 (1990) (agreement between two bar review course providers under which each agreed not to compete in the other’s territory was “unlawful on its face”); Oce Printing Sys. USA, Inc. v. Mailers Data Servs., Inc., 760 So. 2d 1037, 1043 (Fla. 2d DCA 2000) (“When competitors at the same level of the market conspire to allocate territories in order to minimize competition, that action constitutes a horizontal restraint on trade which results in a per se violation of the antitrust statutes”).
Vertical agreements fixing minimum prices at which goods may be resold (“vertical price fixing,” a kind of “resale price maintenance”) constitutes a “per se” § 1 violation. See generally, State Oil Co. v. Khan, 522 U.S. 3 (1997). See also, Khan, 522 U.S. at 22 (Conversely, “vertical maximum price fixing … should be evaluated under the rule of reason”).
Group boycotts or concerted refusals to deal “involving horizontal agreements among direct competitors” constitutes a “per se” § 1 violation. Nynex Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998). See also, FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 428–31 (1990); Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284 (1985).
Some kinds of tying arrangements can also constitute a “per se” § 1 violation. See generally Eastman Kodak Co. v. Image Tec. Servs., Inc., 504 U.S. 451 (1992); MCA Television Ltd. v. Pub. Int. Corp., 171 F. 3d 1265 (11th Cir. 1999).
The Rule of Reason – for § 1 Antitrust Violations other than “Per Se” Violations
The lawfulness under §1 of conduct that is not manifestly anticompetitive, i.e., conduct that is not a “per se” violation, is tested under the “rule of reason.” See Levine v. Cent. Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1546 (11th Cir. 1996) (“Agreements that do not fit within an established per se category are analyzed under the ‘rule of reason,’ i.e., courts will engage in a comprehensive analysis of the agreement’s purpose and effect to determine whether it unreasonably restrains competition”).
As every agreement concerning trade restrains trade to some extent, the courts have long construed the language of §1 as prohibiting only those agreements that have resulted or are likely to result in unreasonable restraints of trade. See Khan, 522 U.S. at 10. The test is whether, under the facts and circumstances, an agreement’s actual or likely anticompetitive economic effects in a “relevant market” outweigh its actual or likely procompetitive effects in that market.
A “relevant market” consists of a product market and a geographic market. “A relevant product market is a market composed of products that compete with each other: that is, products that are reasonably interchangeable from a buyer’s point of view.” Godix Equip. Export Corp. v. Caterpillar, Inc., 948 F. Supp. 1570, 1580 (S.D. Fla. 1996). A geographic market is the “area of effective competition. . . in which the seller operates, and to which the purchaser can practicably turn for supplies.” Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961).
The first step in a rule of reason analysis consists of defining the relevant market the agreement likely will (or does) affect. Levine, 72 F.3d at 1551. The second step is a determination of whether the competitors involved collectively have “market power” which, to a seller, is the “ability profitably to maintain prices above competitive levels for a significant period of time.” U.S. Dep’t of Justice & Federal Trade Comm’n, Merger Guidelines § 0.1 (1992), 57 Fed. Reg. 41552 (Sept. 10, 1992), 4 Trade Reg. Rep. (CCH) ¶13,104.
“The existence of [market] power ordinarily is inferred from the seller’s possession of a predominant share of the market.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 464 (1992). If the combined firms do not have market power, the agreement lacks “the potential for genuine adverse effects on competition” in the relevant market and accordingly is not proscribed. Levine, 72 F.3d at 1551.
The third step is a weighing of procompetitive justifications and effects against predicted (or known) anticompetitive effects toward a determination of whether, on balance, the agreement likely will have (or has had) a “substantially adverse” effect upon competition in the relevant market. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375 (1967); Graphic Prods. Distribs., Inc. v. Itek Corp., 717 F.2d 1560, 1573 (11th Cir. 1983).
The last step is an inquiry into whether the agreement is “reasonably necessary to the accomplishment of the legitimate goals and narrowly tailored to that end.” Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1581 (11th Cir. 1991) (citation omitted). Under some circumstances, courts apply an abbreviated (“quick-look”) rule of reason analysis. See California Dental Ass’n v. FTC, 526 U.S. 756 (1999).
Exemptions from Antitrust Laws
There are many statutory and judicially created exemptions from antitrust liability. One of the most important of these is the “Noerr-Pennington doctrine,” which “protects businesses and other associations when they join to petition legislative bodies, administrative agencies, or courts for actions having anticompetitive consequences.” See TEC Cogeneration Inc. v. Florida Power & Light Co., 76 F. 3d 1560, 1570 (11th Cir. 1996).
Another is the “intra-enterprise immunity doctrine,” also known as the “Copperweld doctrine,” which holds that a firm is incapable of conspiring with its subsidiaries or employees. See Crosby v. Hospital Auth. of Valdosta and Lowndes Cnty., 93 F. 3d 1515, 1526 (11th Cir. 1996) (“Under the intraenterprise immunity doctrine announced in Copperweld. . . , unilateral actions of a single enterprise do not constitute the type of concerted action proscribed by section one of the Sherman Act. Accordingly, an officer and an employee of the same company are legally incapable of conspiring with one another.”).
The “labor” exemption, the “state action doctrine,” and the statutory exemption for the “business of insurance” generally do not offer protection to trade associations. See 15 U.S.C. § 17 (antitrust laws are not applicable to labor organizations); Crosby, 93 F. 3d at 1521–22 (“Under the state action immunity doctrine, also known as the Parker doctrine, states are immune from federal antitrust law for their actions as sovereign.”); McCarran-Ferguson Act, 15 U.S.C. §§ 1011–15.