The Big Powerful “Innocent” Oligopoly

1. The Big Powerful “Innocent” Oligopoly • The situation: • Market has few players, all successful. A “Shared Monopoly” • High barriers to entry. • Product is homogeneous. • Numerous buyers with no acceptable substitutes. • Sellers have been able to generate supracompetitive prices for a long time without any agreement. Just natural market course of dealing. • Sellers have power and means to continually offer different products, • develop multiple brands, that have effect of keeping others out. • 7. No bad conduct – Just power and effective operations. Law 552 - Antitrust - Instructor: Dwight Drake

2. The Big Powerful “Innocent” Oligopoly FTC’s Deconcentration Case Against Cereal Industry. Who were the players? What were their market shares? What had companies done to maintain their shared monopoly? Was there any evidence of collusion or predatory behavior? What was FTC’s rationale for deciding to not pursue the matter? What practices did the FTC say may be singled out for action? Can FTC force parties to compete? Where Perschuk and Bailey correct in saying legislature should act? Law 552 - Antitrust - Instructor: Dwight Drake

3. Bogosian v. Gulf Oil Corp. (3rd Cir. 1978) • Basic Facts: Suit by independent service station dealers alleging that 14 big oil • companies violated Sherman 1 by tying leases of land with requirement • to use only lessor’s trademark, sell only lessor’s gas. Dist.Ct. dismissed • because no allegation of “contract or conspiracy”, just “interdependent • conscious parallel action.” • Held: 3rd cir reversed. • Conscious parallel action, without more, not sufficient. Must show • acts in contradiction of D’s interest or motivation for agreement. • P says it can prove with discovery. • P argues interdependent parallel action alone should be sufficient • in highly concentrated market. This theory can’t be tested without • a fuller record. • Dissent: Allegation of conscious parallel behavior, without more, not • state claim under Sherman 1. Law 552 - Antitrust - Instructor: Dwight Drake

4. United States v. General Electric Co. (1977) • Basic Facts: GE and Westinghouse were only two big turbine generator • Producers. Allegation was that they fixed prices with “signals”. Consent • decree with government approved by court. • What were signals? • What was harm in giving customers price protection on sales? • How did decree remedy problems? • Was there any allegation of agreement or conspiracy? Law 552 - Antitrust - Instructor: Dwight Drake

5. E.I. Du Pont De Nemours & Co. v. FTC (2nd Cir. 1984) Basic Facts: FTC issued order against four major antiknock compound manufactures. Fact showed no agreement and no collusive, predatory, or artificial conduct intended to injure competition. What were the challenged business practices? What was central issue of FTC’s authority? Does Section 5 under FTC Act give FTC broader authority then Sherman or Clayton? What did court say about tight oligopoly market that engages in conscious parallel pricing to maintain supracompetitive prices? Was court correct in finding against FTC’s alleged attempt to regulate bona fide business practices in a tight oligopoly market? Law 552 - Antitrust - Instructor: Dwight Drake