Purchase Sales Agreement

1. Purchase Sales Agreement • Reps and warranties • Covenants • Indemnifications • Due Diligence • Executive protection Advising Business Owners Instructor: Dwight Drake

2. Overriding Goal of US Antitrust Preserve, protect and maintain public confidence in free market system by deterring and eliminating economic oppression. Advising Business Owners Instructor: Dwight Drake

3. Social Goals of U.S. Antitrust • Efficient allocation of goods and services • Prevent “deadweight loss” • Stop “wealth transfer” from market power • Promote innovation – “dynamic efficiency” • Two fading-fast goals: - Protect market entry for individual firms - Decentralize economic power Advising Business Owners Instructor: Dwight Drake

4. Antitrust Statutes • Broad statements, ala constitution • Courts have huge interpretive freedom • Courts used “charter of freedom” to gradually define what we call “Antitrust law” • An ever evolving process – at varying speeds and often in varying directions • Tangled with microeconomic analysis that cries out for commentators and experts • Cases heavily fact driven Advising Business Owners Instructor: Dwight Drake

5. Sherman Act Section 1 • Every “contract, combination, conspiracy” • In “restrain of trade or commerce” • Justice Hughes in 1933 – a “Charter of Freedom” ala constitution provisions • First two approaches – “Rule of Reason” and “Per Se” doctrines. • Middle ground approach since ’78 – “Truncated Rule of Reason” Advising Business Owners Instructor: Dwight Drake

6. Sherman Act Section 2 Three criminal offenses: - To monopolize - To attempt to monopolize - To combine or conspire to monopolize Not unlawful to just be a monopolist There must be offensive conduct Separate elements of each offense Advising Business Owners Instructor: Dwight Drake

7. Robinson-Patman §§ 2 -3 • Price discrimination unlawful • Must show “substantially lessen competition”, “tend to create monopoly” or “injure, destroy or prevent competition” • No monopolization showing required • Overlap with Sherman 2 where price discrimination in seller’s own market • Burden of proof shift • Exclusive dealing, tying Advising Business Owners Instructor: Dwight Drake

8. FTC Act Section 5 • Makes unlawful “unfair methods of competition” and “unfair and deceptive acts and practices” • Empowers FTC • Gives FTC broad power to wade in • Monopolization enforcement heavily influenced by Sherman 2 interpretations Advising Business Owners Instructor: Dwight Drake

9. FTAIA of 1982 • Bottom line: Foreigners not protected • Export commerce to foreign nations excluded. • Other foreign commerce included if “direct, substantial, reasonable effect on: - Non foreign commerce - Import commerce - Injury to export business in US Advising Business Owners Instructor: Dwight Drake

10. The Players • Congress • Feds, DOJ & FTC – up and down • The courts – off and running after commerce clause boom of mid-’30s • Academic commentators • State Attorney General Offices • Private antitrust bar Advising Business Owners Instructor: Dwight Drake

11. Fed Ups and Downs • Vigorous during Taft years (1909-1913) • Slow down in the roaring ‘20s. • Hit all time low in depression years 30-35 • FDR’s 1st term cartel experiments • FDR’s 2nd term started hard-nosed action • Enforcement peaked during ’60s • Commentators triggered slow down in ’70s • Reagan accelerated slow down in ’80s • Bush One cranked up a little • Clinton turned up more, but nothing like ’60s • Bush two – Tougher than expected Advising Business Owners Instructor: Dwight Drake

12. Private Antitrust Suits • Treble damages - deterrence and greed • Uniquely American • High watermark late ’70s – 20 to 1 • Today – 10 private to 1 government • Tougher now – fairness, efficiency values; standing, injury, causation issues • The debate continues Advising Business Owners Instructor: Dwight Drake

13. Horizontal Restraints – Analytical Process Is there agreement or conspiracy? Are the parties rival, horizontal competitors? Is restrain potentially suspect per se – price, market division, group boycott? What are parties’ purposes? Any bona fide business purpose beyond naked competitive advantage? What is the competitive effect of the restrain? Is it anticompetitive or pro competitive? How obvious are effects? How much market power do the parties have? Do they have the capacity to effect output and price? If restrain has some valid business purposes, is there a less restrict alternative for accomplishing those purposes? Advising Business Owners Instructor: Dwight Drake

14. Some Horizontal “Rule of Reason” Special Factors • “Rule of reason” analysis essential in select cases. Complete analysis must be applied to unique facts of case. Some unique factors we have seen include: • Does restrain merely regulate, not restrain, competition? Chicago Board. • Does restrain change character of established market? Aspens Ski • Does restrain involve essential facility? Otter Tail, Terminal Ass’n of St. Louis? • Does restrain force blanket license, long-term lease or boycott that forecloses competition? U.S. Shoe, Griffith, Loraine Journal. • Does restrain amount to to tort or contract liability, not antitrust claim? Olympic Equip, Curtis Tinker. • Is party giving up short-term profits for long-term anticompetitive effect? Aspen Ski. • Is there a legitimate exercise of IP rights? Xerox. • Are IP rights just a pretext, phony excuse? Kodak, Microsoft. • Does restrain shut out competitors? Microsoft. • Does restrain impact price-setting mechanism? Indiana Dentists. Advising Business Owners Instructor: Dwight Drake

15. Some Horizontal “Rule of Reason” Special Factors • Does restrain have potential to strengthen market? Cal Dentists. • Is there dominate market power or a tight oligopoly? Rothery Storage, Microsoft. • Does restrain promote or demand exclusivity? Broadcast Music, Microsoft. • Is industry susceptible to collusion? Todd/Exxon, Container Corp. • Does restrain help get product to market? Broadcast Music, GM/Toyota. • Is there an expectation consumer prices will decrease? GM/Toyota • Are there fundamental social welfare issues? Brown University. • Are there efficiency-enhancing infrastructures? Med South • Is there any free-riding? VISA USA • Is restrain ancillary to broader J.V. or business arrangement? Addyston Pipe, VISA USA, GM/Toyota • All these potentially impact mega factors: • 1. Is their power to limit output or market efficiency? • 2. Is there injury to innovation or dynamic efficiency? • 3. Do the pro-competitive effects outweigh anticompetitive effects? • 4. Are there less restrictive means to pro-competitive benefits? Advising Business Owners Instructor: Dwight Drake