Class Rreflection 1

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Chapter5PP.2019.ppt

ACC 150
THE LEGAL ENVIRONMENT OF BUSINESS

With Doreen Smith, Esquire

Chapter 5

POWER TO REGULATE BUSINESS

  • Federal government
  • May regulate any business to advance the nation’s economic need (interstate commerce)
  • State government
  • May regulate all intrastate business as long as they do not create an unreasonable burden on business
  • Local government
  • May regulate business to the extent permitted by state law

FEDERAL STATUTES

  • Federal statutes
  • regulate unfair competition from horizontal restraints (among competitors) and vertical restraints on trade (through supply chain).
  • Examples of horizontal restraints
  • price fixing, monopolization and mergers among competitors
  • Example of vertical restraints
  • price discrimination, exclusive dealings and territories, mergers along the supply chain, resale price maintenance and tying.

REGULATION OF PRICES

  • Prohibition on Price Fixing.
  • The Sherman Antitrust Act
  • Prohibits competitors from setting prices.
  • Prohibited Price Discrimination.
  • The Clayton Act and Robinson-Patman Act prohibit price discrimination.
  • When a seller charges a different price to different buyers for commodities of like grade and quality.
  • Sellers cannot sell below cost to harm competitors.

REGULATION OF PRICES

  • Permitted Price Discrimination.
  • Some price differences are justified
  • Examples of justified price differences:
  • Difference in quality, grade, quantity,
  • Cost of transportation involved in performing contract,
  • Close-out sale of a particular line of goods.

MONOPOLIZATION

  • Market Power
  • Defined: The ability to control price and exclude competition
  • Sherman Antitrust Act prohibits monopolies.
  • It is only considered a monopoly if business has market power which is defined by considering the product market and geographic market.

BOYCOTTS AND REFUSALS TO DEAL

  • A refusal to deal with certain buyers may violate the law.
  • The Sherman Act applies to these situations.

TYING

  • Anticompetitive practice of requiring buyers to purchase one product in order to get another.
  • The tied product must be one that the buyer would not want.
  • Example:
  • Microsoft was accused of requiring the purchase of its internet browser in order to get Microsoft software.

MERGERS AMONG COMPETITORS

  • Business Combinations.
  • Premerger Notification
  • Large businesses must give notice to the Federal Trade Commission if they are merging.
  • Courts examine market share and relevant markets to determine if a merger will create a monopoly
  • Takeover Laws
  • These laws guard against unfairness in corporate takeover situations.

POWER TO PROTECT BUSINESS

Remedies for Anticompetitive Behavior.

  • Criminal Penalties.
  • Sherman Act provides for fine or imprisonment.
  • Up to $100 million for corporation.
  • Up to $1 million and/or prison up to 10 years for natural persons.

  • Civil Penalties.
  • Individual treble damages (3 times actual damages).
  • Class Action suit by State Attorney General.