Class Rreflection 1
QuynhCaoChapter5PP.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.