Global Antitrust

					 Global Antitrust.
Predatory Practices & Mergers
       [Sherman Act]

        Amosa Jumbam
        Tingting Huang
              Overview
Recent global antitrust practices concerns
price-fixing and mergers on a global scale.

              Cases involved:
                 DRAM Price Fixing
         British Airways/Korean Air Lines
         AT&T CORP. / TELE-COMMUNICATIONS, INC
         F. HOFFMANN-LA ROCHE LTD
                         …
                Just to name a few
      Overview (continued)
The main U.S. legislation that governs
     Antitrust is the Sherman Act.

   Subsequent Legislations include
             Clayton Act
    Federal Trade Commission Act
                 Legislation
   The Sherman Act was signed into law in
    1890 by President Benjamin Harrison and
    was named after its author, Senator John
    Sherman.
   The Sherman Act was the first U.S.
    government action to limit cartels and
    monopolies and is the oldest of all federal
    antitrust law.
   The birth of the Act was helped by the
    strong public opposition to the
    concentration of economic power in large
    corporations that had been taking place
    after the Civil War.
        Legislation (continued)
   The Act was initially proposed to break up
    the Standard Oil trust and the name
    “antitrust” has been used since.
   Despite the name, the Sherman Act is not
    targeted at trusts only, but at any form
    that creates a “restraint of trade”.
   For a decade right after its passage, the
    Act was rarely effectively used against
    monopolies. Its only effective use during
    that time was against the labor unions.
         Legislation (continued)
   In 1895 the Supreme court dismantled the Act in
    United States v. E.C. Knight Company with an
    explanation that the company’s control of
    manufacturing did not constitute control of trade.
   In 1898 President McKinley launched the “trust-
    busting” era.
   President Theodore Roosevelt used the Act
    extensively in his antitrust campaign which led to
    the successful employment of the Act.
   In 1904 the Supreme Court ordered to dissolve
    the Northern Securities Company in State of
    Minnesota v. Northern Securities Company.
   In 1911 the Supreme Court found Standard Oil
    Company in violation of the Sherman Act.
         Legislation (continued)
   In this decision, the Supreme Court established
    an important legal standard “the rule of reason”
    which stated that “the large size and monopoly in
    themselves are not necessarily bad and do not
    violate the Sherman Antitrust Act. Rather it is the
    use of certain tactics to attain or preserve such
    position that is illegal”.
   The most successful application of the Act in the
    second half of the 20th century is the breakup of
    AT&T.
   Recent antitrust case in the U.S. involves the
    fight against the monopolistic practices by
    Microsoft.
   Since the inception of the Act, its application has
    been met with intense pressure from the
    trusts/businesses and been hampered by the
    lobbying of the large corporations.
                                Key Provisions
   Section 1 Trusts, etc., in restraint of trade illegal; penalty
    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. Every person who shall make any contract or engage in any combination or
    conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on
    conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation,
    or, if any other person, $350,000, or by imprisonment not exceeding three years, or by
    both said punishments, in the discretion of the court.
   Section 2 Monopolizing trade a felony; penalty
    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,
    and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a
    corporation, or, if any other person, $350,000, or by imprisonment not exceeding three
    years, or by both said punishments, in the discretion of the court.
   Section 3 Trusts in Territories or District of Columbia illegal; combination a felony
    Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of
    trade or commerce in any Territory of the United States or of the District of Columbia, or
    in restraint of trade or commerce between any such Territory and another, or between
    any such Territory or Territories and any State or States or the District of Columbia, or
    with foreign nations, or between the District of Columbia and any State or States or
    foreign nations, is declared illegal. Every person who shall make any such contract or
    engage in any such combination or conspiracy, shall be deemed guilty of a felony, and,
    on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a
    corporation, or, if any other person, $350,000, or by imprisonment not exceeding three
    years, or both said punishments, in the discretion of the court.
                             Key Provisions
   Section 4 Jurisdiction of courts; duty of United States attorneys; procedure
    The several district courts of the United States are invested with jurisdiction
    to prevent and restrain violations of sections 1 to 7 of this title; and it shall
    be the duty of the several United States attorneys, in their respective
    districts, under the direction of the Attorney General, to institute proceedings
    in equity to prevent and restrain such violations. Such proceedings may be
    by way of petition setting forth the case and praying that such violation shall
    be enjoined or otherwise prohibited. When the parties complained of shall
    have been duly notified of such petition the court shall proceed, as soon as
    may be, to the hearing and determination of the case; and pending such
    petition and before final decree, the court may at any time make such
    temporary restraining order or prohibition as shall be deemed just in the
    premises.
   Section 5 Bringing in additional parties
    Whenever it shall appear to the court before which any proceeding under
    section 4 of this title may be pending, that the ends of justice require that
    other parties should be brought before the court, the court may cause them
    to be summoned, whether they reside in the district in which the court is held
    or not; and subpoenas to that end may be served in any district by the
    marshal thereof.
   Section 6 Forfeiture of property in transit
    Any property owned under any contract or by any combination, or pursuant
    to any conspiracy (and being the subject thereof) mentioned in section 1 of
    this title, and being in the course of transportation from one State to another,
    or to a foreign country, shall be forfeited to the United States, and may be
    seized and condemned by like proceedings as those provided by law for the
    forfeiture, seizure, and condemnation of property imported into the United
    States contrary to law.
                                   Key Provisions
   Section 6a. Conduct involving trade or commerce with foreign
    nations
    Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce (other
    than import trade or import commerce) with foreign nations unless –
    (1) such conduct has a direct, substantial, and reasonably foreseeable effect -
     •   (A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade
         or import commerce with foreign nations; or
     •   (B) on export trade or export commerce with foreign nations, of a person engaged in such trade
         or commerce in the United States; and
    (2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title,
    other than this section.
    If sections 1 to 7 of this title apply to such conduct only because of the operation of
    paragraph (1)(B), then sections 1 to 7 of this title shall apply to such conduct only for
    injury to export business in the United States.


   Section 7 ''Person'' or ''persons'' defined
    The word ''person'', or ''persons'', wherever used in sections 1 to 7 of this title shall be
    deemed to include corporations and associations existing under or authorized by the
    laws of either the United States, the laws of any of the Territories, the laws of any State,
    or the laws of any foreign country.
            Criticisms of the Act
   Critics question whether the Act improves
    competition and benefits consumers or just aids
    inefficient businesses at the expense of larger,
    more innovative ones. One of the critics is former
    Fed Chairman, Alan Greenspan.

   Some debates whether the goal of the Act should
    be increased competition or lower prices.

   Others criticize the Act for its failure to define key
    terms such as combination, conspiracy, monopoly
    and trust and for its narrow interpretation of
    what constituted trade or commerce among
    states.
                  Enforcement
   The responsibility is on the government attorneys
    and district courts to pursue and investigate
    suspected violations of the Act.

   The Department of Justice brings criminal actions
    and civil actions against suspected violators.

   The Federal Trade Commission can also launch
    civil action against possible violators of antitrust
    laws.
   Sherman Act Cases

             DRAM Price Fixing
     British Airways/Korean Air Lines
AT&T CORP. / TELE-COMMUNICATIONS, INC
      F. HOFFMANN-LA ROCHE LTD
             DRAM Price Fixing
   In 2002 US Department of Justice began a probe
    into the activities of Dynamic Random Access
    Memory (DRAM) manufacturers
    US computer makers, including Dell and
    Gateway, claimed that inflated DRAM pricing was
    causing lost profits and hindering their
    effectiveness in the marketplace.
   To date, five manufacturers have pleaded guilty
    to their involvement in an international price-
    fixing conspiracy including,Hynix, Infineon,
    Micron Technology, Samsung and Elpida.
             DRAM Price Fixing
   In December 2003, the Department charged
    Alfred P. Consello, a Regional Sales Manager for
    Micron Technology Inc., with obstruction of
    justice in violation of 18 U.S.C. § 1503.
   In October of 2004 four executives from Infineon
    were each sentenced to 4 to 6 months in jail, and
    fined $250,000
            DRAM Price Fixing
   In October 2004, Infineon pled guilty. The
    company was fined $160M for its
    involvement, which at the time was the
    third largest antitrust fine in US history.
    Hynix Semoconductor also pleaded guilty
    in April 2005 with a $185M criminal
    penalty.
   In October 2005, Samsung entered their
    guilty plea in connection with the cartel
    and was fined $300 million.
    British Airways/Korean Air Lines

   AUGUST 1, 2007 the Department of Justice U.K.-
    based British Airways Plc and South Korean-
    based Korean Air Lines Co. Ltd. have each agreed
    to plead guilty and pay separate $300 million
    criminal fines for their roles in conspiracies to fix
    the prices of passenger and cargo flights
   British Airways and Korean Air are each charged
    with two counts of price fixing in violation of the
    Sherman Act. Each count of the Sherman Act
    carries a maximum sentence of 10 years of
    imprisonment for individuals and a fine of $100
    million for corporations
    British Airways/Korean Air Lines
   Korean Air is the largest passenger carrier from
    the United States to Korea and averages more
    than $250 million a year on those flights. British
    Airways is the largest passenger carrier from the
    United Kingdom to the United States. It had $14
    billion in total passenger revenues in 2006
    British Airways/Korean Air Lines
   British Airways' fuel surcharge for round-trip
    passenger tickets was around $10 per ticket. By
    the time the passenger conspiracy was cracked in
    2006, the surcharge was nearly $110 per ticket a
    10-fold increase, said the Department. The
    Department noted that during the air cargo
    conspiracy, British Airways' fuel surcharge on
    shipments to and from the United States changed
    more than 20 times and increased from four
    cents per kilogram of cargo shipped to as high as
    72 cents per kilogram
    British Airways/Korean Air Lines
   The Department noted that the conspirators
    agreed to increase the fuel surcharge over time
    from 10 cents per kilogram to as high as 60 cents
    for each kilogram of cargo shipped from the
    United States. The Department also charged that
    Korean Air reached an agreement with its rival to
    fix certain passenger fares for flights from the
    United States to Korea
         AT&T CORP. / TELE-
        COMMUNICATIONS, INC
   The United States brings this antitrust action to
    prevent the proposed merger of Tele-
    Communications, Inc. ("TCI") into a wholly
    owned subsidiary of AT&T Corporation ("AT&T").
   This action is filed under Section 15 of the
    Clayton Act, as amended, 15 U.S.C. § 25, to
    prevent and restrain the violation by defendants,
    as hereinafter alleged, of Section 7 of the Clayton
    Act, as amended, 15 U.S.C. § 18
          AT&T CORP. / TELE-
         COMMUNICATIONS, INC
   The relevant geographic markets are those areas in which
    AT&T is one of the two cellular licensees, and in which
    Sprint PCS is a PCS licensee. These areas include the
    metropolitan areas of New York City; Los Angeles; Dallas-
    Fort Worth; San Francisco-Oakland-San Jose; Miami-Ft.
    Lauderdale; Minneapolis-St. Paul; Seattle; Pittsburgh;
    Denver; Portland, OR; Sacramento; Salt Lake City; Las
    Vegas; and at least 18 other metropolitan markets.

   In each of the geographic areas described in Paragraph 16,
    the market for the provision of mobile wireless telephone
    services is highly concentrated. AT&T is the largest or
    second largest provider of mobile wireless telephone
    services in each of these markets. Sprint is one of a small
    number of competing providers in each of these markets
    and is a uniquely close substitute for AT&T.
         AT&T CORP. / TELE-
        COMMUNICATIONS, INC
   The effect of the proposed acquisition of TCI by
    AT&T may be substantially to lessen competition
    in interstate trade and commerce in violation of
    Section 7 of the Clayton Act.
   The DOJ requested (a) adjudication that AT&T's
    proposed acquisition of TCI would violate Section
    7 of the Clayton Act; (b) preliminary and
    permanent injunctive relief preventing the
    consummation of the proposed acquisition
    F. HOFFMANN-LA ROCHE LTD
   F. Hoffmann-La Roche Ltd and co-conspirators
    entered into and participated in a combination
    and conspiracy to suppress and eliminate
    competition by fixing the price and allocating the
    volume of certain vitamins manufactured and
    sold in the United States and elsewhere, and to
    allocate customers for vitamin premixes sold in
    the United States.
   The combination and conspiracy engaged in by
    the defendant and its co-conspirators was in
    unreasonable restraint of interstate and foreign
    trade and commerce in violation of Section 1 of
    the Sherman Act (15 U.S.C. § 1)
    F. HOFFMANN-LA ROCHE LTD
   Roche, a pharmaceutical conglomerate based
    here, was by far the biggest player in what the
    United States Justice Department has described
    as a sophisticated cartel to fix worldwide vitamin
    prices as much as 25 percent above the market
    level.

   Roche agreed to pay $500 million to settle
    charges with the Justice Department. Two of its
    top executives resigned, and one of them agreed
    to serve a four-month prison sentence in the
    United States
               Major Problems
   Extraterritoriality is a major problem in the
    application of U.S. Antitrust law.

   The actions under investigation are legal under
    foreign laws.

   Application of U.S. antitrust law raised the issue
    of “clash of competing national laws”.

   Extraterritoriality has met with fierce opposition
    from other countries as violation of their national
    sovereignty.
                    References
   http://en.wikipedia.org/wiki/DRAM_price_fixing
   http://www.usdoj.gov/atr/public/press_releases/2007/224
    928.htm
   http://www.usdoj.gov/atr/cases/f2100/2141.htm
   http://www.usdoj.gov/atr/cases/f2400/2452.htm
   http://www.usdoj.gov/atr/foia/divisionmanual/ch2.htm#a1
   http://www.linfo.org/sherman.htm

				
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