Holding
An oligopoly's interdependent pricing may provide a means for achieving recoupment, and thus may form the basis of a primary-line injury claim. Predatory pricing schemes, in general, are implausible, and are even more improbable when they require coordinated action among several firms. They are least likely to occur where, as alleged here, the cooperation among firms is tacit, since effective tacit coordination is difficult to achieve.
Since there is a high likelihood that any attempt by one oligopolist to discipline a rival by cutting prices will produce an outbreak of competition; and since a predator's present losses fall on it alone, while the later supracompetitive profits must be shared with every other oligopolist in proportion to its market share, including the intended victim.
Ultimately, Justice Kennedy, held that:
- There is no per se rule of nonliability under Robinson-Patman Act for predatory price discrimination when recoupment is alleged to take place through supracompetitive oligopoly pricing, but
- Competitor's alleged below-cost sales of generic cigarettes through discriminatory volume rebates did not create competitive injury in violation of Robinson-Patman Act.
An oligopoly is a market in which pricing control lies in the hands of a few sellers.
The Robinson–Patman Act (RPA) of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.
In the United States, antitrust law is a collection of mostly federal laws that govern the conduct and organization of businesses in order to promote economic competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
Collusion is a deceitful agreement or secret cooperation between two or more parties to limit open competition by deceiving, misleading or defrauding others of their legal right. Collusion is not always considered illegal. It can be used to attain objectives forbidden by law; for example, by defrauding or gaining an unfair market advantage. It is an agreement among firms or individuals to divide a market, set prices, limit production or limit opportunities. It can involve "unions, wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties". In legal terms, all acts effected by collusion are considered void.
A price war is a form of market competition in which companies within an industry engage in aggressive pricing activity "characterized by the repeated cutting of prices below those of competitors". This leads to a vicious cycle, where each competitor attempts to match or undercut the price of the other. Competitors are driven to follow the initial price-cut due to the downward pricing pressure, referred to as “price-cutting momentum”.
Anti-competitive practices are business or government practices that prevent or reduce competition in a market. Antitrust laws ensure businesses do not engage in competitive practices that harm other, usually smaller, businesses or consumers. These laws are formed to promote healthy competition within a free market by limiting the abuse of monopoly power. Competition allows companies to compete in order for products and services to improve; promote innovation; and provide more choices for consumers. In order to obtain greater profits, some large enterprises take advantage of market power to hinder survival of new entrants. Anti-competitive behavior can undermine the efficiency and fairness of the market, leaving consumers with little choice to obtain a reasonable quality of service.
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. For a period of time, the prices are set unrealistically low to ensure competitors are unable to effectively compete with the dominant firm without making substantial loss. The aim is to force existing or potential competitors within the industry to abandon the market so that the dominant firm may establish a stronger market position and create further barriers to entry. Once competition has been driven from the market, consumers are forced into a monopolistic market where the dominant firm can safely increase prices to recoup its losses.
In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market power occurs if a firm does not face a perfectly elastic demand curve and can set its price (P) above marginal cost (MC) without losing revenue. This indicates that the magnitude of market power is associated with the gap between P and MC at a firm's profit maximising level of output. The size of the gap, which encapsulates the firm's level of market dominance, is determined by the residual demand curve's form. A steeper reverse demand indicates higher earnings and more dominance in the market. Such propensities contradict perfectly competitive markets, where market participants have no market power, P = MC and firms earn zero economic profit. Market participants in perfectly competitive markets are consequently referred to as 'price takers', whereas market participants that exhibit market power are referred to as 'price makers' or 'price setters'.
Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes it easier to understand the characteristics of diverse markets.
A civil conspiracy is a form of conspiracy involving an agreement between two or more parties to deprive a third party of legal rights or deceive a third party to obtain an illegal objective. A form of collusion, a conspiracy may also refer to a group of people who make an agreement to form a partnership in which each member becomes the agent or partner of every other member and engage in planning or agreeing to commit some act. It is not necessary that the conspirators be involved in all stages of planning or be aware of all details. Any voluntary agreement and some overt act by one conspirator in furtherance of the plan are the main elements necessary to prove a conspiracy.
Supracompetitive pricing is pricing above what can be sustained in a competitive market. This may be indicative of a business that has a unique legal or competitive advantage or of anti-competitive behavior that has driven competition from the market.
In economics, competition is a scenario where different economic firms are in contention to obtain goods that are limited by varying the elements of the marketing mix: price, product, promotion and place. In classical economic thought, competition causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater the selection of a good is in the market, the lower prices for the products typically are, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).
In United States antitrust law, monopolization is illegal monopoly behavior. The main categories of prohibited behavior include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing. Monopolization is a federal crime under Section 2 of the Sherman Antitrust Act of 1890. It has a specific legal meaning, which is parallel to the "abuse" of a dominant position in EU competition law, under TFEU article 102. It is also illegal in Australia under the Competition and Consumer Act 2010 (CCA). Section 2 of the Sherman Act states that any person "who shall monopolize. .. any part of the trade or commerce among the several states, or with foreign nations shall be deemed guilty of a felony." Section 2 also forbids "attempts to monopolize" and "conspiracies to monopolize". Generally this means that corporations may not act in ways that have been identified as contrary to precedent cases.
Tacit collusion is a collusion between competitors who do not explicitly exchange information but achieve an agreement about coordination of conduct. There are two types of tacit collusion: concerted action and conscious parallelism. In a concerted action also known as concerted activity, competitors exchange some information without reaching any explicit agreement, while conscious parallelism implies no communication. In both types of tacit collusion, competitors agree to play a certain strategy without explicitly saying so. It is also called oligopolistic price coordination or tacit parallelism.
Hypercompetition, a term first coined in business strategy by Richard D’Aveni, describes a dynamic competitive world in which no action or advantage can be sustained for long. Hypercompetition is a key feature of the new global digital economy. Not only is there more competition, there is also tougher and smarter competition. It is a state in which the rate of change in the competitive rules of the game are in such flux that only the most adaptive, fleet, and nimble organizations will survive. Hypercompetitive markets are also characterized by a “quick-strike mentality” to disrupt, neutralize, or moot the competitive advantage of market leaders and important rivals.
In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. It is equal to total revenue minus total cost, including both explicit and implicit costs.
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), was a case in which the Supreme Court of the United States rejected the assertion that attempted monopolization may be proven merely by demonstration of unfair or predatory conduct. Instead, conduct of a single firm could be held to be unlawful attempted monopolization only when it actually monopolized or dangerously threatened to do so. Thus, the Court rejected the conclusion that injury to competition could be presumed to follow from certain conduct. The causal link must be demonstrated.
Weyerhaeuser Company v. Ross-Simmons Hardwood Lumber Company, 549 U.S. 312 (2007), was a United States Supreme Court case related to antitrust regulations.
Raising rivals' costs is a concept or theory in United States antitrust law describing a tactic or device to gain market share or exclude competitors. The origin of the concept has been attributed to Professors Aaron Director and Edward H. Levi of the University of Chicago Law School, who wrote briefly in 1956 that a firm with monopoly power can decide to impose additional costs on others in an industry for exclusionary purposes. They stated that such a tactic "might be valuable if the effect of it would be to impose greater costs on possible competitors."
ACCC v Cabcharge Australia Ltd is a 2010 decision of the Federal Court of Australia brought by the Australian Competition & Consumer Commission (ACCC) against Cabcharge. In June 2009, the ACCC began proceedings in the Federal Court against Cabcharge alleging that it had breached section 46 of the Commonwealth Trade Practices Act (TPA) by misusing its market power and entering into an agreement to substantially lessen competition. The action alleged predatory pricing by Cabcharge and centred on Cabcharge's conduct in refusing to deal with competing suppliers to allow Cabcharge payments to be processed through EFTPOS terminals provided by rival companies and supplying taxi meters and fare updates at below actual cost or at no cost.
