Significance
The Sylvania case became the first shot in the court's march to the "Chicago School" version of antitrust economics as the touchstone of antitrust law. Attributed to the influence of Robert Bork, summarized in The Antitrust Paradox , and Richard Posner, explained in Antitrust Law (both published in 1978), these legal scholars popularized what Chicago economists had produced.
The initial ground was broken by economist George McGee, who reanalyzed the biggest antitrust ruling in history, the Supreme Court's split up of Standard Oil in 1911. McGee disputed Standard Oil's engagement in predatory pricing, the linchpin of its antitrust violations. McGee's view is now widely criticized, by lawyers Christopher Leslie, Elizabeth Granitz, Benjamin Klein, economists James Dalton, Louis Esposito, and historians Ron Chernow, Daniel Yergin. Bork and Posner wrote books that advised attorneys and courts that McGee's paper showed antitrust's foundation was uncertain. Other Chicago economists who influenced antitrust debates in ways that narrowed and limited its legal basis include Ronald Coase, Gary Becker, and George Stigler.
McGee was inspired to rethink antitrust law by his University of Chicago economics co-professor Aaron Director in the 1950s, according to Posner. Director was Milton Friedman's brother-in-law, and shared his agenda to move mainstream economics away from Keynesian macroeconomics and towards laissez-faire.
The case staked out the ground for cases like Broadcast Music v. Columbia Broadcasting System , State Oil Co. v. Khan , Verizon v. Trinko , and Leegin v. PSKS .
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author.
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote 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.
Robert Heron Bork was an American legal scholar who served as the solicitor general of the United States from 1973 until 1977. A professor by training, he was later acting U.S. attorney general and a judge on the U.S. Court of Appeals for the D.C. Circuit from 1982 to 1988. In 1987, President Ronald Reagan nominated Bork to the U.S. Supreme Court, but the Senate rejected his nomination after a contentious and highly publicized confirmation hearing.
Frank Hoover Easterbrook is an American lawyer and jurist who has served as a United States circuit judge of the U.S. Court of Appeals for the Seventh Circuit since 1985. He was the Seventh Circuit's chief judge from 2006 to 2013.
Douglas Howard Ginsburg is an American jurist and academic who serves as a senior judge on the United States Court of Appeals for the District of Columbia Circuit. He was appointed to that court in October 1986 by President Ronald Reagan, and served as its chief judge from 2001 until 2008. In October 1987, Reagan announced his intention to nominate Ginsburg as an associate justice of the United States Supreme Court, but withdrew his name from consideration before being formally nominated, after his earlier marijuana use created controversy.
The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal per se, other actions, such as possession of a monopoly, must be analyzed under the rule of reason and are only considered illegal when their effect is to unreasonablyrestrain trade. William Howard Taft, then Chief Judge of the Sixth Circuit Court of Appeals, first developed the doctrine in a ruling on Addyston Pipe and Steel Co. v. United States, which was affirmed in 1899 by the Supreme Court. The doctrine also played a major role in the 1911 Supreme Court case Standard Oil Company of New Jersey v. United States.
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law, anti-monopoly law, and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies is commonly known as trust busting.
Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices, at or above a price floor or at or below a price ceiling. If a reseller refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with it. Resale price maintenance is illegal in many jurisdictions.
Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1910), was a case in which the Supreme Court of the United States found Standard Oil Co. of New Jersey guilty of monopolizing the petroleum industry through a series of abusive and anticompetitive actions. The Court's remedy was to divide Standard Oil into several geographically separate and eventually competing firms.
Aaron Director was a Russian-born American economist and academic who played a central role in the development of law and economics and the Chicago school of economics. Director was a professor at the University of Chicago Law School, and together with his brother-in-law, Nobel laureate Milton Friedman, Director influenced some of the next generation of jurists, including Robert Bork, Richard Posner, Antonin Scalia and Chief Justice William Rehnquist.
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of Mitchel v Reynolds (1711) Lord Smith LC said,
it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion.
Vertical restraints are competition restrictions in agreements between firms or individuals at different levels of the production and distribution process. Vertical restraints are to be distinguished from so-called "horizontal restraints", which are found in agreements between horizontal competitors. Vertical restraints can take numerous forms, ranging from a requirement that dealers accept returns of a manufacturer's product, to resale price maintenance agreements setting the minimum or maximum price that dealers can charge for the manufacturer's product.
Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), is a US antitrust case in which the United States Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co.Dr Miles had ruled that vertical price restraints were illegal per se under Section 1 of the Sherman Antitrust Act. Leegin established that the legality of such restraints are to be judged based on the rule of reason.
The Antitrust Paradox is an influential 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993. Bork has credited Aaron Director as well as other economists from the University of Chicago as influences.
Competition law theory covers the strands of thought relating to competition law or antitrust policy.
State Oil Co. v. Khan, 522 U.S. 3 (1997), was a decision by the United States Supreme Court, which held that vertical maximum price fixing was not inherently unlawful, thereby overruling a previous Supreme Court decision, Albrecht v. Herald Co., 390 U.S. 145 (1968). However, the Court concluded that "[i]n overruling Albrecht, the Court does not hold that all vertical maximum price fixing is per se lawful, but simply that it should be evaluated under the rule of reason, which can effectively identify those situations in which it amounts to anticompetitive conduct."
Richard Allen Posner is an American legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chicago Law School, Posner is a leading figure in the field of law and economics, and was identified by The Journal of Legal Studies as the most-cited legal scholar of the 20th century. He is widely considered to be one of the most influential legal scholars in the United States.
A post-sale restraint, also termed a post-sale restriction, as those terms are used in United States patent law and antitrust law, is a limitation that operates after a sale of goods to a purchaser has occurred and purports to restrain, restrict, or limit the scope of the buyer's freedom to utilize, resell, or otherwise dispose of or take action regarding the sold goods. Such restraints have also been termed "equitable servitudes on chattels".
Rice v. Norman Williams Co., 458 U.S. 654 (1982), was a decision of the U.S. Supreme Court involving the preemption of state law by the Sherman Act. The Supreme Court held, in a 9–0 decision, that the Sherman Act did not invalidate a California law prohibiting the importing of spirits not authorized by the brand owner.
The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.
