Section 1 Violations
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7 "Section 1" - 15 U.S.C. § 1 - This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that entities establish prices and other terms on their own, without agreeing with a competitor. Thus, consumer prices are determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices for consumers. Accordingly, price fixing is a major concern of government antitrust enforcement as well as private antitrust enforcers.
A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification.
Price fixing relates not only to prices, but also to other terms that affect prices to consumers, such as shipping fees, warranties, discount programs, or financing rates. Antitrust scrutiny may occur when competitors discuss the following topics:
- Present or future prices
- Pricing policies
- Terms or conditions of sale, including credit terms
- Identity of customers
- Allocation of customers or sales areas
- Production quotas
- R&D plans
A defendant is allowed to argue that there was no agreement, but if the government or a private party proves a plain per se price-fixing agreement, there is no defense to it. Defendants may not justify their behavior by arguing that the prices were reasonable to consumers, were necessary to avoid cut-throat competition, or stimulated competition.
Market Division or Customer Allocation
Agreements among competitors to divide sales territories or assign customers amongst themselves are also almost always per se illegal. These arrangements are essentially agreements not to compete: "I won't sell in your market if you don't sell in mine" or “I won’t sell to your customer if you don’t sell to mine.” Illegal market sharing in violation of the antitrust laws may involve allocating a specific percentage of available business to each producer, dividing sales territories on a geographic basis, or assigning certain customers to each seller.
Private parties can and do bring suits to enforce the antitrust laws. In fact, most antitrust suits are brought by businesses and individuals seeking damages for violations of the Sherman or Clayton Act. Private parties can also seek court orders preventing anticompetitive conduct (injunctive relief) or bring suits under certain state antitrust laws.
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