Reference no: EM131660988

Question: Business managers need to be aware of how antitrust legislation may affect their activities. In addition to the federal antitrust laws covered in this chapter, the states also have antitrust and unfair competition laws. Moreover, state authorities have the power to bring civil lawsuits to enforce federal antitrust laws. Additionally, antitrust law is subject to various interpretations by the courts. Unless a businessperson exercises caution, a court may decide that his or her actions are in violation of a federal or state statute. Pricing Issues Almost all businesses have competitors and want to outsell those competitors. The pricing of a business's goods or services is extremely important not only for its volume of sales, but also for its bottom-line profit. When setting or changing a price, businesses frequently hire a cost accountant to perform an analysis. This is only a start because a firm must also consider the price of a competitor's similar or identical products. Most businesses do not want a "price war" with rapidly declining prices. Thus, it is not uncommon for a business to charge basically the same price as its competitors. A problem arises when there is an agreement (express or implied) to fix the price. This is a per se violation of Section 1 of the Sherman Act and can result in criminal or civil actions (including treble damages). Knowing the price a competitor charges-and meeting that price-is not a violation in and of itself.

Frequently, its legality depends on how the information was obtained. Violations occur when there is a communication (regardless of purpose) between a business owner (or employee) and a direct competitor. If concerned that a communication may cause antitrust pricing problems, businesspersons should consult with an attorney who can explain what is legal when dealing with competitors. Another problem in pricing can occur when a business wants to have some control over the price that its retailers charge when selling its product to customers. Historically, resale price maintenance agreements were automatically deemed illegal as vertical restraints of trade. Today, the courts use the rule of reason to test for illegality. There are a variety of legitimate reasons for price maintenance agreements, including product image and resale value. For example, a BMW automobile has both a price and a value image, and to sell it at a Hyundai price could seriously damage BMW's image. Implications of Foreign Law Antitrust issues are not limited to domestic businesses doing business in the United States. Because of today's global economy, many companies conduct business in other nations and with foreign businesses. Antitrust laws in other countries differ from U.S. law and can apply to a U.S. firm that has dealings with businesses located in a foreign nation even though the firm does not have a physical presence there. Always be aware of the antitrust laws of any country in which you are doing business. Generally, any businessperson who is considering doing business overseas should seek counsel from a competent attorney concerning potential antitrust violations.

CHECKLIST FOR AVOIDING ANTITRUST PROBLEMS

1 Exercise caution when communicating and dealing with competitors.

2 Seek the advice of an attorney specializing in antitrust law to ensure that your business practices and agreements do not violate antitrust laws.

3 If you conduct business ventures in other nations, obtain the advice of an attorney who is familiar with the antitrust laws of those nations.