These competitive market laws include anti-trust, restraint of trade, price fixing and unfair competition…which is a lot of lawyer talk!
So as I am not an expert on law, I have some great examples to help me explain what these all mean…
ANTI-TRUST
While Milton Friedman (a Nobel Prize winning economist) might think that anti-trust laws do more harm than good, it is not to the agreement of the U.S. government. Anti-trust laws were established in order to promote and protect competition (Law Offices of William Markham).
The below brochure from the FTC gives a great history and explanation of Anti-Trust laws:
So basically, anti-trust laws protect the open/free market based upon two interests - Public Interest and Economic Interest. By ensuring that prices never get too low (or to high), the anti-trust laws help stabilize the economy.
According to the FTC, since the Sherman Act is a criminal law,
punishment can be severe, to include penalties of up to $100 million for a
corporation and $1 million for an individual, along with up to 10 years in
prison (Federal Trade Commission).
RESTRAINT OF TRADE
Section one of the Sherman Act provides that "[e]very
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 hereby declared to be illegal" (Legal Dictionary). Going further,
the Supreme Court rules that this only applies to unreasonable restraint of
trade, also known as the Rule of Reason, as determined in Standard Oil Co. of
New Jersey vs U.S. in which Standard Oli Co. essentially bought all oil refining
companies and was turning into a monopoly. The Court identified three such consequences: higher prices, reduced
output, and reduced quality (Wikipedia - Standard Oil Company of New Jersey vs U.S.).
In 2012, the U.S. Department of Justice hit Apple with an
anti-trust lawsuit for the conspiracy of price fixing e-book sales (Bosker, 2012). The claim
is that Apple was telling the five largest publishers that it would charge more
per e-book with the launch of its ipad than the e-books had been selling for
previously on other e-readers like Amazon’s Kindle, with Apple getting 30% of
the sales (Bosker, 2012). This meant that as a consumer, you were not able to get cheaper
prices for your ipad e-books. In this case, the Department of Justice is
defending the American people.
Here are some news clips describing it further:
Shorter version – 2 minutes
Longer version – 5 minutes
UNFAIR
COMPETITION
...is pretty much just what it sounds like. Unfair competition is compromised of torts
that cause an economic injury to a business through a deceptive or wrongful
business practice (Cornell Law). The first being a tort that is meant to
confuse consumers as to the source of the product, and the second being all
other forms of unfair trade practices (Cornell Law). Similarly to what we
learned about last week, unfair
competition can include trademark infringement and misappropriation. However,
unfair competition is separate from ant-trust or competition laws because it is not just about monopolies, but rather this is based upon individual cases, the action,
and the facts.
It is important for public relations professionals to understand these laws as their clients may be involved in one of these industries and/or violate some laws.
But, what about maneuvering markets??
And the plot thickens...
Maneuvering markets is not illegal, yet it seems like it should be…the Feds are
looking into it. But in the mean time, this is precisely what Goldman Sachs
does with its aluminum. In order to make the market more desirable, the corporation
has a constant flux of aluminum coming and going from one of their warehouses
to another of their warehouses down the street. This is just enough movement to
keep the aluminum difficult to track, making the prices go up.
Here
is an excerpt from New York Times article ‘A Shuffle of Aluminum, but to Banks,
Pure Gold’
“Before Goldman bought Metro
International three years ago, warehouse customers used to wait an average of
six weeks for their purchases to be located, retrieved by forklift and
delivered to factories. But now that Goldman owns the company, the wait has
grown more than tenfold — to more than 16 months, according to industry records.
Longer waits might be written off as
an aggravation, but they also make aluminum more expensive nearly everywhere in
the country because of the arcane formula used to determine the cost of the
metal on the spot market. The delays are so acute that Coca-Cola and many other
manufacturers avoid buying aluminum stored here. Nonetheless, they still pay
the higher price.” (Kocieniewski, 2013)
What
do you think of maneuvering markets? Does it fall under the competition laws
or should it be protected? As a consumer, do you feel that you are being duped?
References
Bosker, Bianca (2012). “Apple's Antitrust Lawsuit Might
Be A Big Deal For You -- But Not For Apple” Retrieved from http://www.huffingtonpost.com/2012/04/11/apple-antitrust-lawsuit_n_1418764.html
Cornell
University Law School: Unfair Competition. Retrieved from
http://www.law.cornell.edu/wex/unfair_competition%20
Federal
Trade Commission Guide to Antitrust Laws. Retrieved from http://www.ftc.gov/bc/antitrust/antitrust_laws.shtm
Federal
Trade Commission Fact Sheet – Antitrust Laws: A Brief History. Retrieved from http://www.ftc.gov/bcp/edu/microsites/youarehere/pages/pdf/FTC-Competition_Antitrust-Laws.pdf
Kocieniewski, David (2013). A Shuffle of
Aluminum, but to Banks, Pure Gold. Retrieved from http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html?_r=1&
Legal
Dictionary: Restraint of Trade. Retrieved from http://legal-dictionary.thefreedictionary.com/Price+Fixing%20
Markham,
William (2006). “Why Antitrust Laws Matter” Retrieved from http://www.markhamlawfirm.com/law-articles/why-antitrust-laws-matter/
Wikipedia: Standard
Oil Company of New Jersey vs. United States. Retrieved from http://en.wikipedia.org/wiki/Standard_Oil_Company_of_New_Jersey_v._United_States
The
United States Department of Justice: Antitrust Division. Retrieved from http://www.justice.gov/atr/about/antitrust-laws.html