Bid-Rigging: A form of price-fixing where firms conspire to submit pre-determined bids to a governmental entity or other purchaser that utilizes a competitive bidding process to award contracts. Bid-rigging usually results in higher than competitive prices being paid for goods or services because it eliminates or reduces competition. See “Price-Fixing” below.
Clayton Act: A federal antitrust statute passed in 1914 as a supplement to the Sherman Act. The Clayton Act is aimed at specific forms of anticompetitive conduct. For example, Section 3 of the Clayton Act prohibits tying (see “Tying” below) and exclusive dealing arrangements. Section 7 of the Act prohibits potentially anticompetitive mergers and acquisitions.
Collusion: Concerted activity; conspiracy. In the antitrust context, collusion is the action of two or more competitors working together to modify or agree on certain terms of doing business. It is usually for the purpose of affecting terms such as price, quality, territories and the like.
Group Boycott: An agreement among two or more competitors to refuse to deal with another firm, or to coax others not to deal with another firm, in order to discipline, influence or even destroy the target firm. The target firm may be a supplier, customer or competitor of the conspirators. Group boycotts are illegal under Section 1 of the Sherman Act, as well as under the Valentine Act, although they are not always per se violations. (Per se violations are those which are deemed to be so harmful to healthy competition as to be illegal regardless of a defendant’s excuses or justifications.)
Market Share: The percentage or portion of a given market accounted for by any one seller. For example, let’s say that there are three companies in Columbus, Ohio that sell bungee jumping equipment and supplies – Bungees ‘R Us, Bungee-A-Rama and Bungee World. Out of total annual industry-wide sales in Columbus of $1 million last year, Bungees ‘R Us accounted for $250,000, Bungee-A-Rama accounted for $400,000 and Bungee World accounted for the remaining $350,000. Using this information, we can see that Bungees ‘R Us has a 25% market share ($250,000/$1,000,000), Bungee-A-Rama has a 40% market share and Bungee World has a 35% market share. High market share is a strong indicator of market power, an important factor in antitrust cases.
Monopoly or Monopolization: Actions by a monopolist (a firm that is the only, or virtually the only, seller of a good or service in the market) which are taken for the purpose of becoming a monopolist or maintaining its monopoly position. Monopolization is more than just growth through skill, innovation or hard work – it requires the intent to obtain or and maintain monopoly power to exclude competitors.
Price-Fixing: A conspiracy among two or more sellers of a good or service to set (and usually raise) the prices of their products. An agreement among competitors to set prices at a particular level is per se illegal under Section 1 of the Sherman Act. Ohio courts have also found price fixing activities to be per se violations of the Valentine Act.
Sherman Act: The first of the federal antitrust statutes. Passed in 1890, the Sherman Act declares, at §1 that: “Every 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….” “Trust” was a common word in that era for the concept of concentrations of power – thus giving rise to the term “antitrust.” Section 2 of the Sherman act makes it unlawful to monopolize, attempt to monopolize or conspire to monopolize. The Sherman Act can be found at 15 U.S.C. §§1-7.
Tying: An arrangement whereby the seller of some product or service requires, as a condition to the sale of that product (the tying product), that the buyer purchase some additional product (the tied product). The tying arrangement is unlawful when the seller has some power over the market for the tying product. Tying arrangements are generally per se illegal, assuming that the selling firm has the market power to force the arrangement upon its customers.
Market Allocation: Market Allocation is when competitors agree to divide up a market between competitors and not compete in those areas. The markets can be divided up in a variety of ways, including
- By geographic area: Company A agrees to take customers in the northern part of the state, and Company B takes customers in the southern part;
- By customer type: Company A will only bid on food contracts for colleges, and Company B will only bid on food contracts for primary and secondary public school systems; or
- By product: Company A will only bid on toner, and Company B will on bid on copier paper.
Valentine Act: Ohio’s antitrust law, found at Ohio Revised Code §§1331.01-1331.99. The Valentine Act is now over a century old and while similar in some respects to the federal Sherman Act, it is in many ways different and stronger than the Sherman Act.