What is antitrust law? correct answers a) A field of law used to create efficiency in economic markets
How does antitrust create efficiency? correct answers By promoting fair competition in business
(1) When there is fair competition in business, prices go down and quality goes up because in or...
SPM 4723 Exam 3 || Already Passed.
What is antitrust law? correct answers a) A field of law used to create efficiency in economic
markets
How does antitrust create efficiency? correct answers By promoting fair competition in business
(1) When there is fair competition in business, prices go down and quality goes up because in
order to stay profitable businesses have to have the best products at the lowest process
(2) Businesses are also forced to compete with each other to hire the best labor , which drives up
wages and benefits because workers will join the company that offers the most
Businesses—including sports entities—compete with each other for: correct answers i)
Customers and Market Share
ii) Cheaper/better access to supplies / resources
iii) The best/ cheapest employees
The Sherman Act of 1890 Section 1 correct answers Forbids contracts, combinations, or
conspiracies that unreasonably restrain competition (if more than one company is involved) -->
popular in sport
(1) Classic example: Price Fixing, where businesses work together to set the price of a particular
product, supply, or labor at an industry-wide cost
(2) This means that they do not compete with each other to have the lowest price product
offering or the highest offered price for the best supplies or labor
The Sherman Act of 1890 Section 2 correct answers Prohibits monopolization of trade and
commerce (one company involved). --> not often in sport
(1) What is a monopoly?
(a) Exclusive control of a supply or market
(b) "Mono" = "One," so a "monopoly means that one company owns everything in a particular
industry
(i) Very difficult to prove
1) Antitrust Enforcement correct answers Antitrust violations can be enforced by the
government, by the Federal Trade Commission (FTC) and/or the Antitrust Division of the
Department of Justice
i) Criminal penalties for antitrust violations for individuals can range from minor fines to up to
$1 million in fines and 10 years in prison
a) Antitrust violations can also be enforced in Civil Lawsuits
Per the Clayton Act of 1912 correct answers i) proven civil damages from antitrust violations are
automatically tripled to discourage antitrust violations and encourage antitrust lawsuits
Most antitrust issues in sport are enforced using _________ correct answers Section 1 of
Sherman Act
a) Why? Individual teams are generally considered to be "separate" entities
, Applying Antitrust Law: Section 1 Judicial Analysis correct answers a) Courts look at three
elements when determining whether a business practice is a Section 1 violation
i) An agreement between 2 or more parties
(1) If there is just one party acting, there's only an antitrust violation if there's a monopoly (very
hard to prove)
Antitrust Activity affects affects interstate commerce correct answers (1) Why? The Sherman act
is a federal law based on the Commerce Clause
(2) If not (and this is a very low bar), go to state law
ii) The activity unreasonably retrains trade
What tests do courts use to determine if a business activity unreasonably retrains trade? correct
answers 1) Test 1: Per se Test
2) Test 2: Rule of Reason Test
Test 1: Per se Test correct answers (1) Restraints of trade that are inherently (obviously)
unreasonably are immediately invalidated
(a) For example, price fixing agreements are inherently unreasonable
(b) This has become a very low bar for businesses to clear
Test 2: Rule of Reason Test correct answers (1) If the restraint is not inherently unreasonable, the
court must balance the activities harms vs benefits
(2) Balance harm to competition vs. benefit of restraint
(3) The Rule o Reason Test creates shifting burdens of proof so courts can balance benefits vs.
harms (per Law v. NCAA, 1998)
(a) Step 1: The plaintiff must show that the defendants' activity has a substantially adverse effect
on competition
(b) Step 2: The defendant must give evidence that the alleged wrongful activity has pro-
competitive virtues
(c) Step 3: The plaintiff must prove that the challenged conduct is not reasonably necessary to
achieve those virtues
Certain activity has been ruled by statute and by the courts to be exempt from antitrust scrutiny:
correct answers a) Actions in professional baseball
i) Federal Baseball v. National League
b) "Single entity" Organizations
c) Amateurism (maybe?)
d) Union Activity
i) Per the statutory labor Exemption
e) Collectively Bargained Employment Terms
i) Per the non-statutory labor Exemption
MLB's Antitrust Exemption correct answers i) Federal Baseball Club v. National League (1922):
Professional baseball is not interstate commerce; therefore the Sherman Act cannot apply
ii) Flood v. Kuhn (1972): Professional baseball is interstate commerce but "By positive inaction
[congress] clearly eviced a desire not to disapprove legislatively"
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