Difference between Section 1 and Section 2 of the Sherman Act
Section 1 of Sherman Act reads: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among several States, or with foreign nations, is declared to be illegal”.Section 2 of Sherman Act reads: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any person or persons, shall be deemed guilty of a felony”. Section 1 illegalizes trusts. A trust is defined as an organization that controls a wide range of companies in an industry. Formation of trusts is an anti-competitive business activity. Hence, it prevents normal business competition and this affects consumers. It addresses oligopolies through formation of trusts and collusion. Hence, it forbids contracts and conspiracy between potential competitors. These contracts include price-fixing contracts between potential competitors.Section 2 of Sherman Act on the other hand is against monopolization or misuse of monopoly power. Hence, business actions can be perceived as violating section 2 of Sherman law if they exhibit monopoly power or the intent to achieve monopoly power.
How Alcoa case represent a departure
The case represents a departure due to the fact that the final decision issued by the Supreme Court redefined a standard through which future courts were to evaluate claims of monopolization. The decision was written a Judge Learned Hand. The decision stressed on the need to maintain competition and incentives in order to innovate without punishing a superior and successful producer. The decision that was made by Judge Hand is used today since it provides language for defending monopolization claims. Moreover, the Alcoa case establishes a new standard by which monopolization is determined through the classic test.The court therefore declared and found out that Alcoa had violated section 2 of Sherman Act. This represents more like a final decision or departure. The final decision was based on the fact and belief on the undesirability of great industrial consolidations without regard to the economic results. Hence, the ruling of Alcoa case is an important departure from the rule of reason which dictates determination of actions in a way that ensures predatory and intent to violate section 2, monopolization.
Market power and its significance
Market power is a component of monopolization that may be defined as the ability to influence the price of a commodity. Market power plays a critical role in judicial setting with the support of market share. Market power is used to determine monopolization with respect to Alcoa standard. Market definition on the other hand is important since it is among the vital components of any given antitrust analysis such as analysis of Sherman Act.Courts make use of cross-price elasticity of demand during definition of relevant market for calculating market share. After, definition of relevant market, it becomes easier to determine market power. Sherman Act, section 2 focuses on monopolization, which can be demonstrated sufficiently by use of market power combined with a given exclusionary conduct. Examples of such conducts include leveraging, vertical restraints and refusal to deal.
Is this your assignment or some part of it?
We can do it for you! Click to Order!
