The Sherman Act
The per se illegality are violations that are against section 1 of the Sherman act. The violation covers conspiracies, trust or agreements of trade. In the per se illegality, further inquiries are not needed. However, for the MTL, further inquiries should be carried out to establish the validity of the violation. In the per se violation, competition is illegal. This rule can be applied when the crime proves to be antitrust in the face of Sherman’s Act.
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Under unreasonable restraints on trade as provided for by the Sherman Act, NATLA has to prove that the violation of location and non-affiliation restrictions by MTL is unreasonable enough to cause restraints to trade. By acting in that way, MTL has not caused any restriction to trade according to Sherman Act. They carry out their operations in other locations that are not operated on by the members of NATLA. The non-affiliation agreement of NATLA does not apply here since the agreement allows MTL to operate in other locations with a different name. Therefore, MTL can have a business enterprise under a different name.
To be considered a per se violation, the act should reduce the output of NATLA. Since MTL has opened new locations that are not within the perimeters of the NATLA there is no violation, and the illegality is null and void (Twomey, 1980). Another factor considered resulting in illegality is when the action of MTL has resulted in increased competition. Since there is no clear evidence from NATLA to justify increased competition, the suspension threat is unfair to MTL.
The rule of reason
The MTL Company is a registered company and also a member of NATLA, the company under the company’s Act can carry out business in its name and not only by the name of the company in which it is a member. NATLA is trying to establish a monopoly market in which it can control the market. This form of market control is not inherently illegal, but it reduces turnover. MTL in a view to increasing its operations can move to violate some of the rules and regulations since the initial agreement was not meant to create a monopoly. It is only tie-ins; otherwise, other types of horizontal Restraints of trade are illegal per se according to Sherman Act. The NATLA has no agreement that restricts its member from entering into an agreement with competitors. In the agreement for NATLA members, it postulates that members can carry on business elsewhere with a different name. This according to Sherman Act is not allowed hence NATLA has no valid agreement that is against the Act.
If NATLA suspends MTL from operations, then it will be acting contrary to the rule of reason by restricting trade. It is the interest of the public to access the leasing services from the company, since NATLA is trying to reduce the provision of such services through restriction on the business location and operations it is not reasonable at all under the rule reason. This is restraining trade/operations of leasing tractors. There are no established facts on restraining MTL to continue with its unique operations. The MTL is still operating on the agreement allowing it to establish other operations under a different name and in locations in which the NATLA has no business. In this case, under the rule of reason, it will be unreasonable to restrict operations of MTL.
In NATLA, no agreement is unreasonable. The rule of reason covers only practices that go against the public interest. The NATLA made agreements only on the location; their mandate does not include any price restrictions. MTL has not acted on any price alterations against the member organizations. Therefore, the Act is not considered per se illegal under the Sherman Act. There is no standard of reasonableness in implicating MTL when it finds new markets, which are not within the jurisdiction of NATLA. In making the agreements, MTL did not agree on price control. There is no selling price established or resale price in the agreement. The only location agreement is not reason enough to be considered per se illegal under this Act. The rule restrains vertical price-setting under the same organization. Since there is no violation of the Sherman Act, then there is no application of the rule of reason on this case of NATLA and MTL when MTL has violated the agreement.
Sherman Act, Section Two
Section two of the Sherman act spells out that any person or corporation found to engage in monopolistic practices is chargeable in court with a felony. It further outlines that it is unlawful for any group of corporations to conspire in an effort to monopolize the market. A charge of $ 10000000 for a corporation and $ 350000 for an individual is to apply upon conviction. Alternatively, the person may be imprisoned for a period not exceeding three years depending on the decision of the court.
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In the analysis to determine whether Dycos monopolized the market in its sale of orange 100, we look at the activities that the corporation engaged in while trying to promote orange 100. Having discovered that product A was less expensive than orange 100, Dycos decided to reduce the quality of their product so that they could reduce their selling price to the buyers. The majority of the buyers were orange growers. This was a move to try and control the market. Gaughan defines a monopolist act as one where a business firm tries to control the prices of goods and services rather than the forces of demand and supply (2009). Evidently, Dycos involved itself in monopolistic practices. Orange 100 was expensive but of higher quality in comparison to the other commodities.
Dycos can be described as monopolistic in their activities because they tried to be the leading suppliers of the goods they were handling. For instance, they wanted to be the leading supplier of orange 100 to orange growers as well as becoming the best sellers of the product as a dye for photograph manufacturing. The products X, Y and Z, are equally suitable for the coloring of the orange skins yet the corporation is seeking ways of convincing the orange growers that their product is the preferred one.
Furthermore, Dycos tries to gain market power, an attribute associated with monopoly. This involves manipulating the terms of trade. This is evident when the corporation tries to fix the cost of their products so that customers can be convinced that their products are the proper ones. When the corporation discovered that the sale of its product to the orange growers was subject to the prices of products X, Y and Z, the owners decided to seek ways of taking control of the market.
Moreover, Dycos tries to behave like an industry on its own, yet it is just a firm. This is evident when the firm tries to convince customers that its products are the correct ones. A monopolistic firm is one that changes the price to maximize sales without following the forces of demand and supply (Miron, 1990). Dycos discovers that its product will be less demanded on one side of the market while on-demand on the other side of the market. As a result, it looks for ways of making its products demand the most on either side of the market. The firm resorted to monopolistic tactics to achieve this.
Another fact that points to Dycos’ monopolistic nature are how it regulates the prices of its commodities. The firm had a tendency of changing the prices of its goods in an effort to attract customers. The company regulated prices depending on the elasticity of the market. In particular, when the market was more elastic, they decided to reduce the selling price of orange 100 to increase the sale of the product as a dye for photographic film processing. Also, when the market was inelastic, they decided to compare the selling price with the price of products X, Y and Z to increase the sale of orange 100.
Dycos is also observed to be dealing in goods that have no close substitutes. This provides them with the opportunity to influence the selling price of these goods irrespective of the qualities of the product. For instance, orange 100 is more superior to product A; hence it cannot be substituted for product A in the manufacture of Dye for photography. Furthermore, orange 100 competes favorably with products X, Y and Z as a coloring material for orange skins. Consequently, orange growers cannot substitute it for other coloring products.
Thus, according to Sherman case 2, the firm can be accused of engaging in a monopoly which the case recommends that any individual or organization involved in, should be fined at least $350000 or $ 10000000. Thus, it can be concluded that Dycos Company engaged in monopolistic business.
Comparison of analysis in case Dycos cost of production was less than those of X, Y and Z
In this case, a variety of techniques would be used to determine whether the company engaged in monopolistic activities or not. One of these techniques would be market power. In this case, the firm would have a lower market power compared to those firms dealing with products X, Y and Z. Here, it involves the elevation of a product’s price higher than the marginal cost. If Dycos allowed the natural market forces to determine the selling price of its products, then the organization is not monopolistic. This is because it is the forces of demand and supply that determine prices. On the contrary, if Dycos does not allow perfect competition to determine the selling prices of its goods and force its own selling price on the customers, then the firm is a price maker and not a price taker. Price makers are firms associated with monopolies. Hence the firm can be said to be monopolistic.
On the basis of price, in a perfectly competitive market, the price of a product is the same as its marginal cost whereas, in a monopolistic market, price is greater than the marginal cost. In case the marginal cost of production of orange 100 is considerably lower than the cost of producing products X, Y and Z. To determine whether the firm engaged itself in monopolistic activity, the market prices are to be compared with the marginal cost. As the expected market cost of orange 100 will be as low as its production cost whereas the market cost of products X, Y and Z, will be as high as their marginal costs. If the market price of orange 100 is greater than its marginal cost, then the corporation will prove to be monopolistic and is liable to charges in court.
The argument whether Dycos have monopoly powers in either case
In the first case, it is possible for Dycos to have monopoly powers because it deals with only one product, which is competing with other products, for the same customers. Furthermore, the market prices are the same. In the second case, however, it is not easy for Dycos to enjoy a monopoly in the marketing of orange 100 because its marketing prices will be lower than its marginal costs. Market prices of products X, Y and Z, will be higher than their marginal costs. Consequently, products X, Y and Z will enjoy monopoly instead of orange 100.
It would be difficult for orange 100 to gain a monopoly in its sale as a coloring agent for orange skins because it has equal competitors in the market. However, it will enjoy a monopoly in its sale as a dye product because it has a high-market price as well as high quality.
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