Anti-Trust

From the enactment of the Sherman Anti-Trust Act of 1890 to the passage of the Clayton Anti-Trust Act in 1914, a set of laws has been established to safeguard the principles of competition. Under these laws, monopolies that arise from exceptional performance are protected, while those maintained by stifling competition are deemed illegal.

Principles from Wikipedia:

The Sherman Act consists of three sections. Section 1 identifies and prohibits specific forms of anti-competitive conduct, while Section 2 addresses the outcomes that result from anti-competitive practices. These sections work together to prevent businesses from violating the spirit of the Act while technically staying within the bounds of the law. Additionally, Section 3 extends the provisions of Section 1 to U.S. territories and the District of Columbia.

  • Section 1: "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 declared to be illegal."[12]

  • Section 2: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony [...]."[13]

The Clayton Act introduced substantive and procedural modifications to federal antitrust law. In terms of substance, the act aims to identify and prohibit specific types of conduct that are detrimental to a competitive market. The act proposed four sections that brought about substantive changes to antitrust laws, supplementing the Sherman Antitrust Act of 1890. These sections cover the following principles of economic trade and business:

  • Price discrimination refers to differentiation in pricing between different purchasers if such discrimination substantially diminishes competition or tends to create a monopoly (Act Section 2, codified at 15 U.S.C. § 13).

  • Sales on the condition that (A) the buyer or lessee refrains from dealing with the seller's competitors ("exclusive dealings"), or (B) the buyer also purchases another distinct product ("tying"), but only if these acts significantly lessen competition (Act Section 3, codified at 15 U.S.C. § 14).

  • Mergers and acquisitions that may substantially diminish competition (Act Section 7, codified at 15 U.S.C. § 18) or meet the threshold of voting securities and assets (Act Section 7a, codified at 15 U.S.C. § 18a).

  • Restricting any person from being a director of two or more competing corporations if such corporations would violate the antitrust criteria through merging (Act Section 8, codified at 15 U.S.C. § 19).

Impacts on the Repair Industry:

In relation to the repair industry, most antitrust actions involve violations of the Clayton Act, specifically tying agreements, exclusive dealings, and price discrimination.

Among these impacts, tying agreements are the most common. Original Equipment Manufacturers (OEMs) frequently structure their post-warranty support agreements in a way that necessitates the purchase of separate software support agreements, extended services, or post-warranty support agreements in order to use the purchased equipment. Although manufacturers skillfully word these requirements to conceal their intent, the underlying purpose remains evident.

OEMs also engage in "exclusive" dealings by refusing to sell parts, tools, diagnostics, and other resources to repair providers. It is clear that manufacturers widely practice discriminatory pricing by offering internal rebates and refunds to authorized buyers, even when the list price is ostensibly paid. 

U.S. Department of Justice Anti-Trust Division:

Antitrust laws can be employed to curtail the use of tying agreements in exclusive repair contracts. The U.S. Department of Justice (DOJ) is responsible for investigating cases where customers can demonstrate harm resulting from a monopoly. Competitors, such as independent repair companies, are not considered harmed due to the loss of business. In discussions with the DOJ regarding antitrust matters, it has been advised that since the issue is widespread and not specific to any one OEM, seeking a legislative solution is the recommended course of action. Consequently, our focus has been on legislation rather than litigation.

Litigation:

Equipment owners or repair companies have the option to pursue litigation against any manufacturer on the grounds of antitrust. However, this approach requires not only a strong case but also substantial financial resources and boundless patience. Many small repair businesses may have solid cases, but financial constraints and time limitations pose insurmountable obstacles. Antitrust litigation is a lengthy process that can span years and incur millions of dollars in costs.

Precedent cases involving antitrust, particularly concerning replacement parts availability, are scarce. Notable examples include Eastman Kodak Co. v. Image Technology Services, Inc. and Redlion Medical Safety et al's successful antitrust case against GE in November 2017. Additionally, Continuant/TLI won their antitrust case against AVAYA in March 2014, but AVAYA subsequently filed an appeal.