Anti-Trust

Between the Sherman Anti-Trust Act of 1890 and the 1914 passage of the Clayton Anti-Trust Act there is a body of law that protects the idea of competition.  Monopolies that are earned through excellence are not damaged – but those that are maintained by preventing competition are illegal under the law. 

Principles from Wikipedia:

“The Sherman Act is divided into three sections. Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anti-competitive in nature. Thus, these sections supplement each other in an effort to prevent businesses from violating the spirit of the Act, while technically remaining within the letter of the law. Section 3 simply 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 made both substantive and procedural modifications to federal antitrust law. Substantively, the act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct, not deemed in the best interest of a competitive market. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Antitrust Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business:

·       price discrimination between different purchasers if such a discrimination substantially lessens competition or tends to create a monopoly in any line of commerce (Act Section 2, codified at 15 U.S.C. § 13);

·       sales on the condition that (A) the buyer or lessee not deal with the competitors of the seller or lessor ("exclusive dealings") or (B) the buyer also purchase another different product ("tying") but only when these acts substantially lessen competition (Act Section 3, codified at 15 U.S.C. § 14);

·       mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at 15 U.S.C. § 18) or where the voting securities and assets threshold is met (Act Section 7a, codified at15 U.S.C. § 18a);

·       any person from being a director of two or more competing corporations, if those corporations would violate the anti-trust criteria by merging (Act Section 8; codified 1200 at 15 U.S.C. § 19).

 

Repair Impacts:  Most of the anti-trust actions related to repair have been Clayton Act violations of tying, exclusive dealings, and price discrimination.  

Of the 3 impacts, the most common is the tying agreement.  It is very common for OEMs to structure their post-warranty support agreements to require the buyer to separately acquire a software support agreement, extended services or post-warranty support agreement, in order to use their purchased equipment.  This is rarely presented so crudely – manufacturers are careful to parse their words to hide the intent – but the intent is there.

OEMs also commonly engage in “Exclusive” dealings when they refuse to sell parts, tools, diagnostics etc to repair providers.  It is also obvious that manufacturers widely discriminate in pricing in practice by offering internal rebates and refunds to authorized buyers even when the list price is supposedly paid.

US Department of Justice Anti-Trust Division:   Anti-trust law could clearly be used to restrain the use of tying agreements for exclusive repair contracts.  The US DOJ is set up to investigate cases where customers can document they have been harmed as the result of a monopoly.  Competitors, such as independent repair companies, are not considered having been harmed as the result by loss of business.   We have discussed anti-trust situations with the US DOJ and been advised that since the problem is widespread and not unique to any one OEM, we should seek a legislative solution.    We have therefore focused on legislation and not litigation. 

Litigation:  It remains possible for any equipment owner or repair company to litigate against any manufacturer on the basis of anti-trust.  This approach requires not only a great case, but enormous amounts of money and infinite patience.  Many small repair businesses have great cases, but money and time are impossible hurdles.   Anti-trust litigation takes years and costs millions.  

There are very few precedent cases since Eastman Kodak Co. v. Image Technology Services, Inc. over availability of replacement parts.  Redlion Medical Safety et al won their anti-trust case against GE in November of 2017.  Continuant/TLI won their anti-trust case against AVAYA in March of 2014, but AVAYA appealed and is now in bankruptcy.