Exemptions

  • The main “goal” of all antitrust legislation is to protect consumer welfare
  • Thus, there are some notable exemptions to antitrust laws
    • Labor
    • Agricultural Co-ops
    • Regulated Industries
    • Patents

Labor

  • Labor unions act as trusts by collectively striking, demanding higher wages, etc.
    • Section 6 of the Clayton Act declares “the labor of a human being is not a commodity or article of commerce”
  • However, labor unions’ powers are not absolute
    • If the union deviates from the interest of its members and attempts to drive a specific company out of business, the union may be prosecuted by antitrust laws

Labor but not firms

Firms that engage in anticompetitive practices in the labor market may be subject to antitrust laws

  • No solicitation agreements
    • US v Adobe et al (2010): civil class action lawsuit against several Silicon Valley Companies for alleged “no cold call” agreements, which the plaintiffs allegged lead to the tech companies restraining the recruitment of each other’s employees
  • Non-compete agreements
    • Jimmy John’s employment agreements used to include a “non-competition” clause, which requires workers to not work at one of the sandwich chain’s competitors for a period of two years following employment
    • There’s evidence these types of agreements suppress wages of low-wage workers

Agricultural Co-ops

Agricultural co-ops are groups of farmers who collectively agree to set the same price for their perishable goods

  • The Clayton Act exempts co-ops
  • Co-ops are NOT allowed to collude with other co-ops
  • The Secretary of Agriculture oversees co-ops to ensure the prices are not set too high

Regulated Industries

  • Some industries give rise to natural monopolies
    • If the industry is more efficient as a natural monopoly, enforcing antitrust laws does not increase welfare
  • Hence, these monopolies are allowed to exist and are regulated by the government
    • Examples include telecommunications, utilities, and transportation

Patents

As we learned in previous lectures, a patent is a legal claim to be the sole seller of a new, innovative product for 20 years

  • Patents are awarded to firms to encourage innovation, allowing the firm to have a 20 year monopoly in order to recoup the (substantial) cost of research and development (R&D)