Key Terms
Free enterprise defined
A private and consensual system of production and distribution, conducted for profit in a competitive environment, relat
Addresses two main concerns
1. Unreasonable restraints on trade between two or more parties 2.
Monopoly power
Power of a business to fix prices unilaterally or to exclude competition.
Key concept
Substitutability (also called functional interchangeability). This asks: what goods or services are interchangeable in c
Why it matters
A broader product market = more competitors = smaller market share. A narrower product market = fewer competitors = larg
Third element of illegal monopoly
Intent to acquire and use monopoly power.
Intent is evaluated in context
Is there a change in law affecting the industry? An economic downturn?
Restraint on trade
Agreement between two or more businesses intended to eliminate competition, create a monopoly, artificially raise prices
Unreasonable restraint on trade
A restraint that produces a significant anticompetitive effect, violating antitrust laws.
Concerted action
Action planned, arranged, and agreed upon by parties acting together.
Horizontal agreements
Between direct competitors (same level).
Vertical agreements
Between businesses at different levels of the same distribution chain.
Price fixing
Artificial setting or maintaining of prices at a certain level, contrary to free market forces.
Horizontal price fixing
Among competitors at the same level (e.g., retailers across an industry agree on prices).
Vertical price fixing
Among businesses in the same distribution chain (e.g., manufacturer and retailer agreeing to control a product's resale