Question

Construction Corp, Inc. is a construction company that specializes in building large skyscrapers. Construction Corp acquires Sbeams, Inc., a company that manufactures steel beams. Construction Corp then directs Sbeams to cancel all of its contracts with all of Construction Corps competitors and to sell exclusively to Construction Corp. Sbeams had approximately 15 percent of the relevant market share for steel beams in Construction Corp's geographic area.

What is the best reason why Construction Corp's actions directing Sbeams not to sell to a competitor is not a violation of Section 1 of the Sherman Act?

Answer 1

The best reason Construction Corp's actions are not a violation of the Sherman Act is the single-entity doctrine, which applies when two companies become a single economic entity. As a result of the acquisition, Construction Corp and Sbeams are considered a single entity and not in competition with each other. Additionally, Sbeams' 15 percent market share is not enough to establish a dominant position or antitrust violation.

Step-by-step explanation:

The best reason why Construction Corp's actions directing Sbeams not to sell to a competitor is not a violation of Section 1 of the Sherman Act is because Construction Corp and Sbeams are considered a single entity after the acquisition. This is known as the single-entity doctrine. Under this doctrine, if two companies become a single economic entity, they are not considered competitors and therefore cannot violate Section 1 of the Sherman Act.

In this case, Construction Corp's acquisition of Sbeams makes them a single entity. As a result, directing Sbeams not to sell to Construction Corp's competitors is not a violation, as the two companies are now considered one and not in competition with each other. Furthermore, Sbeams only had a 15 percent market share, which is not enough to establish a dominant position or an antitrust violation.

It's important to note that the single-entity doctrine is subject to legal scrutiny and must meet specific criteria to be valid. However, based on the information provided, Construction Corp's actions appear to be within the bounds of the law.