Cross-8e: Case Problem with Sample Answer Chapter 27: Antitrust and Monopoly

277. Case Problem with Sample Answer In 1999, residents of the city of Madison, Wisconsin, became concerned that overconsumption of liquor seemed to be increasing near the campus of the University of WisconsinMadison (UW , leading to more frequent use of deto!ification facilities and calls for police services in the campus area" Under pressure from UW, #hich shared these concerns, the city initiated a ne# policy, imposing conditions on area taverns to discourage price reduction $specials% believed to encourage high&volume and dangerous drin'ing" In ())(, the city began to draft an ordinance to ban all drin' specials" *avern o#ners responded by announcing that they had $voluntarily% agreed to discontinue drin' specials on +riday and ,aturday nights after - ."M" *he city put its ordinance on hold" UW student /ic 0ichenseer and others filed a suit in a Wisconsin state court against the Madison&1ane 2ounty *avern 3eague, Inc" (an association of local tavern o#ners , and others, alleging violations of antitrust la#" 4n #hat might the plaintiffs base a claim for relief5 6re the defendants in this case e!empt from the antitrust la#s5 What should the court rule5 Why5 7Eichenseer v. Madison-Dane County Tavern League, Inc., ())8 WI6pp ((8, 9(: /"W"(d (9;, (())8 <

Sample Answer: *he plaintiffs might base their claim for relief (damages and an in=unction, for e!ample on an allegation that the taverns, in agreeing to eliminate drin' specials on +riday and ,aturday nights after ->)) ."M", violated antitrust prohibitions against $conspirac7ies< in

restraint of trade"% *he defendants might argue that they could not be held liable for anticompetitive conduct because their agreement #as in direct response to the city?s e!ercise of its regulatory authority over tavern operations" In other #ords, they could argue that they acted in response to a clearly articulated policy that #as actively supervised by the state (through the city " 6nticompetitive actions or agreements voluntarily underta'en by private entities can be e!empt from liability for violations of antitrust la#s if the private conduct is prompted or motivated by governmental regulatory authority" *he private parties are e!empt as long as the effective decision ma'er is the government" In this case, the city of Madison #as the effective decision ma'er" *he conduct here thus qualifies for an e!emption from the antitrust la#s, and the court should rule in the defendants@ favor"