Studying for Antitrust...

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turbotong
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Studying for Antitrust...

Postby turbotong » Mon Apr 29, 2013 9:56 pm

How do you study for an antitrust class? We learned so many overturned cases. Furthermore, there are few hard and fast rules.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 11:54 am

turbotong wrote:How do you study for an antitrust class? We learned so many overturned cases. Furthermore, there are few hard and fast rules.


For the most part, antitrust comes down to understanding the basics of the Sherman / Clayton acts and notable exceptions. The list below isn't comprehensive, but you should at minimum understand:

The basics of cartels
Who exactly can conspire (e.g. What the point of American Needle was)
Vertical and horizontal arrangements (tying, price fixing, territorial division, bid rigging)
Market share and what a relevant market is
The HHI formula / how to evalute potential mergers
The fact that only unreasonable restraints of trade are illegal
Predatory pricing / other monopolistic behavior
Exceptions for political advocacy (Noerr-Pennington)

When it comes down to it, antitrust law has a lot of gray areas, but that also means you have more room to run on an issue spotter.

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OneMoreLawHopeful
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Re: Studying for Antitrust...

Postby OneMoreLawHopeful » Wed May 01, 2013 2:07 pm

turbotong wrote:How do you study for an antitrust class? We learned so many overturned cases. Furthermore, there are few hard and fast rules.


The most important thing to understand is that, even when antitrust cases are overturned, usually the underlying reasoning is still important.

For example, Dr. Miles Medical was overturned by Leegin Creative Leather (and arguably earlier under the "to ensure retailer investment" theory), but this just means that vertical price restraints are no longer unlawful per se, not that they're universally legal. So the reasoning in Dr. Miles can still be used on an exam to argue why a subsequent vertical price restraint would be unlawful under the rule of reason, even if it's no longer per se illegal.

That's why you look at some many overturned cases: usually the underlying arguments can still be used under a subsequent rule of reason analysis.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 3:05 pm

OneMoreLawHopeful wrote:
turbotong wrote:How do you study for an antitrust class? We learned so many overturned cases. Furthermore, there are few hard and fast rules.


The most important thing to understand is that, even when antitrust cases are overturned, usually the underlying reasoning is still important.

For example, Dr. Miles Medical was overturned by Leegin Creative Leather (and arguably earlier under the "to ensure retailer investment" theory), but this just means that vertical price restraints are no longer unlawful per se, not that they're universally legal. So the reasoning in Dr. Miles can still be used on an exam to argue why a subsequent vertical price restraint would be unlawful under the rule of reason, even if it's no longer per se illegal.

That's why you look at some many overturned cases: usually the underlying arguments can still be used under a subsequent rule of reason analysis.


This also brings up something I forgot to mention in my original answer. Per se illegality is really uncommon these days. You basically need blatant price fixing on a criminal level to achieve that standard of review. So if you find yourself straying from the rule of reason on your exam outside of that really narrow circumstance, you might want to re-read the question.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Wed May 01, 2013 3:28 pm

This is relevant to me.

I've just been reading the E & E and I picked up an old outline. It's difficult to understand this class though because, to me at least, trying to figure out exactly what kind of behavior is being engaged in is tough.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 3:53 pm

gdane wrote:This is relevant to me.

I've just been reading the E & E and I picked up an old outline. It's difficult to understand this class though because, to me at least, trying to figure out exactly what kind of behavior is being engaged in is tough.


Do you men distinguishing between various types of conspiracies or distinguishing between per se illegality and rule of reason?

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gdane
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Re: Studying for Antitrust...

Postby gdane » Wed May 01, 2013 4:19 pm

hmlee wrote:
gdane wrote:This is relevant to me.

I've just been reading the E & E and I picked up an old outline. It's difficult to understand this class though because, to me at least, trying to figure out exactly what kind of behavior is being engaged in is tough.


Do you men distinguishing between various types of conspiracies or distinguishing between per se illegality and rule of reason?

All of this. I know the three main areas where Per Se applies, but it's a bitch to figure out when behavior falls into those categories. The case law is very scattered and contradictory, at least to me.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 4:40 pm

gdane wrote:
hmlee wrote:
gdane wrote:This is relevant to me.

I've just been reading the E & E and I picked up an old outline. It's difficult to understand this class though because, to me at least, trying to figure out exactly what kind of behavior is being engaged in is tough.


Do you men distinguishing between various types of conspiracies or distinguishing between per se illegality and rule of reason?

All of this. I know the three main areas where Per Se applies, but it's a bitch to figure out when behavior falls into those categories. The case law is very scattered and contradictory, at least to me.


Yeah, I could see that. I'll start by saying that, in the real world (I saw this personally working in the DOJ Antitrust division during law school) per se illegality is rare. It happens, but it has to be really obvious for the most part. There's really only two situations that you will run into this:

Horizontal price fixing (the recent 7th circuit decision on this falls into a special set of circumstances)
Bid rigging

On the other hand, tying, group boycotts, exclusive deal arrangements, and refusal to deal are almost always analyzed using the rule of reason these days. Tying and group boycotts are a little murky, but there is a general presumption in the courts in favor of the rule of reason in ambiguous cases.

Therefore, unless your issue spotter has the elements of horizontal price fixing or bid rigging in it, your default should be the rule of reason. If you aren't sure whether the conduct in question is horizontal price fixing or bid rigging, you should use the rule of reason while mentioning that if the conduct did constitute either of those schemes, it would be per se illegal.

Basically rule of reason all of the time.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Wed May 01, 2013 5:14 pm

Thanks for the help.

When analyzing under Rule of Reason do you just make the best argument that the behavior is "unreasonable" to competition? Seems really subjective.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 5:51 pm

gdane wrote:Thanks for the help.

When analyzing under Rule of Reason do you just make the best argument that the behavior is "unreasonable" to competition? Seems really subjective.


Usually, you look at the harms as balanced by the benefits, while taking into account the motivations of the parties that are engaging in the unreasonable conduct. So if I were trying to answer a question on it, my thought process for analysis would probably go something like:

0. Figure out if I'm dealing with a cartel situation or a monopolist situation

If cartel:

1. Identify the parties on either side... which includes questions of whether:

1a. Are the parties conspiring a corporation and its wholly owned subsidiaries? If so, there's no collusion (Copperwood)

1b. But be careful if the parties in the issue spotter are teams in a sports league, because that's not the same (American Needle)

1c. Are the cartel members related to each other horizontally or vertically?

1d. Is the party that's suing a direct or indirect purchaser? (Indirect purchasers have no standing to sue for antitrust damages as per Illinois Brick)

2. What type of action was taken?

2a. Did the conspirators agree to charge the same price, or agree to limit their output in order to raise the price? If so, you've got price fixing. If you determined that the conspirators are in a horizontal relationship to each other it's horizontal price fixing. If on the other hand it's a producer trying to set the price of a product for a retailer, that's vertical price fixing. If horizontal proceed to (3) for per se analysis. If vertical, proceed to (4) for rule of reason.

2b. Did a manufacturer make buyers have to purchase an additional product or a set of products to get one product, or bundle a separate product with a different product (like internet explorer with windows)? Then you've got tying. Proceed to (4) for rule of reason.

2c. Did the conspirators divide up sales territory based on geography? Territorial division proceed to (4) for rule of reason

2d. Did the conspirators agree to submit artificially high bids to allow a rotating member to win a contract during a bid process? You've got bid rigging. Proceed to (3) for per se analysis.

2e. Did the conspirators all get together and refuse to purchase from or sell to another entity? That's a group boycott. Proceed to (4) for rule of reason.

2f. Did a seller and a buyer agree to sell or buy only (or almost only) to each other? That's an exclusive dealing arrangement. Proceed to (4) for rule of reason.

3. Per Se analysis

Was there an actual injury to competition? I.e., did the price go up, or stay at a level when it should have gone down? That's bad. Illegal.

4. Rule of reason analysis

4a. Who was hurt? Consumers? Remember, the antitrust laws protect competition and not competitors (exception for things with monopolies, see below).

4b. Was there actually a negative effect? How much did the price go up? A lot? A little?

4c. Are there any benefits to the restriction? Are things more efficient? Easier to regulate? More predictable (like rules in a football game, for example - see Board of Regents)?

4d. Related to both 4b and 4c, what was the motivation behind the action? Was it to drive out current competitors? Prevent new ones from entering? Maintain existing divisions of customers so nobody went out of business? Or was it more innocuous like pooling money together for a joint venture in research and development?

4e. Balance 4b against 4c, while thinking about 4d. That's your answer. And yeah, it is really subjective.

If monopoly:

1. First figure out the market shares of the parties here. HHI is useful for this. This'll tell you if you have a monopoly already or are really close to getting one.

2. Did the party take an unreasonable action that was designed to acquire or maintain a monopoly? (Like predatory pricing). If so, it's bad and illegal.

There's probably some more stuff in the monopoly area I'm forgetting, but I didn't do a whole lot with that while working, and it's been a while since I actually took an antitrust class.

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traehekat
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Re: Studying for Antitrust...

Postby traehekat » Wed May 01, 2013 6:45 pm

E&E was solid, IMO. A lot of antitrust comes down to identifying the potentially anticompetitive conduct, determining how the court is going to analyze it (per se unreasonable or rule of reason?), and if you have determined it is not per se unreasonable, analyzing the potential economic benefits/harms of the conduct.

For me the difficult part was identifying what the hell is going on in the problem. There isn't much "law" to memorize in antitrust; rather, it is a bunch of reoccurring conduct that we categorize as either competitive or anticompetitive for one reason or another, and so you have to be able to recognize what category the conduct that appears on your exam most likely falls into and then work from there.

A good way of putting it, I think, is for most people this is not a class where you can just look at whatever the law is and apply it to a set of facts for the first time on a law exam like you can for criminal law or something - you learn a lot in antitrust by reading the facts of the cases and understanding the conduct. This is obviously because most of us understand without an example what manslaughter or murder is, but a lot of the time there is nothing particularly "illegal-looking" (at least on its face) about the conduct that occurs in antirust.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Wed May 01, 2013 7:57 pm

hmlee wrote:
gdane wrote:Thanks for the help.

When analyzing under Rule of Reason do you just make the best argument that the behavior is "unreasonable" to competition? Seems really subjective.


Usually, you look at the harms as balanced by the benefits, while taking into account the motivations of the parties that are engaging in the unreasonable conduct. So if I were trying to answer a question on it, my thought process for analysis would probably go something like:

0. Figure out if I'm dealing with a cartel situation or a monopolist situation

If cartel:

1. Identify the parties on either side... which includes questions of whether:

1a. Are the parties conspiring a corporation and its wholly owned subsidiaries? If so, there's no collusion (Copperwood)

1b. But be careful if the parties in the issue spotter are teams in a sports league, because that's not the same (American Needle)

1c. Are the cartel members related to each other horizontally or vertically?

1d. Is the party that's suing a direct or indirect purchaser? (Indirect purchasers have no standing to sue for antitrust damages as per Illinois Brick)

2. What type of action was taken?

2a. Did the conspirators agree to charge the same price, or agree to limit their output in order to raise the price? If so, you've got price fixing. If you determined that the conspirators are in a horizontal relationship to each other it's horizontal price fixing. If on the other hand it's a producer trying to set the price of a product for a retailer, that's vertical price fixing. If horizontal proceed to (3) for per se analysis. If vertical, proceed to (4) for rule of reason.

2b. Did a manufacturer make buyers have to purchase an additional product or a set of products to get one product, or bundle a separate product with a different product (like internet explorer with windows)? Then you've got tying. Proceed to (4) for rule of reason.

2c. Did the conspirators divide up sales territory based on geography? Territorial division proceed to (4) for rule of reason

2d. Did the conspirators agree to submit artificially high bids to allow a rotating member to win a contract during a bid process? You've got bid rigging. Proceed to (3) for per se analysis.

2e. Did the conspirators all get together and refuse to purchase from or sell to another entity? That's a group boycott. Proceed to (4) for rule of reason.

2f. Did a seller and a buyer agree to sell or buy only (or almost only) to each other? That's an exclusive dealing arrangement. Proceed to (4) for rule of reason.

3. Per Se analysis

Was there an actual injury to competition? I.e., did the price go up, or stay at a level when it should have gone down? That's bad. Illegal.

4. Rule of reason analysis

4a. Who was hurt? Consumers? Remember, the antitrust laws protect competition and not competitors (exception for things with monopolies, see below).

4b. Was there actually a negative effect? How much did the price go up? A lot? A little?

4c. Are there any benefits to the restriction? Are things more efficient? Easier to regulate? More predictable (like rules in a football game, for example - see Board of Regents)?

4d. Related to both 4b and 4c, what was the motivation behind the action? Was it to drive out current competitors? Prevent new ones from entering? Maintain existing divisions of customers so nobody went out of business? Or was it more innocuous like pooling money together for a joint venture in research and development?

4e. Balance 4b against 4c, while thinking about 4d. That's your answer. And yeah, it is really subjective.

If monopoly:

1. First figure out the market shares of the parties here. HHI is useful for this. This'll tell you if you have a monopoly already or are really close to getting one.

2. Did the party take an unreasonable action that was designed to acquire or maintain a monopoly? (Like predatory pricing). If so, it's bad and illegal.

There's probably some more stuff in the monopoly area I'm forgetting, but I didn't do a whole lot with that while working, and it's been a while since I actually took an antitrust class.

Wow!!! This is amazing. Thank you so much.

But, I'm confused. I thought territorial allocations among horizontal competitors is per se illegal per the BarBri case. Same thing with group boycotts. I'm thinking of the dc public defenders case.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Wed May 01, 2013 9:49 pm

gdane wrote:
hmlee wrote:
gdane wrote:Thanks for the help.

When analyzing under Rule of Reason do you just make the best argument that the behavior is "unreasonable" to competition? Seems really subjective.


Usually, you look at the harms as balanced by the benefits, while taking into account the motivations of the parties that are engaging in the unreasonable conduct. So if I were trying to answer a question on it, my thought process for analysis would probably go something like:

0. Figure out if I'm dealing with a cartel situation or a monopolist situation

If cartel:

1. Identify the parties on either side... which includes questions of whether:

1a. Are the parties conspiring a corporation and its wholly owned subsidiaries? If so, there's no collusion (Copperwood)

1b. But be careful if the parties in the issue spotter are teams in a sports league, because that's not the same (American Needle)

1c. Are the cartel members related to each other horizontally or vertically?

1d. Is the party that's suing a direct or indirect purchaser? (Indirect purchasers have no standing to sue for antitrust damages as per Illinois Brick)

2. What type of action was taken?

2a. Did the conspirators agree to charge the same price, or agree to limit their output in order to raise the price? If so, you've got price fixing. If you determined that the conspirators are in a horizontal relationship to each other it's horizontal price fixing. If on the other hand it's a producer trying to set the price of a product for a retailer, that's vertical price fixing. If horizontal proceed to (3) for per se analysis. If vertical, proceed to (4) for rule of reason.

2b. Did a manufacturer make buyers have to purchase an additional product or a set of products to get one product, or bundle a separate product with a different product (like internet explorer with windows)? Then you've got tying. Proceed to (4) for rule of reason.

2c. Did the conspirators divide up sales territory based on geography? Territorial division proceed to (4) for rule of reason

2d. Did the conspirators agree to submit artificially high bids to allow a rotating member to win a contract during a bid process? You've got bid rigging. Proceed to (3) for per se analysis.

2e. Did the conspirators all get together and refuse to purchase from or sell to another entity? That's a group boycott. Proceed to (4) for rule of reason.

2f. Did a seller and a buyer agree to sell or buy only (or almost only) to each other? That's an exclusive dealing arrangement. Proceed to (4) for rule of reason.

3. Per Se analysis

Was there an actual injury to competition? I.e., did the price go up, or stay at a level when it should have gone down? That's bad. Illegal.

4. Rule of reason analysis

4a. Who was hurt? Consumers? Remember, the antitrust laws protect competition and not competitors (exception for things with monopolies, see below).

4b. Was there actually a negative effect? How much did the price go up? A lot? A little?

4c. Are there any benefits to the restriction? Are things more efficient? Easier to regulate? More predictable (like rules in a football game, for example - see Board of Regents)?

4d. Related to both 4b and 4c, what was the motivation behind the action? Was it to drive out current competitors? Prevent new ones from entering? Maintain existing divisions of customers so nobody went out of business? Or was it more innocuous like pooling money together for a joint venture in research and development?

4e. Balance 4b against 4c, while thinking about 4d. That's your answer. And yeah, it is really subjective.

If monopoly:

1. First figure out the market shares of the parties here. HHI is useful for this. This'll tell you if you have a monopoly already or are really close to getting one.

2. Did the party take an unreasonable action that was designed to acquire or maintain a monopoly? (Like predatory pricing). If so, it's bad and illegal.

There's probably some more stuff in the monopoly area I'm forgetting, but I didn't do a whole lot with that while working, and it's been a while since I actually took an antitrust class.

Wow!!! This is amazing. Thank you so much.

But, I'm confused. I thought territorial allocations among horizontal competitors is per se illegal per the BarBri case. Same thing with group boycotts. I'm thinking of the dc public defenders case.


You're correct re: market division. Not sure what I was thinking of on that one. As far as group boycotts, though, it's not as clean cut. This is from the FTC:

"The Court then held that, absent market power or "unique access to a business element necessary for effective competition," expulsion from a buying cooperative is appropriately analyzed under the rule of reason. Subsequently, in SCTLA, 493 U.S. at 432-36, the Court clarified that group boycotts used to implement price-fixing conspiracies may be condemned without a market-power inquiry. Recent applications of the per se rule to group boycotts have tended to involve either boycotts of suppliers or customers directed toward discouraging dealings with the boycotters' competitor or boycotts utilized to implement per se unlawful price fixing or market divisions."

So group boycotts are sometimes under per se analysis and sometimes under rule of reason. For that one you really just have to make a call on how bad the conduct seems to be. Or you might want to just default to talking about the murkiness in your answer.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Wed May 01, 2013 9:59 pm

Ok cool. That clarified things a bit. Thanks.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Thu May 02, 2013 5:05 pm

I'm terrified of this exam. The worst thing is that I have very little to practice with.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Fri May 03, 2013 11:48 am

You shouldn't be. I might be in the minority, but one of the reasons I liked antitrust was because it was very hard to be wrong. With only a few exceptions, the murkiness in antitrust law means that if you can make a well written argument with some support for how a court would treat a particular situation, you'll probably get credit for it. I also think that antitrust exams have really interesting hypos, but I'm an antitrust nerd so.

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gdane
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Re: Studying for Antitrust...

Postby gdane » Fri May 03, 2013 12:48 pm

hmlee wrote:You shouldn't be. I might be in the minority, but one of the reasons I liked antitrust was because it was very hard to be wrong. With only a few exceptions, the murkiness in antitrust law means that if you can make a well written argument with some support for how a court would treat a particular situation, you'll probably get credit for it. I also think that antitrust exams have really interesting hypos, but I'm an antitrust nerd so.

Would you happen to remember anything about interdependent oligolpolies? I'm not really wrapping my head around what they are, how to spot one on an exam, and what to do once I've spotted one.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Sat May 04, 2013 5:32 pm

Oligopolies are tough. Fortunately they aren't all that common. In terms of spotting them, the giveaway is a scenario with between 2-10ish firms in a market that all have roughly equal market shares. So you could have five firms with two firms having a 25% share, two having 20% share, and one having a 10% share. Or all could have close to 20% shares. This is opposed to a market with not a whole lot of firms and a monopolist, where one firm has like a 70% market share and 6 other firms have 5% shares.

When you're dealing with oligopolies, a lot of time the problem is the tendency for the firms to collude - price fixing and market allocation schemes being the most common. I did once see an odd hypo that had two firms in a small market colluding to become monopolists, which threw me for a loop. Hopefully you don't get one like that.

Edit: I should also add that a lot of the time, what professors seem to test on if they throw an oligopoly situation at you is whether ou can distinguish collusion from parellel action in a market where the firms are interdependent. In an oligopoly, the firms have to pay attention to what their competitors are doing, and if one firm changes its output or raises/lowers its price, the other firms usually have to respond. But, just because they do so doesn't mean the firms have colluded. In terms of distinguishing, you have to just ask yourself if the facts of the hypo are fishy in a way that might suggest the firms are conspiring and not just responding to one another's actions...

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gdane
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Re: Studying for Antitrust...

Postby gdane » Sun May 05, 2013 5:26 pm

Wow. Thank you so much for your help. I feel a little better after your above step by step guide and your other explanations.

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hmlee
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Re: Studying for Antitrust...

Postby hmlee » Mon May 06, 2013 3:16 pm

gdane wrote:Wow. Thank you so much for your help. I feel a little better after your above step by step guide and your other explanations.


No problem! Hope you do well. :)




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