...Antitrust Practices and Market Power Antitrust Practices and Market Power Content Introduction…………………………………………………………………………..Page 2 Case for Antitrust Behavior……………………………….……….…..…………….Page 2 Antitrust and Market Power…………..……………………………………………...Page 3 Benefit of Monopoly………………………………………………………….……...Page 4 Conclusion……………………………………………………………………….......Page 4 References………………………………………………………………………........Page 5 Antitrust Practices and Market Power Introduction First of all, what is antitrust? It was first introduced and advanced by the neoclassical economists. We also call the antitrust law as the "competition laws". The main purpose of developing the antitrust law is to ensure fair competition in an open market economy, thus protect the consumers and maximize social welfare. Case for Antitrust Behavior I consider the case of Microsoft as the perfect antitrust law case of the antitrust police. On May 18 1998, United States of Department of Justice initiated the lawsuit towards Microsoft Corporation. Microsoft was accused of becoming a monopoly and engaging in abusive practices contrary to the Sherman Antitrust Act 1890 sections 1 and 2. The accuser alleged that Microsoft was being monopolistic because its product Windows requires bundling IE, Intel, and MSO which are all it’s own products. In other words, people that wants to use Microsoft Windows has to buy all the sub-products in order to make the whole system run normally. The settle...
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...Antitrust law is the law of competition, and it is perhaps the least understood law of all. This article provides an overview and explanation of the essential principals of antitrust law, along with comments on certain recurring themes and recent developments in the voluminous case law by which the courts have struggled to give meaning and practical effect to the principal antitrust statutes. What Is Antitrust Law? Broadly speaking, antitrust laws seek to promote fair competition on the merits and to protect consumers and wronged competitor businesses from anti-competitive business practices — practices undertaken in effort to undermine competitive commercial behavior in a given market or line of commerce. The antitrust laws therefore forbid the wrongful acquisition or preservation of monopoly power, the abuse of monopoly power in order to establish a new monopoly, and concerted restraints of trade (i.e., business practices undertaken by two or more firms that improperly stifle or suppress “competition on the merits” in a given market). They also govern proposed mergers and acquisitions that are sufficiently large to constitute a threat to competition, and they address commercial practices that pose an arguable danger to competition on the merits in a properly defined antitrust market. The Principal Antitrust Offenses. Antitrust law is the law of competition. It is concerned with wrongs committed against competition on the merits in a given line of commerce or market. It is...
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...Abstract Antitrust laws were put in place to make sure markets are free and open, which is the foundation of a vibrant economy (ftc.gov). The benefits of these laws are mainly for the consumer, and they infuse competition in any market space, which ultimately leads to good prices and high quality products and services. To better assert the fact that Antitrust Laws have in fact been enforced for the protection and benefit of the consumer, one must look at actual cases in which organizations have been investigated for violation of Antitrust Laws. In the following paper, I’ll be focusing on Apple’s antitrust investigation. Additionally, we’ll identify some costs associated with the antitrust behavior, and why Apple was investigated? To conclude, we’ll then shift our focus to weighing out whether or not monopolies and oligopolies benefit society, with at least looking at one study where they did benefit. Apple Gets Investigated and Charged Apple, which has an oligopoly market structure because of their number of competitors, pricing similarities and dependencies with other vendors, was hit with a huge fine for antitrust violations (in the 840 million range). Apple was investigated for helping facilitate a price hike in the e-book market space by colluding with major publishers. The U.S. Department of Justice said this conspiracy was designed to undercut online retailer, Amazon.com Inc’s dominance of the fast-growing e-book market (Reuters, 2013). However, what really drew attention...
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...Antitrust Practices and Market Power | DeVry University | Eva Wise | Antitrust Policy consists of laws and government actions designed to prevent monopoly and promote competition. On June 23, 2011, the U.S. Federal Trade Commission initiated an antitrust probe into Google, the world’s largest search engine. FTC’s investigation entailed a broad probe into Google’s business practices and weather it was abusing its search power to drive traffic to its own properties over rival sites and services. After a nearly twenty month high-profile investigation, the federal government announced on January 3, 2013, that its dropping an “exhaustive” probe into Google as it found no evidence the company was abusing its search power. Google was investigated under violating the Sherman antitrust act. “The definitive antitrust statute, passed by Congress in 1890, that prohibits monopolies or unreasonable combinations of companies to restrict or in any way control interstate commerce. Specifically outlawed is two or more persons engaging in monopolistic practices, such as price fixing, although it does not outlaw price-fixing per se. It was amended in 1914 by the Clayton Act, which outlaws interlocking directorates and deals with acquisitions that aim to restrain or eliminate competition. (Your Dictionary Law)” “For example, one element of a duty-to-deal claim under the Sherman Act is proving that Google’s treatment of rival websites harms consumers; even the cleverest economist would be...
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...Antitrust Investigation Marissa Percoco Economics 312 Professor Allen Chamberlain College of Nursing 03-21-15 Antitrust Investigation An antitrust Investigation is intended to stop a large firm from over taking their competitors, eliminate price fixing which is the conspiracy of two or more firms to set the price of a specific practice, (McConnell, Brue, & Flynn, 2012) or interfering with free competition (Antitrust investigation meaning, Retrieved March 22, 2015, from http://dictionary.reverso.net/english-cobuild/antitrust investigation). Although these practices do not happen on a regular basis they do exist. One antitrust case would be the Google antitrust probe that started in 2011. This antitrust investigation was basically started because Google is the dominant navigator and king-maker of the internet. The Federal Trade Commission are the ones who bought Google up on these charges but Googles competitors are happy about the decision. Google dominates the search inquiries by 65% and search dollars by 75.2% this is showing the pecuniary portion associated with the antitrust behavior (Lee, 2011). Google has more than half of the market share associated with search dollars and inquires. Google controls the market for a variety of things like the housing market, map market and the travel market (Lee, 2011). This in turn makes a problem for any other company in the business. Google was investigated under more than one act. Sherman act was one which is an antitrust...
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...1. Why was/were the firm(s) investigated for antitrust behavior? The Justice Department and the states believe that Microsoft has used its monopoly in operating system software to protect its dominance and eliminate competitors. The government says that in the long run, consumers will be harmed, because there will be less competition and fewer choices. More specifically, the government contends that Microsoft has engaged in actions to preserve its Windows monopoly that violate antitrust laws. The government also maintains that the company has used the power of its Windows monopoly to attempt to monopolize the market for Internet browsing software. In addition, government lawyers allege that the company has committed other anti-competitive acts. Microsoft contends that it is simply trying to innovate its products. The company contends that its actions are legal and says that there's no grounds of consumer indignation over the practices that the government is targeting. If the government wins at the trial court, it has already specified that it wants Microsoft to cancel contracts deemed exclusionary. In addition, the government wants Microsoft either to strip out its Internet browsing technology from Windows 98 or to include a rival browser made by Netscape Communications Corp. The plaintiffs alleged that Microsoft abused monopoly power on Intel-based personal computers in its handling of operating system sales and web browser sales. The issue central to the case was whether...
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...Antitrust , Monopoly and Oligopoly Introduction Prior to the United States Civil War the market was limited. After the war the market opened up into a more competitive market due to increased transportation and production abilities. Some large companies emerged leading to a monopoly market structure in which “one firm is the sole seller of a product or service” (McConnell, Brue, Flynn, 2012, p.164). When a monopoly market exists, companies have control over several key factors such as price, production, and distribution. A monopoly market creates high and difficult barriers for entry, preventing other companies from entering the market. Monopolistic companies “tend to produce less output and charge higher prices” (McConnell, Brue, Flynn, 2012, p. 375). To keep the market in competition, the United States government developed Antitrust Laws. What this law provide is a means of prevention of “monopolization, promote competition, and achieve allocated efficiency” (McConnell, Brue, Flynn, 2012, p.375). These Antitrust Laws are still being exercised today and one such example is Dean Foods. Antitrust The United States has Antitrust Division (DOJ) that monitors companies. In 2010, the DOJ brought suit against Dean Foods Company for violation of antitrust laws. Dean Food Company was in the process of acquiring Consumer Product Division of Foremost Farms USA. The suit alleged that this was a violation of the Clayton Act, an act that “sought to outlaw techniques that firms...
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...Introduction …………………………………………………………..page 1 Microsoft Antitrust Investigation……………………………………..page 2 Market Structures……………………………………………………..page 3-4 Disadvantages of Monopoly Market………………………………….page 4 Advantages of Monopoly Market…………………………………….page 4-5 Conclusion…………………………………………………………….page 5 References…………………………………………………………….page 6 Introduction The purpose of this paper is to identify an antitrust investigation for a firm, to discuss the reason for the investigation, and the impact its impact on the firm. The paper also identifies the practices and power of monopoly and oligopoly market structures. It also discusses the advantages and disadvantages of monopoly market. Microsoft Antitrust Investigation According to CNN Money News, the European Union found Microsoft guilty of breaching a 5 years commitment to providing EU customers a choice of browser (Thompson, 2013). This verdict came after an antitrust investigation of the company. Antitrust law is one that was put into place to help foster competition in market and to prevent large companies from breaching these agreements. In the case of Microsoft, the EU utilized the Clayton Antitrust Act of 1914. McConnell and Campbell (2012), describe this Act as one that outlaws techniques that firms use to develop monopoly power. The EU ruled that Microsoft’s behavior did give customers a choice thereby decreasing competition. Microsoft like Google operates under a monopoly market system meaning that they have increase market...
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...I have chosen to write on antitrust laws. Antitrust laws enable a free market to thrive and flourish without the fear of monopolization. Monopolization in itself isn’t a bad thing. There are naturally occurring monopolies like public utilities and when a firm is the only producer of a particular good or service. This single firm or company because the scale of economies is so large that they can supply the entire market at a lower cost than any other competing firm could. Monopolies become a problem when a firm or corporation is the only producer selling a particular good or service, this monopoly wills tend to produce fewer products at a high price. This meanwhile is not productive of a free market. The antitrust laws that are in place today came about from the Sherman Act of 1890. This act was created when the public grew resentfully of the trusts that emerged in the 1870’s and 1880’s. The Sherman Act states that “Every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among several states, or with foreign nations is declared to be illegal.” This surprising short sentence is the cornerstone for our antitrust laws today. The Sherman Act basically outlawed restraints of trade, meaning anything that would restrain the flow of free trade. This gave a firm foundation for new and current business to enter into the market place; there would be no fear that they would be pushed out of the market either by price-fixing or collusion...
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...Who Enforces the Antitrust Laws? The antitrust laws are enforced by both public and private parties. A. Government Enforcement The United States Department of Justice Antitrust Division (“DOJ”) and the Federal Trade Commission (“FTC”) share responsibility for investigation and litigation of cases under the Sherman Act; and, review potentially anticompetitive mergers under the Clayton Act. There is not a formal system by which the DOJ and the FTC divide enforcement responsibilities, the agencies devote resources to particular industries where they have investigated or litigated in the past. Typically the DOJ will review mergers in transportation industries, such as airlines or railroads, as well as the telecommunications industry. The FTC focuses its enforcement responsibility in the oil and gas, pharmaceutical, and health care industries. State attorneys general have authority to enforce federal and state antitrust laws. States investigating a matter arising under the federal antitrust laws will jointly investigate with either the DOJ or the FTC, or may conduct a separate investigation. Individuals or businesses that violate antitrust laws are subject to civil penalties that vary by state per violation for individuals, and vary by state per violation for corporations. In addition, state attorneys general have authority to seek restitution on behalf of the citizens of their states as a result of violations of either the federal or state antitrust laws. Some states allow Attorneys...
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...pieces of legislation collectively known as the Antitrust Laws. Antitrust laws were put in place to make business’s compete fairly. These fall into four main areas: agreements between competitors, contractual arrangements between sellers and buyers, the pursuit or maintenance of monopoly power, and mergers. The four major pieces of legislation collectively known as the Antitrust Laws are; the Sherman Antitrust Act, the Clayton Antitrust Act, the Federal Trade Commission Act and the Celler-Kefauver Act of 1950. The Sherman Antitrust Act has two categories that are targeted; ○ to restrain or prevent trade among states or foreign nations ○ prohibit against monopolies. ○ Only the United States Department of Justice has the power to prosecute individuals who are suspected of violating this act, (unless the individual state has the power granted by its own antitrust legislation.) The Federal Trade Commission Act ○ created the Federal Trade Commission ○ gave the Commission the power to enforce United States Antitrust legislation. The Clayton Antitrust Act ○ passed to prohibit mergers and acquisitions when those would substantially lessen competition. ○ enabled state attorney generals the ability to prosecute and enforce federal antitrust laws. ○ outlawed price discrimination, regulated stock acquisitions, and tying contracts ○ The Robinson - Pitman Act amended the Clayton Antitrust Act by banning discriminatory business practices...
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...Antitrust Laws After much research and investigations on Antitrust Laws, and reading up on individual cases, I think that overall Antitrust Laws are effective and good for the people. Without the Sherman, Clayton, and Federal Trade Commission Act, there would be a monopoly of every industry, trade, marketing, and services. This would in-turn lead to higher prices for the consumer, lower quality products, less innovation, and poor service. As I mentioned in my opening sentence, I will bring up two individual cases that the DOJ (Department of Justice) is pursuing when it comes to Antitrust Laws. I would like to begin by quoting the DOJ’s mission statement. Mission “The mission of the Antitrust Division is to promote economic competition through enforcing and providing guidance on antitrust laws and principles. Antitrust Laws The goal of the antitrust laws is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace. Competition in a free market benefits American consumers through lower prices, better quality and greater choice. Competition provides businesses the opportunity to compete on price and quality, in an open market and on a level playing field, unhampered by anticompetitive restraints. Competition also tests and hardens American companies at home, the better to succeed abroad. Federal antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution...
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...individuals, seeing the success of this industry, would try to enter the market in order to compete. This idea is the very basis of free market and capitalist economies. But sometimes there are situations where an individual will have a product or service that is better, cheaper, or quicker than everyone else; so much so that they are the only ones that can effectively provide it. When this occurs, competing businesses and giant government entities will stop at nothing to shut it down. The Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act make up the current US antitrust laws. The antitrust laws are supposed to promote and protect competition. The philosophy behind the laws is that trusts and monopolies will stagnate markets and prevent others from engaging in healthy market competition. A monopoly is defined as a situation in which a single company owns all or nearly all of the market for a given type of product or service. (Investorwords, 2010) Antitrust law legislation started with the Sherman Act that was passed in 1890. The intent of the law was put in place to challenge the unchecked growth of corporations. By 1888, large corporations gained enough market muscle to dominate entire industries. The Sherman Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate trade. This includes agreements among competitors to fix prices, rig bids and allocate consumers. The Act also makes it a crime to monopolize any...
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...Section 2 by unlawfully maintaining its monopoly in the market for Intel-compatible PC operating systems ("OSs") and by unlawfully attempting to monopolize the market for internet browsers, and that it had violated Section 1 by illegally tying its Windows operating system and its Internet Explorer ("IE") browser. The court ordered Microsoft to submit a plan of divestiture that would split the company into an OS business and an applications business, and ordered interim conduct restrictions. Microsoft, 253 F.3d at 45.” (Weil & McMillan, 2003). The Sherman Antitrust Act prohibits agreements, contracts, combinations, and conspiracies that result in inhibiting or restraining free trade. The act is very broad and can include relationships or agreements that result in price fixing. The Act attempts to either prevent monopolies or break up a monopoly that has been created. Antitrust statutes can be enforced by the federal government through the U.S. Attorney, Federal Trade Commission, through the attorney general of each state, or by individual action. The antitrust provisions of the Sherman Antitrust Act have been used against the railroad industry, the major oil companies, telecommunications, and more recently companies in the high tech industry such as Microsoft. (Mallor, et. al., 2010). Issues: Did Microsoft maintain a monopoly for their product (PC OS system) in violation of the Sherman Act Section 2? Did Microsoft attempt to create a monopoly for their IE browser in violation...
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...Antitrust Laws & Their Effects Jamar Averyhart Dr. Law Trine University In order to have a free economy you must have a competitive market place. A market that is open and stimulates the economy. This gives consumers whether they are organizations or just regular citizens the opportunity to purchase consumer goods at a relatively low price. As opposed to other economies that are not open markets, and that have one firm dominating the market place. Which drives up the price of consumer goods and make them unreasonably high. This is where antitrust laws come into play ("The Antitrust Laws," 2015). What are antitrust laws? Antitrust laws keep organizations from creating monopolies in industries, or colluding to drive up the price of items. If two major firms i.e. Apple and Microsoft were to merge. They control a large majority of the marketplace in the computer industry. This merger would lead to a shift in the price of computer and computer technology. It would create unequal competition and drive many other firms out of business. With the resources and consumer base that both companies have they would be able to dictate the prices in the industry and not have to rely on consumer demand and market trends. The first ever antitrust law was passed in 1890 which was the Sherman Act ("The Antitrust Laws," 2015). The Sherman Act made it illegal to try to form a monopoly, have a monopoly, or plan to have one. ("The Antitrust Laws," 2015) With the Sherman Act violating any...
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