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Anti-Trust Laws

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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 of the terms can lead to be prosecuted by the Department of Justice. Some of the major penalties for violating the Sherman Act can be a fine for one million for an individual, or upwards to 100 million for an organization ("The Antitrust Laws," 2015. The next antitrust law was passed in 1914 which were the Federal Trade Commission Act, and the Clayton Act. The Federal Trade Commission Act created the Federal Trade Commission ("The Antitrust Laws," 2015). Which the Federal Trade Commission Act banned any competition that was deemed unfair or deceptive. The Supreme Court has said if someone violates the Sherman Act then they also violate the Federal Trade Commission Act ("The Antitrust Laws," 2015). Only the Federal Trade Commission can bring cases under the Federal Trade Act. The Clayton Act goes into more detail that the Sherman Act doesn’t talk about. Like if an individual decides they want to run two different companies that are competing in the same industry. While also making important decision for that company is it illegal. Also the Clayton Act goes in more detail about mergers ("The Antitrust Laws," 2015).
In other words antitrust laws help to regulate fair competition with in the market place. Antitrust laws are regulated by the Federal Trade Commission and the U.S. Department of Justice ("The Enforcers," 2015). The big difference between the two agencies is that the Department of Justice can obtain criminal sanctions against an individual or organization ("The Enforcers," 2015). Both complement each other and can pursue cases that they see as violating antitrust laws and rights of consumers ("The Enforcers," 2015).
A significant Sherman Act case was the U.S. VS. MICROSOFT which involved nineteen different states and the District of Columbia. They were suing Microsoft over wrongfully tried to monopolize the web browser market. Also they mentioned that Microsoft had a large amount of computers in the market place that ran on Intel based operating systems. This in theory before being brought to court suggested that Microsoft had an unfair advantage in the market place. In thus could dictate the prices of computer software. While also controlling the web browser market place ("Excerpts From the Ruling That Microsoft Violated Antitrust Law," 2000). In the filing the Supreme Court found that Microsoft had violated two major sections of the Sherman Act. Microsoft violated Section 2 of the Sherman Act. Which Section 2 states “that is unlawful for a person or firm to monopolize any part of the trade or commerce among the several states, or with foreign nations”. Section 2 has two different perspectives part one is that a firm can not control a large portion of an market place or have enough power where they can create an monopoly. The second part is a firm can not knowingly or willingly acquire that power from the development of a superior product. In this case the plaintiffs which were the states that were mentioned earlier implied because of Microsoft worldwide licensing of their intel-compatible operating systems. That it gave them an unfair amount of power in the market place. The court ruled that there no other viable options to consumers that would be a good substitute. Without consumers taking on an significant amount of cost. The court also ruled that no firm that was not marketing the operating system could not just start marketing another product that would represent a large number of different consumers. In the court findings they found that a large firm i.e. Microsoft could in fact control the market place for software marketplace. Especially since Microsoft share of the software marketplace was at 95 percent during the time of this case. If you were to include the Mac operating system it brings Microsoft share of the marketplace down to 80 percent. Even while including another major firm in the case Microsoft still controls a very significant portion of the market place. With this Microsoft could set their prices unreasonably high, and still not loss a large portion of their consumer base. Also the court found that the plaintiffs proved that Microsoft created an unfair barrier to entry into the market place because of the large share percentage that Microsoft controlled of the market place ("Excerpts From the Ruling That Microsoft Violated Antitrust Law," 2000).
This ruling change the economy by keeping Microsoft from monopolizing the web browser market place. If they were allowed to purchase one of the companies they had been pursuing then it would create a significant shift in power that would give Microsoft an tremendous amount of power within the market place. With the court disallowing that it kept Microsoft from creating a monopoly legally. Which if they were able to would have given them 70 percent of the web browser market place. With them being able to not only control the computer operating system, but also the web browser market place too. It would give Microsoft an unrivaled amount of power. That could not be challenged or threatened by any other company with in that industry. If the court had not initiated that ruling then Microsoft would be able to set prices where ever they liked. Without fear of them losing a large portion of their consumer base ("Excerpts From the Ruling That Microsoft Violated Antitrust Law," 2000).
One major Clayton antitrust act case was the 1974 AT&T case. An Attorney General by the name of William Saxbe filed for a case against AT&T (Reed, 2007). He filed this suit because AT&T had been allowed to have a natural monopoly by the government of the United States since their existence (Reed, 2007). The Department of Justice particularly pursued this case because they felt AT&T was in fact engaging in anti-competitive behavior (Reed, 2007). In the phone industry AT&T controlled a very large portion of the marketplace. Which created unnatural barriers to entry into the market place. The settlement that AT&T came to with the United States government allowed them to keep their long distance services. It also split up some their other in house companies into smaller companies that would not be controlled by AT&T (Blanch, 2015). That took AT&T away from twenty-two of their local monopolies (Blanch, 2015).
This brought down the price of phone services across the nation. It allowed other companies to be able to enter into the market place. With the entry of additional companies into the market place it gives consumers more varieties of choices. With the variety choices to consumers it gives them more power to dictate prices. It takes away the power that AT&T once held that allowed them to set prices. This makes the market place more competitive. Since this case AT&T has been trying to grow and expand their company again. With most recently the acquisition of BellSouth. Also in the cable industry they have bought the company DirecTV giving them a significant portion of the consumer base in the industry.
One other major antitrust case was in 1976. This case involved the Robinson-Pactman Act and the suit was Texaco,Inc. v. Hasbrouck. Which the major issue was that Texaco was supplying gasoline to two different firms. Texaco was selling the gasoline with different incentives to the two firms. One firm Gull was given the gasoline and was allowed to resale the gasoline to other distributors under their firm’s name. While the other firm Dompier was enticed by Texaco to sell the gasoline under Texaco’s name, but given a significant discount in doing so. Both Gull and Dompier sold gasoline to local distributors. The two firms were nothing growing at an equal mark. Dompier was growing two to three times faster because of the discounts they were being given by Texaco. Texaco executives were well aware of the issue and continued to allow it. Both firms hauled gasoline from Texaco’s main gasoline facility. Dompier was given a substantial discount while Gull was paying more. This in turn gave Dompier an unfair advantage by making a profit that they were not notified of. With evidence piling up pointing directly at Exectuives showing them having full knowledge of the rapid growth of Dompier. In due part to their discount for selling under Texaco’s name and also their discount for hauling the gasoline. The court ruled in favored of the Plaintiff’s and awarded them the differences in the prices that they had paid for the gasoline. From the time frame of 1972-1981 the firm got the difference in the expenses paid back to them that they had spent during those years ("Texaco, Inc. v. Hasbrouck 496 U.S. 543 (1990)," 2015).
This case effected economy from that point on by setting a precedent. Which from that point on made it well known to companies that offering discounts they have to be fair. A firm cannot give a discount to a firm and not give it to another competitor just because they do not like them. It leads to unfair practices and unfair competition in the market place. Largely this case has made it pretty even across the board in terms of distributors offering discounts to firms if they do so.
Antitrust laws have created a more ever marketplace for consumers and firms. Without these laws business and individuals could engage in unfair practices. That could take advantage of other consumers, and leave them with faulty products. This would lead to a lack of consumer trust and would have an immediate impact upon the economy. With the lack of trust consumer had in the marketplace it would drive down sales and profits. Then would lead to an economic crisis. Antitrust laws are in place to make sure no one is taking advantage of, and if they are that firm or individual is pursued to the full extent of the law.

Reference Page
Blanch, R. (n.d.). Famous Antitrust Cases. Retrieved November 29, 2015, from http://www.hg.org/article.asp?id=6025
Excerpts From the Ruling That Microsoft Violated Antitrust Law. (2000, April 03). Retrieved November 29, 2015, from http://www.nytimes.com/2000/04/04/business/us-vs-microsoft-excerpts-from-the-ruling-that-microsoft-violated-antitrust-law.html?pagewanted=all
Reed, B. (2007, November 27). U.S. Department of Justice vs. AT&T. Retrieved November 29, 2015, from http://www.networkworld.com/article/2287512/lan-wan/u-s--department-of-justice-vs--at-t.html
Texaco, Inc. v. Hasbrouck 496 U.S. 543 (1990). (n.d.). Retrieved November 29, 2015, from https://supreme.justia.com/cases/federal/us/496/543/case.html
The Antitrust Laws. (n.d.). Retrieved November 29, 2015, from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
The Enforcers. (n.d.). Retrieved November 29, 2015, from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/enforcers

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