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Page 1: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

19

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved..

Antitrust Policy and Regulation

Page 2: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Laws

• The purpose:

• Prevent monopoly

• Promote competition

• Achieve allocative efficiency

• Historical background

• Regulatory agencies

• Antitrust laws

LO1

Page 3: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Laws

• Sherman Act 1890• Made restraint of trade and

monopolization illegal• Injured firms can sue for treble

damages• Department of Justice or injured

firms can initiate suits

LO1

Page 4: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Laws

• Clayton Act 1914 – Illegal if competition is reduced• Outlaw price discrimination• Prohibit tying contracts• Prohibit stock acquisition• No interlocking directorates

LO1

Page 5: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Laws

• Federal Trade Commission Act 1914• Power to investigate unfair

business practices of firms• Cease and desist orders• Wheeler-Lea Act 1938

• Made fraudulent advertising illegal

• FTC investigates fraudulent advertising

LO1

Page 6: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Laws

• Celler-Kefauver Act 1950• Made all mergers illegal if

competition is significantly reduced

LO1

Page 7: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Policy

• Issues of interpretation• Monopoly behavior or structure

• 1911 Standard Oil Case• 1920 U.S. Steel Case

• Rule of reason• 1945 Alcoa Case

• The relevant market• 90-60-30 rule

• 1956 DuPont Cellophane Case• Issues of enforcement

LO2

Page 8: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Antitrust Policy

• Issues of enforcement• Active antitrust perspective• Laissez-faire perspective

LO2

Page 9: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Effectiveness of Antitrust Laws

• Monopoly

• AT&T

• Microsoft Case

• Mergers

• Horizontal merger

• Vertical merger

• Conglomerate merger

LO2

Page 10: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Mergers

• Price fixing• Per se violation

• Price discrimination

• Tying contracts

LO2

Page 11: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Industrial Regulation

• Natural monopolies• Economies of scale• Public interest theory of regulation

• When it’s beneficial to have a single firm price and output must be regulated by government to prevent abuse of power

LO3

Page 12: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Problems with Industrial Regulation

• Costs and inefficiency

• No incentive to reduce cost

• X-inefficiency

• Perpetuate monopoly

• Legal Cartel Theory

• Regulating potentially competitive industries

• Firms desire regulationLO3

Page 13: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Deregulation

• Began in the 1970s• Has produced large net benefits for

consumers and society• Industries deregulated include:

• Airlines• Railroads• Telecommunications• Electricity

LO3

Page 14: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Social Regulation

• Concerned with the conditions under which goods and services are produced

• Impact of production on society• Physical qualities of goods• Applied “across the board” to all

industries

LO4

Page 15: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Social Regulation

LO4

Page 16: 19 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Antitrust Policy and Regulation

Social Regulation

• Optimal level of social regulation

• In support of social regulation

• Criticisms of social regulation• High costs, higher prices

• Uneconomical goals MB<MC, overzealous personnel

• Inadequate information

• Unintended side effects

• Slower innovation

• Reduced competitionLO4


Chapter 17 Auditors’ Reports McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved

CHAPTER 12. MONOPOLY McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved

McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. SAMPLING Chapter 14

Chapter 15 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

Data Resource Management Chapter 5 McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 4 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

16 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Wage Determination

Elasticity 6 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 8 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

Chapter 07 Internal Control McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter © 2008The McGraw-Hill Companies, Inc. All rights reserved. Creating Effective Organizations 17 McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill

11 Salesperson Compensation and Incentives McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 7 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

Chapter 7. PRODUCTION McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7

Chapter 7 Trade McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved

Chapter 12. LABOUR McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 12

Computer Hardware Chapter 3 McGraw-Hill/IrwinCopyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 12 Government Imperfections McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved

Chapter 16 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 8 Property Dispositions McGraw-Hill/IrwinCopyright © 2009 by The

Chapter 02 Professional Standards McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 4 Risk Assessment McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved

Consumer Behavior 9 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved

CHAPTER 11. PERFECT COMPETITION McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved

12 Cost Analysis McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter Mutual Funds McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 4

Chapter © 2008The McGraw-Hill Companies, Inc. All rights reserved. Influence, Empowerment, and Politics 15 McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill

34 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Money, Banking, and Financial Institutions McGraw-Hill/IrwinCopyright

Chapter Interest Rates McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 9

McGraw-Hill/IrwinCopyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. Fundamentals of Variance Analysis Chapter 16

Chapter © 2008The McGraw-Hill Companies, Inc. All rights reserved. Leadership 16 McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies, Inc. All

Chapter 03 Professional Ethics McGraw-Hill/IrwinCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved

Chapter 18W McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved

Chapter 8 Costs McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved

Competing in Foreign Markets McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved