Antitrust Policy & Regulation
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What’s the Problem with Market Power?
Tend to produce less
 Charge higher prices
 Less incentive to provide quality for the
consumer
 If the consumer is unhappy, they can….?

Trusts
DEF: A combination
of firms or
corporations formed
by a legal
agreement
 Especially in order
to reduce
competition
 Standard Trust –
came after Standard
Oil
ANTI-TRUST LAWS
Stated another way…(Anti-monopoly )laws
 Prevent one company from gaining too
much power

Sherman Antitrust Act
1890 – used in early
 Outlaws monopolies
1900’s
 First government law to
limit monopolies
 Gave federal gov’t
power to investigate
trusts and companies
suspected of violating
the Act
 “Antitrust” really means
“competition law”

Clayton Antitrust Act
1914
 Strengthened Sherman
Act
 Prohibit “anticompetitive
practices”

– Mergers/Acquisitions that
lessen competition
– One person being a
director of competing
companies
B. Cases
1.
Standard Oil case (1911) – broke-up.
2.
U.S. Steel case (1920) – ‘rule of
reason’ by Supreme Court that
unreasonably restrain trade.
John D. Rockefeller
controlled nearly all
trade for oil and gas.
The Supreme Court
used the Sherman
Act to break up
Standard Oil into 34
companies.

In an out-of-court
settlement, AT&T
divested itself into
22 regional phoneoperating
companies in 1982.
Other cases…
Microsoft Case in US
http://www.wired.com/techbiz/it/news/20
02/11/35212
-case timeline
 Microsoft has spent 21 years — more than
half its lifetime — fighting antitrust battles
with the U.S. government. It has earned a
page in the history books, waging one of
the biggest monopoly wars in this country.

The company barely escaped being split
up after it was ruled an unlawful
monopolist in 2000 for using its
stranglehold on the PC market with its
Windows operating system to cripple
competitors, such as Netscape's Navigator
Web browser.
 A court settlement approved in 2002 and
a consent decree curbing some of its
practices saved Microsoft

Countries with Antitrust Laws
shown in red
Mergers
The combining of two or more companies,
generally by offering the stockholders of
one company securities in the acquiring
company in exchange for the surrender of
their stock.
 Basically, when two companies become
one. This decision is usually mutual
between both firms.

Acquisition

A corporate action in which a company
buys most, if not all, of the target
company's ownership stakes in order to
assume control of the target firm.
Acquisitions are often made as part of a
company's growth strategy whereby it is
more beneficial to take over an existing
firm's operations and niche compared to
expanding on its own.
 Acquisitions are often paid in cash, the
acquiring company's stock or a
combination of both.

AT&T ended its effort to buy T-Mobile
USA, acknowledging that it could not
overcome stiff opposition by the Obama
administration to form the nation’s biggest
cellphone service provider.
 -2011, Dec


The decision to scrap the $39 billion
takeover — which would have been the
biggest deal of the year — is a major
setback for AT&T, which had pinned its
hopes for growth on the acquisition. The
company wanted T-Mobile’s cellular
airwaves, or spectrum, to relieve its
congested network and offer faster service
for data-hungry devices like the iPhone.
And the deal’s end leaves T-Mobile, the weakest
of the four national operators, with an uncertain
future.
 For the Obama administration, the collapse of
the deal is confirmation that it has reinvigorated
antitrust oversight that it said had become weak
under its predecessor. The Justice Department
took the aggressive step of suing to block the
deal in late August, while the Federal
Communications Commission had signaled its
intent to fight the merger as well.

Govt. carefully monitors and decides if
mergers and acquisitions are legal based
on the Anti Trust Laws
 Goal of the US Govt.
 Protect Consumers
 Ensure Free and Fair Competition

How Do You Feel About Government
Regulation in the US Economy?