Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
Key Terms
30
Antitrust Policy
and Regulation
End Show
30-1
Copyright 2008 The McGraw-Hill Companies
Chapter Objectives
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
Key Terms
End Show
30-2
• The Core Elements of the Major
Antitrust (Antimonopoly) Laws in
the United States
• Some of the Key Issues Relating
to the Interpretation and
Application of Antitrust Laws
• The Economic Principles and
Difficulties Related to the Setting
of Prices (Rates) Charged by SoCalled “Natural Monopolies”
• The Nature of “Social
Regulation,” Its Benefits and
Costs, and Its Optimal Level
Copyright 2008 The McGraw-Hill Companies
Antitrust Policy
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• The Antitrust Laws
–Historical Background
–Regulatory Agencies
–Sherman Act of 1890
–Clayton Act of 1914
• Price Discrimination
• Tying Contracts
• Interlocking Directorates
Key Terms
End Show
30-3
Copyright 2008 The McGraw-Hill Companies
Antitrust Policy
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• The Antitrust Laws
–Federal Trade
Commission Act of 1914
• Cease and Desist Orders
• Wheeler-Lea Act 1938
–Deceptive Acts or
Practices
• Celler-Kefauver Act 1950
Key Terms
–Merger Regulation
End Show
30-4
Copyright 2008 The McGraw-Hill Companies
Policy Issues and Impacts
• Issues of Interpretation
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
– Focus on Monopoly Behavior or
Structure
• 1911 Standard Oil Case
• 1920 U.S. Steel Case
– Rule of Reason
• 1945 Alcoa Case
– How Broadly Should Markets be
Defined?
• 1956 DuPont Cellophane Case
Key Terms
• Issues of Enforcement
End Show
30-5
Copyright 2008 The McGraw-Hill Companies
Effectiveness of Antitrust Laws
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• Monopoly
O 30.1
–Microsoft Case
• Mergers
–Merger Types
• Horizontal Merger
• Vertical Merger
• Conglomerate Merger
Key Terms
End Show
30-6
Copyright 2008 The McGraw-Hill Companies
Effectiveness of Antitrust Laws
Types of Mergers
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
Automobiles
Blue Jeans
Conglomerate Merger
Blue
Jeans
Autos
B
A
T
U
C
V
Glass
E
D
W X
F
Y Z
Denim
Fabric
Key Terms
Horizontal Merger
End Show
30-7
Copyright 2008 The McGraw-Hill Companies
Vertical Merger
Effectiveness of Antitrust Laws
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• Merger Guidelines
–The Herfindahl Index
–Price Fixing
• Per Se Violations
–Price Discrimination
–Tying Contracts
Key Terms
End Show
30-8
Copyright 2008 The McGraw-Hill Companies
Industrial Regulation
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• Natural Monopoly
– Public Ownership
– Public Regulation
– Public Interest Theory of
Regulation
• Problems With Industrial
Regulation
– Costs and Inefficiency
– Perpetuating Monopoly
– Legal Cartel Theory
Key Terms
• Deregulation
End Show
30-9
Copyright 2008 The McGraw-Hill Companies
Social Regulation
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
Key Terms
End Show
30-10
• Distinguishing Features
– Food and Drug Administration
1906
– Equal Employment Opportunity
Commission 1964
– Occupational Safety and Health
Administration 1971
– Environmental Protection
Agency 1972
– Consumer Product Safety
Commission 1972
Copyright 2008 The McGraw-Hill Companies
Social Regulation
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• Optimal Level of Social
Regulation
–In Support of Social
Regulation
–Criticisms of Social
Regulation
–Two Reminders
• There is No Free Lunch
• Less Government is Not
Always Better than More
Key Terms
End Show
30-11
Copyright 2008 The McGraw-Hill Companies
United States v. Microsoft
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
• Charges May 1998
• Windows Monopoly
• District Court Findings
–95% of Intel PCs
–Restrictive Contracts
–District Court Remedy
• Appeals Court Ruling
• Final Settlement
Key Terms
–No Break Up
End Show
30-12
Copyright 2008 The McGraw-Hill Companies
Key Terms
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
•
•
•
•
•
•
•
•
•
•
•
•
Key Terms
antitrust policy
industrial regulation
social regulation
Sherman Act
Clayton Act
tying contracts
interlocking
directorates
Federal Trade
Commission Act
cease-and-desist order
Wheeler-Lea Act
Celler - Kefauver Act
Standard Oil case
End Show
30-13
Copyright 2008 The McGraw-Hill Companies
•
•
•
•
•
•
•
•
•
•
•
U.S. Steel case
rule of reason
Alcoa case
DuPont cellophane case
Microsoft case
horizontal merger
vertical merger
conglomerate merger
per se violations
natural monopoly
public interest theory of
regulation
• legal cartel theory of
regulation
Next Chapter Preview…
Antitrust
Policy
Policy Issues
and Impacts
Effectiveness
of Antitrust
Laws
Industrial
Regulations
Social
Regulation
Last Word
Agriculture:
Economics and
Policy
Key Terms
End Show
30-14
Copyright 2008 The McGraw-Hill Companies