|
Our Expert Tutors Can Help
With Difficult Assignments.
|
Chapter 32 Antitrust and Other Government Regulation To
Print from an Internet browser, set type size to Smaller by choosing Our Economics Learning Center has information for students, teachers, an professionals. |
Our Expert Tutors Can Help
With Difficult Assignments.
|
I. Understanding monopoly power
|
|
|
C. Measuring the amount of industry concentration
1. Standard industrial
classifications (SIC) divide industries into homogeneous concentrations such as
apparel (23),
male (3),
and nightwear (2),
resulting in an SIC of 2332. FOR MORE READ
1997 NAICS and 1987 SIC Correspondence Tables.
2. Concentration ratios measure
the % of total industrial activity in areas such as sales and employment for
oligopoly industries
a. Four company
industries are the most common.
b.
Evidence is mixed as to whether concentration ratios are changing .
c. Increased
inter-industry mergers and international competition make analysis difficult.
d. Concentration rations
are available from the
US Census Bureau.
D. Types of business integration (mergers)
1. Horizontal integration
results from a merger of competing companies.
U.S. Steel was formed with the merger of competing
steel
companies.
2. Vertical integration
results when companies that have supply dealings merge. Standard Oil combined
refineries and oil
transportation systems.
E. A brief history of the merger movement
1. The late 19th century brought
trusts (controlling corporations by controlling their boards of directors) and
the need
for antitrust laws to
regulate the many horizontal mergers of America's Gilded Age.
2. The 1920's brought vertical
mergers as antitrust
laws had made horizontal mergers difficult
3. The 1960's and early 1970's
was the time of
conglomerates, which combined unrelated businesses.
4. The 1980's brought corporate
raiders who broke up conglomerates, many using junk
(high risk) bonds to finance
leverage (high
debt) buyouts.
5. The 1990's brought a return to mergers, many
of them combining international companies.
II. Antitrust laws
A. Sherman
Antitrust Act of 1890 made monopolies and attempts to monopolize
illegal. Combinations, contracts, and
conspiracies
in restraint of trade were made
illegal.
B. Clayton Act
of 1914 prohibited tying contracts (tying the purchase of product A
to the purchase of product B), price
discrimination, and stock ownership of
competitors which would substantially lessen competition.
C. Federal
Trade Commission Act of 1914 created the FTC to control
deceptive business practices.
D. Robinson-Patnan Act of
1936 made predatory pricing illegal
E. The Wheeler-Lea Act of
1938
amended the FTC Act to make
unfair and deceptive trade illegal.
F. Celler-Kefauver
Antimerger Act of 1950 made the purchase of assets of another company
illegal if the purchase
would substantially lessen competition.
III. Antitrust prosecutions IV. The changing role of government regulation
A. Enforced by the
antitrust division of the Justice Department
B. Rule
of reason
1.
Applied by the Supreme Court in a 1911 antitrust case against Standard
Oil of New Jersey and the American
Tobacco Company
2. Court stated that
behavior must be unreasonable in a competitive sense and anti-competitive
effects must be
demonstrated.
3. Both companies were
found guilty.
4. The Court ruled that
bigness alone was not against the law in1921 when it ruled that U.S. Steel was
not a
monopoly even though it
controlled 50% of the market.
5.
Bigness alone was prosecuted by the Supreme Court in 1945 as it broke up Alcoa
because it controlled
90% of the aluminum market.
C. Tight enforcement, which began
in 1914, ended in the early 1980's.
D. For more information read
1.
Rule of reason
- Wikipedia, the free encyclopedia
2.
Executive Summary Of The Antitrust Laws
1.
Interstate Commerce Commission (ICC)-rails
and trucking
2.
Federal Aviation Administration (FAA)-air
travel
3.
Federal Communications Commission (FCC)-airways
4.
Securities and Exchange Commission (SEC)-issuers
of financial instruments such as stocks and bonds
B. A move toward
deregulation began by Margaret Thatcher in the 1970's spread to the United States
and
Western Europe in the 1980's.
1. Many felt
federal government regulation represents a costly and
inefficient misallocation of economic resources.
2. Railways,
trucking, airlines, and financial institutions were deregulated in the late
1970's and 1980's.
a. Some deregulation activities were very costly (financial
institutions bailout of the late 1980's)
b. Overall, the jury is still out on the success of deregulation.
C. Regulators are
redirecting efforts away from maintaining competition toward social regulation.
1.
Government regulation of industry has changed direction.
a. International competition requires companies work together to
develop technology and share in its high costs.
b. Many feel government should foster cooperation among
competitors with an industrial policy.
c. Others feel the market system should be left to direct resource (factor)
allocation.
2.
Regulation protecting individuals has become more prominent.
a.
Environmental Protection Agency (EPA)
protects individuals from pollution (air, water, noise).
b.
Consumer Protection and Safety Commission (CPSC)
protects consumers from unsafe products.
c.
Food and Drug Administration (FDA) protects
consumers from dangerous food, drugs, cosmetics, etc.
d.
Federal Trade Commission (FTC) protects the
consumer from unfair trade practices such as deceptive
advertising.
e.
Occupational Safety and Health Administration (OSHA)
protects people while at work.
f.
Equal Employment Opportunity Commission (EEOC)
attempts to eliminate workplace prejudice.
g.
National Labor Relations Board (NLRB) regulates activities between
business and unions.
D. Henry David Thoreau concerning
Government
Regulations
| Last Chapter | Next Chapter | |
| Chapter 32 Class Discussion Questions | Table of Contents | |
| Chapter 32 Homework Questions | Economics Internet Library |