Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
19
C HAPTE R
Industrial
Regulation
Social Regulation
Key Terms
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ANTITRUST POLICY &
REGULATION
Copyright McGraw-Hill/Irwin, 2005
Antitrust Policy
and Regulation
The Antitrust
Laws
ANTITRUST POLICY
AND REGULATION
Antitrust Policy
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Industrial Regulation
Social Regulation
Copyright McGraw-Hill/Irwin, 2005
THE ANTITRUST LAWS
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Historical Background
•Trusts
•P=MC Pricing
•Monopoly Pricing
•Regulatory Agencies
•Natural Monopolies
Copyright McGraw-Hill/Irwin, 2005
THE ANTITRUST LAWS
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Sherman Act of 1890
• Section 1 - Restraint of Trade
• Section 2 – Monopolization
• Treble Damages
Clayton Act of 1914
•
•
•
•
Section 2 - Price Discrimination
Section 3 - Tying Contracts
Section 7 – Stock Ownership
Section 8 – Interlocking Directorates
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THE ANTITRUST LAWS
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
End
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• Established FTC
• Holds Hearings on Complaints
• Seeks Cease-and-Desist Orders
Wheeler-Lea Act of 1938
Key Terms
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Federal Trade Commission
Act of 1914
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• Policing Deceptive Practices
• False Advertising
• Misleading Representation of
Products
Copyright McGraw-Hill/Irwin, 2005
THE ANTITRUST LAWS
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Celler-Kefauver Act of 1950
• Strengthened Clayton Act
Regarding Asset
Ownership in Competing
Firms
• Anticompetitive Mergers
Illegal No Matter How
Accomplished
Copyright McGraw-Hill/Irwin, 2005
THE ANTITRUST LAWS
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Issues of Interpretation
• Monopoly Behavior vs.
Structure
• Standard Oil Case - 1911
• U.S. Steel Case – 1920
•Rule of Reason
• Alcoa Case - 1945
The Relevant Market
• Du Pont Cellophane Case
Copyright McGraw-Hill/Irwin, 2005
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
THE ANTITRUST LAWS
Issues of Enforcement
Active Antitrust
Perspective
Laissez-faire Perspective
Creative Destruction
(Chapter 26)
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Tradeoffs Among
Objectives
Copyright McGraw-Hill/Irwin, 2005
THE ANTITRUST LAWS
Effectiveness of Antitrust
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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• Monopoly – Microsoft Case
• Mergers
•Merger Types
•Horizontal Merger
•Vertical Merger
•Conglomerate Merger
• Merger Guidelines
•Herfindahl Index (Chapter 25)
• Price Fixing – Per se Violations
• Tying Contracts
Copyright McGraw-Hill/Irwin, 2005
TYPES OF MERGERS
Antitrust Policy
and Regulation
BLUE
JEANS
Business Level
Finished Goods
AUTOS
The Antitrust
Laws
Types of Mergers
A
B
T
U
C
D
E
F
Industrial
Regulation
Social Regulation
Key Terms
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GLASS
V
W
X
Raw Materials
Business Level
Copyright McGraw-Hill/Irwin, 2005
Y
Z
DENIM
FABRIC
TYPES OF MERGERS
Antitrust Policy
and Regulation
BLUE
JEANS
Finished Goods
AUTOS
The Antitrust
Laws
Types of Mergers
A
B
T
U
C
D
E
F
Industrial
Regulation
Social Regulation
Key Terms
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GLASS
V
W
X
Raw Materials
Copyright McGraw-Hill/Irwin, 2005
Y
Z
DENIM
FABRIC
TYPES OF MERGERS
Antitrust Policy
and Regulation
BLUE
JEANS
Finished Goods
AUTOS
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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A
B
T
U
C
D
E
The merger of
suppliers F and Z
represent a
VERTICAL MERGER.
GLASS
V
W
X
Raw Materials
Copyright McGraw-Hill/Irwin, 2005
F
Y
Z
DENIM
FABRIC
TYPES OF MERGERS
Antitrust Policy
and Regulation
BLUE
JEANS
Finished Goods
AUTOS
The Antitrust
Laws
Types of Mergers
A
B
C
D
E
F
Industrial
Regulation
Social Regulation
Key Terms
T
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GLASS
Merging unrelated
firms
represents
U
V
W Xa Y
CONGLOMERATE
MERGER.
Raw Materials
Copyright McGraw-Hill/Irwin, 2005
Z
DENIM
FABRIC
INDUSTRIAL REGULATION
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Natural Monopoly
•Public Utilities
•Public Ownership
•Public Regulation
Public Interest Theory of
Regulation
Copyright McGraw-Hill/Irwin, 2005
INDUSTRIAL REGULATION
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Problems with Industrial
Regulation
• Costs and Inefficiency
• Perpetuating Monopoly
Legal Cartel Theory of
Regulation
Deregulation
• Outcomes of Deregulation
Copyright McGraw-Hill/Irwin, 2005
SOCIAL REGULATION
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Applies to Far More Firms
More Intrusive into Daily
Activities
•Food & Drugs (1906)
•EEOC (1964)
•OSHA (1971)
•EPA (1972)
•CPSC (1972)
Optimal Level of Social
Regulation
Copyright McGraw-Hill/Irwin, 2005
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
Copyright McGraw-Hill/Irwin, 2005
U.S. Steel case
rule of reason
Alcoa case
Du Pont cellophane case
horizontal merger
vertical merger
conglomerate merger
per se violations
natural monopoly
public interest theory of regulation
legal cartel theory of regulation
BACK
END
Coming Next:
Antitrust Policy
and Regulation
The Antitrust
Laws
Types of Mergers
Industrial
Regulation
Social Regulation
Key Terms
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Agriculture:
Economics
and
Policy
Next
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Chapter 20
Copyright McGraw-Hill/Irwin, 2005