© 1999 Michigan State University. All rights reserved.

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Presentation transcript:

© 1999 Michigan State University. All rights reserved. Microeconomics U.S. Antitrust Policy © 1999 Michigan State University. All rights reserved.

United States Antitrust Policy Seeks to promote competition and control monopoly via: 1) Anti-trust Laws (legislative branch) 2) Prosecuted by Justice Dept. (executive branch) 3) Interpreted by Supreme Court (judicial branch) Monopolistic competition

Three Facets of Anti-Trust Policy 1. TOWARDS PRICE FIXING 2. EXISTING STRUCTURES (BIGNESS) 3. MERGERS Monopolistic competition

TOWARDS PRICE FIXING 1. LAW - SHERMAN ANTI-TRUST(1890) SECTION 1 “ every contract , contract, combination in the form of trust or conspiracy in restraint of trade is illegal” 2. INTERPRETATION All efforts to collude formally will be prosecuted, if discovered 3. CASES Electrical machinery conspiracy - 1960 Coca Cola - 1987 Monopolistic competition

Electrical Machinery - 1961 Coca Cola - 1987 3. SELECTED CASES Electrical Machinery - 1961 Coca Cola - 1987 Monopolistic competition

EXISTING STRUCTURE 1. LAW - SHERMAN ANTI -TRUST SECTION 2 “ every person who shall monopolize or attempt to monopolize any part of trade or commerce will be prosecuted” Monopolistic competition

2. CURRENT INTERPRETATION a. Market share of over 70 percent b. Evidence that firm used “unfair” (predatory) practices to get that big 3. SELECTED CASES Standard Oil Co/ American Tobacco - 1911 ATT - 1982 Monopolistic competition

TOWARDS MERGERS 1. LAW - CLAYTON ACT 1914 SECTION 7 “Mergers that substantially lessen competition” 2. INTERPRETATION Generally reject only horizontal mergers and only when would cause prices to increase Monopolistic competition

Office Depot and Staples 3. SELECTED CASES Rite Aid and Revco - 1996 Office Depot and Staples Monopolistic competition

TOWARDS MERGERS 1. LAW - CLAYTON ACT 1914 SECTION 7 “Mergers that substantially lessen competiton” 2. INTERPRETATION Generally only horizontal mergers where new market share exceeds 30 percent Monopolistic competition

Monopolistic competition