Competition and Monopolies Chapter 9 Competition and Monopolies

Section 3: Government Policies Toward Competition Antitrust Legislation Passed to prevent monopolies from forming or to break up existing monopolies and stop interlocking directorates Interlocking Directorates Sherman Antitrust Act Clayton Antitrust Act See page 250

“Trustbuster” www.theodore-roosevelt.com/trm26.html

Mergers A combined company that results when one corporation buys more than half of the stock in another corporation and therefore controls the 2nd corporation There are 3 types of mergers Horizontal Vertical Conglomerate

Horizontal Merger Merger of two companies in the same business to expand control of market Exs: Sandra’s Scented Candles takes over Flora’s Floating Candles Dodge takes over Ford

news.xinhuanet.com

Vertical Merger One company takes over another company in a related industry have more access to materials; make the production process more efficient Exs: Sandra’s Scented Candles takes over Wally’s Wax Factory Ford takes over Michelin Tires

Conglomerate Merger One company takes over at least three other companies in unrelated industries diversification of product line; if one fails, the other products can save the company. Exs: Ford takes over Johnson & Johnson, Dell, and Nabisco

http://professorgeradin. blogs. com/photos/uncategorized/crappymerger http://professorgeradin.blogs.com/photos/uncategorized/crappymerger.gif

Regulatory Agencies Oversee various types of industries to ensure fair pricing and product quality Exs: Federal Trade Commission Food and Drug Administration Federal Communications Commission Environmental Protection Agency

Deregulation Reduction of Government Regulation and control over business activity Increased in 1980’s and 1990’s; the government found that too much regulation does not increase competition by preventing monopolies; instead it created so much red tape that people didn’t want to go into business this allowed the existing companies to further control the markets