1. Antitrust Policy and Regulation
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin .

2. Achieve allocative efficiency Historical background
Antitrust Laws
The purpose
Prevent monopoly
Promote competition
Achieve allocative efficiency
Historical background
Regulatory agencies
Antitrust laws
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3. Outlaw price discrimination Prohibit tying contracts
Antitrust Laws
Sherman Act 1890
Clayton Act 1914
Outlaw price discrimination
Prohibit tying contracts
Prohibit stock acquisition
No interlocking directorates
Federal Trade Commission Act 1914
Wheeler-Lea Act 1938
Celler-Kefauver Act 1950
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4. Issues of interpretation Monopoly behavior or structure
Antitrust Policy
Issues of interpretation
Monopoly behavior or structure
1911 Standard Oil Case
1920 U.S. Steel Case
1945 Alcoa Case
The relevant market
1956 DuPont Cellophane Case
Issues of enforcement
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5. Effectiveness of Antitrust Laws
Monopoly
AT&T
Microsoft Case
Mergers
Horizontal merger
Vertical merger
Conglomerate merger
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6. Mergers Automobiles Blue Jeans A B C D E F T U V W X Y Z
Conglomerate Merger
Blue
Jeans
Autos A B C D E F T U V W X Y Z
Glass
Denim
Fabric
Horizontal Merger
Vertical Merger
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7. Mergers Merger guidelines The Herfindahl Index Price fixing
Price discrimination
Tying contracts
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8. Industrial Regulation
Natural monopolies
Economies of scale
Public utilities
Electricity, water, gas, phone
Solutions for better outcomes
Public ownership
Public regulation
Public interest theory of regulation
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9. Industrial Regulation
Commission
(Year Established)
Jurisdiction
Federal Energy Regulatory
Commission (1930)*
Electricity, gas, gas pipelines, oil pipelines, water-powered sites
Federal Communications
Commission (1934)
Telephones, television, cable television, radio, telegraph, CB radios, ham operators
State public utility
commissions (various years)
Electricity, gas telephones
*Originally called the Federal Power Commission, renamed in 1977
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10. Problems with Industrial Regulation
Regulators establish rates to give natural monopoly “fair return”
No incentive to reduce cost
X-inefficiency
Perpetuate monopoly
Conditions of natural monopoly can end
Legal Cartel Theory
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11. Has produced large net benefits for consumers and society
Deregulation
Began in the 1970s
Has produced large net benefits for consumers and society
Industries deregulated include:
Airlines
Railroads
Telecommunications
Electricity
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12. Impact of production on society Physical qualities of goods
Social Regulation
Concerned with the conditions under which goods and services are produced
Impact of production on society
Physical qualities of goods
Applied “across the board” to all industries
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13. Social Regulation Commission (Year Established) Jurisdiction
Food and Drug Administration (1906)
Safety and effectiveness of food, drugs, and cosmetics
Equal Employment Opportunity Commission (1964)
Hiring, promotion, and discharge of workers
Occupational Safety and Health Administration (1972)
Industrial health and safety
Environment Protection Agency (1972)
Air, water, and noise pollution
Consumer Product Safety Commission (1972)
Safety of consumer products
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14. 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
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