1. Monopoly and Antitrust Laws

2. What’s the Problem with Market Power? (Competition is Limited)
Tend to produce less
Charge higher prices
Less incentive to provide quality for the consumer
If the consumer is unhappy, they can….?
Identify Examples of Firms with Market Power

3. Monopoly
A firm that is the only producer and seller of a product (and there are no close substitutes for that product)

4. ANTI-TRUST LAWS Stated another way…(Anti-monopoly )laws
Prevent one company from gaining too much power
****To ensure that there is competition in the markets
Why?
Because Competition leads to

5. Lower prices
Better quality
More consumer choice

6. Sherman Antitrust Act 1890 – used in early 1900’s
First government law to limit monopolies
Gave federal gov’t power to investigate trusts and companies suspected of violating the Act
“Antitrust” really means “competition law”
Outlaws monopolies

7. Clayton Antitrust Act 1914 Strengthened Sherman Act
Prohibit “anticompetitive practices”
Mergers/Acquisitions that lessen competition
One person being a director of competing companies

8. John D. Rockefeller controlled nearly all
trade for oil and gas. The Supreme Court used the Sherman Act to break up Standard Oil into 34 companies.

9. Microsoft Case in US
case timeline
Microsoft has spent 21 years — more than half its lifetime — fighting antitrust battles with the U.S. government. It has earned a page in the history books, waging one of the biggest monopoly wars in this country.

10. The company barely escaped being split up after it was ruled an unlawful monopolist in 2000 for using its stranglehold on the PC market with its Windows operating system to cripple competitors, such as Netscape's Navigator Web browser.

11. Countries with Antitrust Laws shown in red

12. Mergers
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Basically, when two companies become one. This decision is usually mutual between both firms.

13. Acquisition
A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm.

14. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own.
Acquisitions are often paid in cash, the acquiring company's stock or a combination of both.

15. AT&T ended its effort to buy T-Mobile USA, acknowledging that it could not overcome stiff opposition by the Obama administration to form the nation’s biggest cellphone service provider.
-2011, Dec

16. The decision to scrap the $39 billion takeover — which would have been the biggest deal of the year — is a major setback for AT&T, which had pinned its hopes for growth on the acquisition. The company wanted T-Mobile’s cellular airwaves, or spectrum, to relieve its congested network and offer faster service for data-hungry devices like the iPhone.

17. And the deal’s end leaves T-Mobile, the weakest of the four national operators, with an uncertain future.
For the Obama administration, the collapse of the deal is confirmation that it has reinvigorated antitrust oversight that it said had become weak under its predecessor. The Justice Department took the aggressive step of suing to block the deal in late August, while the Federal Communications Commission had signaled its intent to fight the merger as well.

18. Govt. carefully monitors and decides if mergers and acquisitions are legal, based on the Anti Trust Laws
Goal of the US Govt:
Protect Consumers from higher prices and lower output (choice)
Ensure Free and Fair Competition

19. How Do You Feel About Government Regulation in the US Economy?

20. Competition Is Good
Competition among companies is good.

21. But Competition Among Consumers?

24. Key Concepts on Test What is a monopoly?
What effect does a monopoly have on a market price and quantity?
If there are mergers or acquisitions in an industry, what effect would they have on a market price and quantity?
What is an Anti-Trust law?
What was the first major anti-trust law? What did it try to prevent?

25. Competition among firms will result in what benefits to the market?
Competition among consumers may have what effects on a market?