2. 32 - 1 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show ANTITRUST POLICY & REGULATION 32 C H A P T E R

3. 32 - 2 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show ANTITRUST POLICY AND REGULATION Antitrust Policy Industrial Regulation Social Regulation

4. 32 - 3 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS Historical Background Trusts P=MC Pricing Monopoly Pricing Regulatory Agencies Natural Monopolies

5. 32 - 4 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS 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

6. 32 - 5 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS Federal Trade Commission Act of 1914 Established FTC Holds Hearings on Complaints Seeks Cease-and-Desist Orders Wheeler-Lea Act of 1938 Policing Deceptive Practices False Advertising Misleading Representation of Products

7. 32 - 6 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS Celler-Kefauver Act of 1950 Strengthened Clayton Act Regarding Asset Ownership in Competing Firms Anticompetitive Mergers Illegal No Matter How Accomplished

8. 32 - 7 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS Issues of Interpretation Monopoly Behavior vs. Structure U.S. Steel Case – 1920 Rule of Reason Alcoa Case - 1945 Du Pont Cellophane Case Issues of Enforcement: Tradeoffs Among Goals Balance of Trade Defense Cutbacks Emerging New Technologies

9. 32 - 8 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show THE ANTITRUST LAWS Effectiveness of Antitrust Existing Market Structures Mergers Merger Types Horizontal Merger Vertical Merger Conglomerate Merger Merger Guidelines Herfindahl Index Price Fixing – Per se Violations Tying Contracts

10. 32 - 9 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show Business Level ABCDEF TUVWXYZ Raw Materials Finished Goods TYPES OF MERGERS AUTOS GLASS BLUE JEANS DENIM FABRIC

11. 32 - 10 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show ABCDEF TUVWXYZ Raw Materials Finished Goods TYPES OF MERGERS AUTOS GLASS BLUE JEANS DENIM FABRIC The merger of suppliers T and U represent a HORIZONTAL MERGER

12. 32 - 11 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show ABCDEF TUVWXYZ Raw Materials Finished Goods TYPES OF MERGERS AUTOS GLASS BLUE JEANS DENIM FABRIC The merger of suppliers F and Z represent a VERTICAL MERGER

13. 32 - 12 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show ABCDEF TUVWXYZ Raw Materials Finished Goods TYPES OF MERGERS AUTOS GLASS BLUE JEANS DENIM FABRIC Merging unrelated firms represents a CONGLOMERATE MERGER

14. 32 - 13 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show INDUSTRIAL REGULATION Natural Monopoly Public Utilities Public Ownership Public Regulation Public Interest Theory of Regulation

15. 32 - 14 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show INDUSTRIAL REGULATION Problems with Industrial Regulation Costs and Inefficiency Perpetuating Monopoly Legal Cartel Theory of Regulation Deregulation Outcomes of Deregulation

16. 32 - 15 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show SOCIAL REGULATION 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

17. 32 - 16 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show SOCIAL REGULATION 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 Chapter Conclusions

18. 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 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 ENDBACK Copyright McGraw-Hill/Irwin 2002

19. 32 - 18 Copyright McGraw-Hill/Irwin, 2002 Antitrust Policy and Regulation The Antitrust Laws Types of Mergers Industrial Regulation Social Regulation Key Terms Previous Slide Next Slide End Show Coming Next: Agriculture Economics and Policy Chapter 33