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Antitrust Practices and Market Power (Essay Sample)


Why was/were the firm(s) investigated for antitrust behavior? Identify some of the costs (pecuniary and nonpecuniary) associated with the antitrust behavior (firms having power in the market). Additionally, note the specific antitrust act (Sherman Act, Clayton Act, etc.) under which the violation was investigated. Given your research and findings, are monopolies and oligopolies (firms demonstrating power) always bad for society? Be sure to provide real world examples of where this may be the case to strengthen your position. Provide at least one example of a case where having a monopoly or oligopoly may actually benefit the society. Key concepts to include in your paper include the following. Monopoly Market Structure Oligopoly Market Structure Barriers to Entry Into the Market Natural Monopoly Government Monopoly Downward Sloping Demand Curve Economies of Scale Price Fixing Collusion Monopoly Pricing Price Maker Market Power Economic Profits Imperfect Competition


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Antitrust Practices and Market Power
A trust is a plan where owners of a number of companies transfer their power to make decisions to a group of trustees. The firms were investigated for antitrust behavior to ensure they practiced and maintained competitive behavior in all their dealings (O’Sullivan & Sheffrin, 2001). The antitrust laws were established to break the trust units where the firms in the trust would act as a single entity. This was because competition would lead to a fair business environment that has better products and lower prices for the customers. Using the federal antitrust rules the government would be able to break monopolies, avoid corporate mergers that were aimed at reducing competition, and also be able to regulate business conducts.
Some of the Acts include Sherman Act of 1890, Clayton Act of 1914, Robinson-Patman Act of 1936, Celler-Kefauver Act of 1950, and Hart-Scott-Rodino Act of 1980. The Federal Trade Commission was also established in 1914 to ensure the antitrust laws were enforced. The Sherman Act was designed to ensure all monopolies are illegal and that no trust acted in a way to restrain traded (Landes & Posner, 1981). The Clayton Act was instrumental in outlawing practice that dispirited and disallowed competition; this include typing contracts, stock purchase mergers that worked to decrease competition, and discrimination of prices that were aimed at reducing competition. In addition, the Robinson-Patman Act outlawed the selling of products at very low and unreasonable prices so as to reduce competition. The Celler-Kefauver Act made it illegal to make mergers of asset-purchase so as to trim down competition. The Hart-Scott-Rodino Act introduced antitrust legislation in the partnerships and sole proprietor businesses (O’Sullivan & Sheffrin, 2001).
A merger would occur between firms where they would unite their operations and hence decrease the number of players in the market; this would in turn lead to an increase in prices. However, a merger would be an opportunity for the firms to join their costs of production, administration, and marketing and hence contribute to lower costs for consumers (O’Sullivan & Sheffrin, 2001). The Federal Trade Commission ensured that mergers formed would lead to reduced costs, better services, better products and lower prices. This made sure that the mergers were not made on basis of the number of firms operating in the sector but on how they would provide better service and reduced costs and prices to ensure the benefits trickle down to the consumers.
According to O’Sullivan & Sheffrin, (2001) the Federal Trade Commission identified a lower price for products sold by an office supply chain, Staples in areas where its competitor Office Depot operated. This gives a clear example of how competition may lead to lower pricing. Firms will have a chance to maximize profits in the areas where there is no competition and hence may exploit consumers. This would be the case (increased prices) if a merger would ensure between the two office suppliers Staples and Office Depot, since they would dominate and monopolize the market.
The government can arbitrate in regulating business practices through price fixing; price discrimination and making consumers purchase other products by force. It is quite convincing that monopolies and oligopolies (firms demonstrating power) are always bad for society; this is because they will lead to unfair business practice in order to maximize their profits which is every businesses goal. It will highly lead to high consumer prices, poor services and...
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