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  • Government Monopoly Mergers and Acquisitions: Antitrust

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    Muhammad Akhtar
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    Antitrust laws aim to prevent monopolies and abusive practices by large companies. The United States built its monopoly policy around the 1890 Sherman Antitrust Act, which was used to break up large trusts that dominated industries. In the 1980s, the US adopted a more hands-off approach based on theories that antitrust intervention should only occur when lack of competition harms consumers. In the 1990s, US policy became more interventionist, such as a lawsuit against Microsoft for anti-competitive behavior. Differences exist among countries and over time in what constitutes a monopoly and abusive practices. As globalization increases, the relevant market for antitrust will increasingly span multiple economies.

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    Antitrust

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    Antitrust laws aim to prevent monopolies and abusive practices by large companies. The United States built its monopoly policy around the 1890 Sherman Antitrust Act, which was used to break up large trusts that dominated industries. In the 1980s, the US adopted a more hands-off approach based on theories that antitrust intervention should only occur when lack of competition harms consumers. In the 1990s, US policy became more interventionist, such as a lawsuit against Microsoft for anti-competitive behavior. Differences exist among countries and over time in what constitutes a monopoly and abusive practices. As globalization increases, the relevant market for antitrust will increasingly span multiple economies.

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    14 views2 pages

    Government Monopoly Mergers and Acquisitions: Antitrust

    Uploaded by

    Muhammad Akhtar
    Antitrust laws aim to prevent monopolies and abusive practices by large companies. The United States built its monopoly policy around the 1890 Sherman Antitrust Act, which was used to break up large trusts that dominated industries. In the 1980s, the US adopted a more hands-off approach based on theories that antitrust intervention should only occur when lack of competition harms consumers. In the 1990s, US policy became more interventionist, such as a lawsuit against Microsoft for anti-competitive behavior. Differences exist among countries and over time in what constitutes a monopoly and abusive practices. As globalization increases, the relevant market for antitrust will increasingly span multiple economies.

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    ANTITRUST

    GOVERNMENT policy for dealing with MONOPOLY. Antitrust laws aim to stop abuses
    of market power by big companies and, sometimes, to prevent corporate MERGERS
    AND ACQUISITIONS that would create or strengthen a monopolist. There have been
    big differences in antitrust policies both among countries and within the same
    country over time. This has reflected different ideas about what constitutes a
    monopoly and, where there is one, what sorts of behavior are abusive.
    In the United States, monopoly policy has been built on the Sherman Antitrust Act of
    1890. This prohibited contracts or conspiracies to restrain trade or, in the words of a
    later act, to monopolies commerce. In the early 20th century this law was used to
    reduce the economic power wielded by so-called "robber barons", such as JP Morgan
    and John D. Rockefeller, who dominated much of American industry through huge
    trusts that controlled companies' voting shares. Du Pont chemicals, the railroad
    companies and Rockefeller's Standard Oil, among others, were broken up. In the
    1970s the Sherman Act was turned (ultimately without success) against IBM, and in
    1982 it secured the break-up of AT&T's nationwide telecoms monopoly.
    In the 1980s a more LAISSEZ-FAIRE approach was adopted, underpinned by
    economic theories from the CHICAGO SCHOOL. These theories said that the only
    justification for antitrust intervention should be that a lack of competition harmed
    consumers, and not that a firm had become, in some ill-defined sense, too big. Some
    monopolistic activities previously targeted by antitrust authorities, such as predatory
    pricing and exclusive marketing agreements, were much less harmful to consumers
    than had been thought in the past. They also criticized the traditional method of
    identifying a monopoly, which was based on looking at what percentage of a market
    was served by the biggest firm or firms, using a measure known as the
    HERFINDAHL-HIRSCHMAN INDEX. Instead, they argued that even a market
    dominated by one firm need not be a matter of antitrust concern, provided it was a
    contestable market.
    In the 1990s American antitrust policy became somewhat more interventionist. A
    high-profile lawsuit was launched against Microsoft in 1998. The giant software
    company was found guilty of anti-competitive behavior, which was said to slow the
    pace of innovation. However, fears that the firm would be broken up, signaling a far
    more intervention list American antitrust policy, proved misplaced. The firm was not
    severely punished.
    In the UK, antitrust policy was long judged according to what policymakers decided
    was in the public interest. At times this approach was comparatively permissive of
    mergers and acquisitions; at others it was less so. However, in the mid-1980s the UK
    followed the American lead in basing antitrust policy on whether changes in
    competition harmed consumers. Within the rest of the EUROPEAN UNION several big
    countries pursued policies of building up national champions, allowing chosen firms
    to enjoy some monopoly power at home which could be used to make them more
    effective competitors abroad. However, during the 1990s the European Commission
    became increasingly active in antitrust policy, mostly seeking to promote competition
    within the EU.
    In 2000, the EU controversially blocked a merger between two American firms, GE
    and Honeywell; the deal had already been approved by America's antitrust

    regulators. The controversy highlighted an important issue. As GLOBALISATION


    increases, the relevant market for judging whether market power exists or is being
    abused will increasingly cover far more territory than any one single economy.
    Indeed, there may be a need to establish a global antitrust watchdog, perhaps under
    the auspices of the WORLD TRADE ORGANISATION.

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