Antitrust Practices and Market Power

ANTITRUST PRACTICES AND MARKET POWER Name Institution Affiliation Professor Date of Submission 1 When there a firm is believed to be taking part in antitrust behavior then it is probably involving itself in practices that are unfair and therefore giving it leverage against its competition. An investigation into a firm may seek to establish whether the firm is seeking an illegal form of collusion with some competitors in order to edge out other competing businesses. These firms are often investigated for sinister mergers after all the system can be thrown in disarray when big companies in respective fields or sectors start monopolizing a market or begin engaging in business practices that are unfair or at times unethical in nature. It is important that in a market that is freely competitive, every single business intends to attract customers through provision of products that are good at the best price (Clinard, et al., 1979). The Antitrust laws were crafted to cushion the market from these practices that are unfair or unethical because they could instill a monopoly and inculcate an unfair culture in business. The main reason for this is to protect the consumers against monopolies (Sutherland, 2002) that could do whatever they want to do while they (consumers) had little power to change the situation through imperfect competition. Moreover, competing firms must not collude to; for example, fix prices of products because that would be considered a violation of the regulations. 2 The Sherman Antitrust Act of 1890 applies to transactions that occur from state to state within US and it sort to establish a limitless trade environment devoid of monopolies or attempts to monopolize the trade markets. If is violated according to Areeda & Turner, (1975), the firm involved may be required to incur substantial fines when government enforces the penalties. The act prohibits combinations, contracts, and conspiracies between firms that aim at restraining trade and monopoly. Those found guilty of violation can face jail term too. The Antitrust Division is empowered to carry out this. On the other hand the Clayton Act focuses on restraints of a specific nature that include dealing in exclusive arrangements, binding sales, discrimination in pricing, acquisition and mergers, among others. The cost of violating this act is not pecuniary. The penalties are mostly civil in nature (Bok, 1960). This is so because the Clayton Act majorly checks the industry on potentially illegal associations and mergers or acquisitions that may be aimed at reducing competition or laying grounds for a monopoly. 3 Darby et al., (2012), writes that monopolies and oligopolies are not always bad for society as it may often seem. Take the example of monopolies, if they do not exactly go all the way to employ unethical profit-maximization procedures and patterns it means that the average cost of production shall fall therefore reducing product prices as a result...