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32 - 1Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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ANTITRUST POLICY & REGULATION
32C H A P T E R
32 - 2Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
NextSlide
EndShow
ANTITRUST POLICYAND REGULATION
Antitrust Policy
Industrial Regulation
Social Regulation
32 - 3Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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THE ANTITRUST LAWSHistorical Background•Trusts•P=MC Pricing•Monopoly Pricing•Regulatory Agencies
•Natural Monopolies
32 - 4Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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THE ANTITRUST LAWSSherman 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
32 - 5Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
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EndShow
THE ANTITRUST LAWSFederal 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
32 - 6Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
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EndShow
THE ANTITRUST LAWS
Celler-Kefauver Act of 1950• Strengthened Clayton Act
Regarding Asset Ownership in
Competing Firms
• Anticompetitive Mergers Illegal
No Matter How Accomplished
32 - 7Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
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EndShow
THE ANTITRUST LAWSIssues of Interpretation• Monopoly Behavior vs. Structure• U.S. Steel Case – 1920
•Rule of Reason• Alcoa Case - 1945 • Du Pont Cellophane CaseIssues of Enforcement:
Tradeoffs Among Goals• Balance of Trade• Defense Cutbacks• Emerging New Technologies
32 - 8Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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EndShow
THE ANTITRUST LAWSEffectiveness 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
32 - 9Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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Business Level
Business Level
A B C D E F
T U V W X Y Z
Raw Materials
Finished Goods
TYPES OF MERGERS
AUTOS
GLASS
BLUEJEANS
DENIMFABRIC
32 - 10Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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EndShow
A B C D E F
T U V W X Y Z
Raw Materials
Finished Goods
TYPES OF MERGERS
AUTOS
GLASS
BLUEJEANS
DENIMFABRIC
The merger o
f
suppliers T and U
represent a
HORIZONTAL
MERGER
32 - 11Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
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EndShow
A B C D E F
T U V W X Y Z
Raw Materials
Finished Goods
TYPES OF MERGERS
AUTOS
GLASS
BLUEJEANS
DENIMFABRIC
The merger ofsuppliers F and Z
represent aVERTICAL MERGER
32 - 12Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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EndShow
A B C D E F
T U V W X Y Z
Raw Materials
Finished Goods
TYPES OF MERGERS
AUTOS
GLASS
BLUEJEANS
DENIMFABRIC
Merging unrelatedfirms represents aCONGLOMERATE
MERGER
32 - 13Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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INDUSTRIAL REGULATION
Natural Monopoly•Public Utilities•Public Ownership•Public Regulation
Public Interest Theory of
Regulation
32 - 14Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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INDUSTRIAL REGULATIONProblems with Industrial Regulation
• Costs and Inefficiency• Perpetuating MonopolyLegal Cartel Theory of Regulation
Deregulation• Outcomes of Deregulation
32 - 15Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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SOCIAL REGULATIONApplies to Far More FirmsMore Intrusive into Daily Activities•Food & Drugs (1906)•EEOC (1964)•OSHA (1971)•EPA (1972)•CPSC (1972)
Optimal Level of Social Regulation
32 - 16Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
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SOCIAL REGULATIONApplies to Far More FirmsMore Intrusive into Daily Activities•Food & Drugs (1906)•EEOC (1964)•OSHA (1971)•EPA (1972)•CPSC (1972)
Optimal Level of Social Regulation
ChapterConclusions
antitrust policyindustrial regulationsocial regulationSherman ActClayton Acttying contractsinterlocking directoratesFederal Trade Commission Actcease-and-desist orderWheeler-Lea ActCeller-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
ENDBACKCopyright McGraw-Hill/Irwin 2002
32 - 18Copyright McGraw-Hill/Irwin, 2002
Antitrust Policy and Regulation
The Antitrust Laws
Types of Mergers
Industrial Regulation
Social Regulation
Key Terms
PreviousSlide
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EndShow
Coming Next:
Agriculture Economics and Policy
Chapter 33
