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ANTITRUST POLICY &

REGULATION

32C H A P T E R

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ANTITRUST POLICY

AND REGULATIONAntitrust Policy

Industrial Regulation

Social Regulation

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THE ANTITRUST LAWS

Historical BackgroundTrusts

P=MC Pricing

Monopoly Pricing

Regulatory Agencies

Natural Monopolies

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THE ANTITRUST LAWS

Sherman Act of 1890 Section 1 - Restraint of Trade Section 2 Monopolization

Treble DamagesClayton Act of 1914 Section 2 - Price Discrimination

Section 3 - Tying Contracts Section 7 Stock Ownership

Section 8 Interlocking

Directorates

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THE ANTITRUST LAWS

Federal TradeC

ommissionAct 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

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THE ANTITRUST LAWS

Celler-Kefauver Act of 1950 Strengthened Clayton Act

Regarding Asset Ownership in

Competing Firms

Anticompetitive Mergers Illegal

No Matter How Accomplished

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THE ANTITRUST LAWSIssues 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

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THE ANTITRUST LAWSEffectiveness of Antitrust Existing Market Structures Mergers

Merger Types

Horizontal MergerVertical MergerConglomerate Merger

Merger GuidelinesHerfindahl Index

Price Fixing Per se Violations

TyingC

ontracts

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A B C D E F

T U V W X Y Z

Raw Materials

FinishedGoods

TYPES OF MERGERS

AUTOS

GLASS

BLUE

JEANS

DENIM

FABRIC

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A B C D E F

T U V W X Y Z

Raw Materials

FinishedGoods

TYPES OF MERGERS

AUTOS

GLASS

BLUE

JEANS

DENIM

FABRIC

The merger ofsuppliers F and Z

represent a

VERTICAL MERGER

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A B C D E F

T U V W X Y Z

Raw Materials

FinishedGoods

TYPES OF MERGERS

AUTOS

GLASS

BLUE

JEANS

DENIM

FABRIC

Merging unrelated

firms represents a

CONGLOMERATE

MERGER

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INDUSTRIAL REGULATION

Natural MonopolyPublic Utilities

Public OwnershipPublic Regulation

Public Interest Theory of

Regulation

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INDUSTRIAL REGULATION

Problems with Industrial

Regulation

Costs and Inefficiency

Perpetuating MonopolyLegal Cartel Theory of

RegulationDeregulation

Outcomes of Deregulation

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SOCIAL REGULATION

Applies to Far More FirmsMore Intrusive into DailyActivities

Food & Drugs (1906)EEOC (1964)OSHA (1971)EPA (1972)CPSC (1972)

Optimal Level of Social

Regulation

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SOCIAL REGULATION

Applies to Far More FirmsMore Intrusive into DailyActivities

Food & Drugs (1906)EEOC (1964)OSHA (1971)EPA (1972)CPSC (1972)

Optimal Level of Social

Regulation

ChapterConclusions

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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

ENDBACKCopyright McGraw-Hill/Irwin 2002

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ComingNext:

Agriculture

Economicsand

Policy

Chapter33