Monopolies and Antitrust Laws 1

Government in Action: Antitrust Laws LEGISLATIVE EXECUTIVE JUDICIAL 2

WHAT ARE ANTITRUST LAWS? LAWS DESIGNED TO PREVENT MONOPOLIES AND PROMOTE COMPETITION. AFTER THE CIVIL WAR, ADVANCES IN TECHNOLOGY AND TRANSPORTATION LEAD TO NATIONAL MARKETS. EVENTUALLY ONLY A FEW FIRMS BEGAN TO DOMINATE INDUSTRIES: RAILROADS, STEEL, MEATPACKING, COAL, ETC. 3

Why are monopolies a Market Failure Why are monopolies a Market Failure? Monopolies destroy the key ingredient of the free market system- Competition. To fix this MARKET FAILURE the government must get involved.

WHAT DOES THE GOVERNMENT DO? PASSED LAWS DESIGNED TO STOP MONOPOLIES LEGISLATIVE BRANCH PASSED LAWS DESIGNED TO STOP MONOPOLIES SHERMAN ACT OF 1890- “EVERY PERSON WHO SHALL MONOPOLIZE …OR CONSPIRE TO MONOPOLIZE…SHALL BE DEEMED GUILTY OF A FELONY.” 4

Executive Branch The Federal Trade Commission must approve all corporate mergers. (Like AT&T and…) When firms use anti-competitive tactics the Department of Justice files suit against them.

Judicial Branch Supreme Court finds the firm guilty or not guilty and assigns a punishment.

Microsoft, the year 2000 Antirust Laws have already been put in place by the legislative branch The Department of Justice, which operates within the executive branch, filed suit against Microsoft accusing them of practicing anti-competitive business tactics to maintain a monopoly.

THEN... On June 7, 2000, the Supreme Court decided that Microsoft was GUILTY of illegally maintaining its monopoly power through anticompetitive means and attempting to monopolize the Web browser market by unlawfully tying its Web browser to its operating system. “Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows.” “Because of the separate demand for browsers and operating systems, firms have found it efficient to supply the products separately. A number of operating system vendors offer consumers the choice of licensing their operating systems without a browser”

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