Business and Society POST, LAWRENCE, WEBER Antitrust, Mergers, and Global Competition Chapter 9

Figure 9-1 The 10 largest global corporations,

Comparison of multinational corporations’ sales and the gross domestic product of selected nations Figure 9-2

Economic objectives of antitrust laws 1) The protection and preservation of competition 2) To protect the consumer’s welfare by prohibiting deceptive and unfair business practices. 3) To protect small, independent business firms from the economic pressures exerted by big business competition. 4) To preserve the values and customs of small-town America.

Figure 9-3a Major federal antitrust laws Sherman Act Clayton Act Federal Trade Commission Act Antitrust Improvements Act Forbids restraint of trade and monopoly Forbids price discrimination, tying contracts, anticompetitive mergers, and interlocking directorates Forbids unfair competition and deceptive business practices Requires premerger notification and permits state suits on behalf of consumers against price fixing

Figure 9-3b Federal antitrust enforcement Federal Trade Commission Justice Department Private Persons and Companies State Attorneys General Federal Courts Investigation Guidelines Advisory opinions Informal settlements Lawsuits Investigation Lawsuits Consent decrees Court opinions and decisions

Key antitrust issues Monopoly: Does domination of an industry or a market by one or a few large corporations necessarily violate antitrust laws? Critics claim that economic concentration can eliminate effective price competition, reduce consumer choices, inhibits innovation, and concentrates profits in too few hands. Others claim the opposite is true. Innovation: Focus in antitrust policy. In today’s economy, regulators have increasingly promoted competition to foster technological innovation. Thus, the rationale for bringing antitrust actions is to spur innovation in many cases. High technology business: Economy has changed in the information age from when antitrust laws were crafted. Are the basic principles of antitrust law applicable today?

Figure 9-4 Value of mergers and acquisitions, Source: “M & S Profile” published annually by Mergers and Acquisitions. Year Billions of dollars

Forces driven mergers in the 1990s and 2000s Technological change: The need to keep ahead of advances in biotechnology drove many mergers in the pharmaceutical and chemical industries. Changes in the regulatory environment: Telecommunications deregulation led to a wave of mergers among long-distance phone companies, cable operators, and regional carriers. Mergers also resulted in anticipation of regulatory changes in the health care industry. Many financial services firms merged in response to changes in federal law. Globalization: Many companies found it difficult to compete on the world stage as a result of globalization and subsequently merged. Stock price appreciation: The long bull market of the late 1990s contributed to the merger wave.