1. © 1999 Michigan State University. All rights reserved.
Microeconomics
U.S. Antitrust Policy
© 1999 Michigan State University. All rights reserved.

2. United States Antitrust Policy
Seeks to promote competition and control monopoly
via:
1) Anti-trust Laws (legislative branch)
2) Prosecuted by Justice Dept. (executive branch)
3) Interpreted by Supreme Court (judicial branch)
Monopolistic competition

3. Three Facets of Anti-Trust Policy
1. TOWARDS PRICE FIXING
2. EXISTING STRUCTURES (BIGNESS)
3. MERGERS
Monopolistic competition

4. TOWARDS PRICE FIXING 1. LAW - SHERMAN ANTI-TRUST(1890) SECTION 1
“ every contract , contract, combination in the form of trust or conspiracy in restraint of trade is illegal”
2. INTERPRETATION
All efforts to collude formally will be prosecuted, if discovered
3. CASES
Electrical machinery conspiracy
Coca Cola
Monopolistic competition

5. Electrical Machinery - 1961 Coca Cola - 1987
3. SELECTED CASES
Electrical Machinery
Coca Cola
Monopolistic competition

6. EXISTING STRUCTURE 1. LAW - SHERMAN ANTI -TRUST SECTION 2
“ every person who shall monopolize or attempt to monopolize any part of trade or commerce will be prosecuted”
Monopolistic competition

7. 2. CURRENT INTERPRETATION a. Market share of over 70 percent
b. Evidence that firm used “unfair” (predatory) practices to get that big
3. SELECTED CASES
Standard Oil Co/ American Tobacco
ATT
Monopolistic competition

8. TOWARDS MERGERS 1. LAW - CLAYTON ACT 1914 SECTION 7
“Mergers that substantially lessen competition”
2. INTERPRETATION
Generally reject only horizontal mergers
and only when would cause prices to increase
Monopolistic competition

9. Office Depot and Staples
3. SELECTED CASES
Rite Aid and Revco
Office Depot and Staples
Monopolistic competition

10. TOWARDS MERGERS 1. LAW - CLAYTON ACT 1914 SECTION 7
“Mergers that substantially lessen competiton”
2. INTERPRETATION
Generally only horizontal mergers where new market share exceeds 30 percent
Monopolistic competition

11. Monopolistic competition