Horizontal Mergers: When firms with dominant market shares prepare to enter a merger, the FTC must decide whether the new entity will be able to exert monopolistic and anti-competitive pressures on the remaining firms.
The FTC challenged the merger on the grounds that the two remaining companies could collude to raise prices and forced Malibu to divest its rum business.
Unilateral Effects. The FTC will often challenge mergers between rival firms that offer close substitutes, on the grounds that the merger will eliminate beneficial competition and innovation.
In , the FTC did just that , by challenging a merger between General Electric and a rival firm, as the rival firm manufactured competitive non-destructive testing equipment.
In order to go forward with the merger, GE agreed to divest its non-destructive testing equipment business. Vertical Mergers. Mergers between buyers and sellers can improve cost savings and business synergies, which can translate to competitive prices for consumers.
For example, Valero Energy had to divest certain businesses and form an informational firewall when it acquired an ethanol terminator operator. Potential Competition Mergers. Over the years, the FTC has challenged rampant preemptive merger activity in the pharmaceutical industry between dominant firms and would-be or new market entrants to facilitate competition and entry into the industry. The core of U. At their core, antitrust provisions are designed to maximize consumer welfare.
Supporters of the Sherman Act, the Federal Trade Commission Act and the Clayton Antitrust Act argue that since their inception, these antitrust laws have protected the consumer and competitors against market manipulation stemming from corporate greed. Through both civil and criminal enforcement, antitrust laws seek to stop price and bid rigging, monopolization, and anti-competitive mergers and acquisitions.
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Your Practice. Popular Courses. Part Of. Antitrust Laws and Enforcement. Types of Antitrust Violations. Table of Contents Expand. What Are Antitrust Laws? The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case.
Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age. Yet for over years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.
The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize.
For instance, in some sense, an agreement between two individuals to form a partnership restrains trade, but may not do so unreasonably, and thus may be lawful under the antitrust laws.
On the other hand, certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are " per se " violations of the Sherman Act; in other words, no defense or justification is allowed. The penalties for violating the Sherman Act can be severe.
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Table of contents. What is an antitrust law? Antitrust laws prevent a significant amount of organisational misconduct, including: Cartel formation: A cartel is formed when two or more businesses agree to not compete with each other.
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