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Antitrust Laws and Competitive Strategies Overview

Learn about antitrust laws - Sherman Act, Clayton Act, Robinson-Patman Act and competitive strategies in business. Explore illegal agreements and understand mergers, joint ventures, and more.

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Antitrust Laws and Competitive Strategies Overview

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  1. Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide. CHAPTER 40 Antitrust: Law and Competitive Strategy, Part I

  2. Quote of the Day “Is there not a causal connection between the development of these huge, indomitable trusts and the horrible crimes now under investigation? …Is it not irony to speak of the equality of opportunity in a country cursed with bigness?” Louis D. Brandeis, Supreme Court Justice

  3. Overview of Antitrust Laws • Sherman Act prohibits all agreements “in restraint of trade” and bans “monopolization.” • The Clayton Act prohibits anticompetitive mergers, tying arrangements, and exclusive dealing agreements. • The Robinson-Patman Act bans price discrimination that reduces competition. The text of all antitrust statutes can be seen online. Click here!

  4. Competitive Strategies • For a competitive strategy, managers may consider two approaches: • Cooperative strategies, where companies work together to their mutual advantage. • Aggressive strategies, designed to create an advantage over competitors. • Some cooperative strategies which may be illegal, include: • Horizontal agreements • Vertical agreements • Mergers and joint ventures

  5. Illegal Horizontal Agreements • Market Division • Any effort by a group of competitors to divide its market is a per se violation of §1 of the Sherman Act. • Price Fixing and Bid Rigging • When competitors agree on the prices at which they will buy or sell, their price-fixing is a per se violation of §1 of the Sherman Act. Bid-rigging is also a per se violation. • Refusals to Deal • A refusal to deal violates the Sherman Act if it harms competition.

  6. Illegal Vertical Agreements • Reciprocal Dealing Agreements: • When a buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer. • Price Discrimination • It is illegal to charge different prices to different purchasers if: • the items are the same, and • the price discrimination lessens competition. • However, it is legal to charge a lower price to a particular buyer, if: • the costs of serving this buyer are lower, or • the seller is simply meeting competition.

  7. Mergers and Joint Ventures • The Clayton Act prohibits mergers that are anticompetitive. • Horizontal Mergers • A horizontal merger involves companies that compete in the same market. • Vertical Mergers • A vertical merger involves companies at different stages of the production process.

  8. “Politics are an important ingredient of antitrust enforcement.”

  9. Link to the Internet Click above to return to the slide show. • Clicking on the orange button below will link you to the website for this book. (You must first have an active link to the internet on this computer.) • Once there, click: • Online Study Guide, then • Your choice of a chapter, then • Practice, then • Internet Applications • You should then see web links related to that chapter. Click here!

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