march 26, 2015 aim: how does the government regulate...

Aim: How does the government regulate competition?

• Do Now: Answer the following:

– What is the historical context?

– What is the point of view?

Government policies toward competition

• Antitrust legislation

– Sherman Antitrust Act (1890)

– Clayton Antitrust Act (1914)

Prevent new monopolies from forming, break up existing monopolies

Regulatory Agencies

• Oversee various types of industries to ensure fair pricing and product quality

• Exs:

– Federal Trade Commission

– Food and Drug Administration

– Federal Communications Commission

– Environmental Protection Agency

Mergers

• A combined company that results when one corporation buys more than half of the stock in another corporation and therefore controls the 2nd corporation

• There are 3 types of mergers

– Horizontal

– Vertical

– Conglomerate

Horizontal Merger

• Merger of two companies in the same business to expand control of market

• Exs:

– Sandra’s Scented Candles takes over Flora’s Floating Candles

– Dodge takes over Ford

Vertical Merger

• One company takes over another company in a related industry have more access to materials; make the production process more efficient

• Exs:

– Sandra’s Scented Candles takes over Wally’s Wax Factory

– Ford takes over Michelin Tires

Conglomerate Merger

• One company takes over at least three other companies in unrelated industries diversification of product line; if one fails, the other products can save the company.

• Exs:

– Ford takes over Johnson & Johnson, Dell, and Nabisco

1982 – The United States v. AT & T 1984 – AT&T splits into several smaller companies “The Baby Bells”

Is antitrust legislation relevant today?

• How successful do you think it is?

• Write a response in your notes.