Microsoft Confidential ANTITRUST POLICY By: V.KARTHIK
Microsoft Confidential AGENDA
Objectives of Antitrust policy
Why promote competition
Federal Antitrust Laws in U.S
Competition Act in India
Background of India
Microsoft-Yahoo merger case
History of cases
Criticisms of Antitrust law
Microsoft Confidential ANTITRUST POLICY ANTITRUST LAW Government actions designed to promote competition among firms in the economy. Antitrust law also known as competition law, has three main elements : 1) prohibiting agreements that restrict free trading and competition between business entities. 2) banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. 3)supervising the mergers and acquisitions of large corporations. Transactions that are considered to threaten the competitive process can be prohibited altogether. TRUST A group or collection of firms who agree to coordinate efforts for the purpose of restricting output and raising prices/profit. Also known as cartels
Microsoft Confidential Objectives of Antitrust policy
Microsoft Confidential Why promote competition
Microsoft Confidential “ Having a monopoly is not illegal It all depends on how you get the monopoly”
Microsoft Confidential Anti-competitive practices Product bundling Predatory Pricing Exclusive dealing PROFITS by reducing competition Price fixing Collusion Refusal to deal (Group boycott) Anti-competitive practices 2007 : British Airways and Korean Air Lines fined by regulators for price-fixing in fuel surcharges ,cargo & passenger rates 2005 : WAL-MART accused of predatory pricing by small retailers & labour unions
Microsoft Confidential Frequently asked questions ? ? The gasoline stations in my area have increased their prices the same amount and at the same time. Is that price-fixing? ? ? ? ? ? ? ? I operate two stores that sell recorded music. My business is being ruined by giant discount store chains that sell their products for less than my wholesale cost. I thought there were laws against price discrimination, but I can’t afford the legal fees to fight the big corporations. Can you help? I operate two stores that sell recorded music. My business is being ruined by giant discount store chains that sell their products for less than my wholesale cost. I thought there were laws against price discrimination, but I can’t afford the legal fees to fight the big corporations. Can you help?
Microsoft Confidential Inefficiency of monopoly - By Price Fixing Demand Price Qty
Microsoft Confidential Federal Antitrust Laws
Microsoft Confidential Competition Act in India Finance Minister, P.Chidambaram (2003) highlighted the need to have a strong legal system and said “ A world class legal system is absolutely essential to support an economy that aims to be world class. India needs to take a hard look at its commercial laws and the system of dispensing justice in commercial matters.” With the zeal Government went ahead and enacted the Competition Act 2002
Microsoft Confidential Background of India Competition (Amendment) Act, mid 2008 Competition Act, 2002 MRTP Act, 1969 Monopolies & Restrictive Trade Practices Act The Monopolies and Restrictive Trade Practices Act, 1969 focused in curbing monopolies 1999: A committee (CCI-Competition Commission of India) was setup by govt to examine the MRTP Act 1969 & for shifting the focus of the law from curbing monopolies to promoting competition Following which the Competition Act , 2002 was enacted and notified in January 2003. .
Microsoft Confidential Market share Google has the lion's share of the search market SOURCE : As of Jan 2008 Merger Policy Govt has to decide whether a merger reduces competition in the mkt
Microsoft Confidential MICROSOFT-YAHOO MERGER
MICROSOFT :"The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search & online advertising"
Google is prevented by the antitrust laws from buying Yahoo or buying this business from Yahoo
GOOGLE : is concerned that Microsoft can "unfairly limit the ability of consumers to freely access competitors' email and instant messaging services. Microsoft + Yahoo = Antitrust
Microsoft would need approval from the Federal Trade Commission (FTC) in the U.S. & the Competition Commission in the EU for the deal to pass through
Google and a Microsoft-Yahoo would control 80% to 90% of the search market OLIGOPOLY
Microsoft Confidential HISTORY OF CASES Standard Oil : Monopolized the oil refining industry illegally. In 1911 it was broken into separate entities (Exxon, Mobil, Chevron, Amoco) IBM : U.S Govt brought antitrust action against IBM in 1969 because of its dominance in mainframe computer mkt.Govt withdrew the case later in 1982 when it faced stiff competition from smaller computers, Apple Computers etc AT&T : U.S Govt took action against AT&T in 1970s as it was the only significant supplier telephone service. It was broken apart & had to compete with MCI & Sprint. This increase in competition lowered the cost.
MICROSOFT CASES European Union Microsoft antitrust case
Microsoft has been hit with an €899m ($1.4bn) fine for failure to comply with European regulators' demands to end allegedly anti-competitive business practices.MS failed to provide information necessary for competing networking software to interact fully with Windows desktops and servers & also failed to unbundle Windows media player from Windows
Govt’s interest in Microsoft's affairs had begun in 1991 with an inquiry by the FTC over whether Microsoft was abusing its monopoly on the PC operating system market 1998 – Case filed against MS when it bundled Internet Explorer along with its OS. This restricted the mkt for competing web browsers( Netscape navigator etc.). Order was reversed in 2001 when MS agreed to provide billions of software & services to public schools United States Microsoft antitrust case
Antitrust Paradox : Original intention of antitrust laws was consumer welfare & protection of competition rather than competitors
Paradox of antitrust enforcement was that legal intervention artificially raised prices by protecting inefficient competitors from competition .
Only a few acts should be prohibited, namely price fixing, mergers that create monopolies & pricing predatorily, while allowing practices such as price discrimination
The late Nobel economist believed that Antitrust laws do far more harm than good
“ Antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of what was formerly an industry that was relatively free of government intrusion and that future technological progress in the industry will be impeded as a result”
Changed views overtime
Antitrust laws prevent firms from actions that may benefit society due to fear of antitrust violations
Condemns the Sherman Act as stifling innovation and harming society
"No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born”
Robert Bork Milton Friedman Alan Greenspan Criticisms of Antitrust Laws