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Economics Chap.9 Lesson 4 sec.3
The document discusses competition and monopolies in the economy. It provides details on antitrust legislation in the US that was enacted to encourage competition and limit monopolies. The Sherman Antitrust Act of 1890 was the first such law, followed by others like the Clayton Act of 1914 and Robinson-Patman Act of 1936. These acts established regulatory agencies and defined prohibited practices like price discrimination and interlocking directorates. The types of mergers - horizontal, vertical, and conglomerate - are also explained along with examples. Finally, the role of government in regulating industries and balancing competition through oversight of mergers and business practices is summarized.
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Similar to Economics Chap.9 Lesson 4 sec.3
Economics Chap.9 Lesson 4 sec.3
- 1. The 3 Stooges Chapter9 Lesson 4 Section 3 page 158 COMPETITION & MONOPOLIES
- 2. WHO encourages competition inthe economy? The government encourages competition in the economy. Federal laws & regulatory agencies MONOPOLIES have no competition. Can they be forced to act more competitively? Example: Federal Trade Commission
- 3. ANTITRUST LEGISLATION Followed therise of big businesses
- 4. After the CIVILWAR fueled industrial expansion
- 5. OIL Drove competition outof business & Pressured customers NOT to buy from RIVALS NOTORIOUS
- 6. Owned by JOHN D.ROCKEFELLER What was his secret? Is he to be placed on a pedestal for others as a "CAPTAIN OF INDUSTRY?" Or should he be demonized as a "robber baron." A ROBBER BARON, by definition, was an American capitalist at the turn of the 19th century who enriched himself upon the sweat of others, exploited natural resources, or possessed unfair government influence. America's first billionaire. http://www.ushistory.org/us/36b.asp
- 7. Got Standard Oil’sboard members onto boards of rivals SOessentially the same people controlled both companies = reduced temptation to compete with each other INTERLOCKING DIRECTORATE = Majority of 1 board serves as board of rival company
- 8. Growing public pressure Againsthis oil monopoly, or trust. 1890 Congress passes the Sherman Antitrust Act Important ANTITRUST LEGISLATION = Federal & state laws preventing new monopolies from forming & breaking up those already existent
- 9. Sherman Antitrust ActVAGUE 1914Country needs better antitrust provisions Prohibits/limits certain specific business practices that lessened competition substantially. The Clayton Act substantially UNCLEAR! Federal government decides if the merger of 2 corporations will lessen competition.
- 10. Table page 159Antitrust Legislation Federal Laws & Functions
- 11. Sherman Antitrust Act 1890 Outlawedagreements & conspiracies restraining interstate trade. Illegal to monopolize any part of interstate commerce. Even attempts.
- 12. CLAYTON Act 1914 PRICEDISCRIMINATION restricted ? Selling a good at different prices to different people Sellers cannot prevent buyers from dealing with competitors. OUTLAWED 1. 2. Interlocking directorates betw. rivals Mergers that substantially reduce competition
- 13. Set up theFTC / an independent antitrust agency 19 14 To take private companies to court for unfair trade practices
- 14. ROBINSON-PATMAN ACT 1936 Amendmentto the Clayton act of 1914 STRENGTHENEDLaw against charging different prices for same product to different buyers
- 15. Celler-Kefauver ANTIMERGER Act 1950 STRENGTHENEDLawagainst firms joining together to CONTROL too large a part of the market
- 16. Hart-Scott-Rodino ANTITRUST IMPROVEMENTSAct 1976 1. Restricted mergers that would reduce competition 2. Required big corps. planning to merge to notify the FTC /Dept. of Justice, who’d decide whether to challenge the merge under the terms of the Clayton act of 1914
- 17. In general ANTITRUSTLAWS address the harmful effects of mergers r a combined co. resulting when one corp. buys more than ½ the stock of another, thus gaining control of 2nd corporation. 3 TYPES of MERGERS 1. Horizontal Large corp. made up of smaller corps dealing in unrelated businesses p. 160 2 V e r t I c a l 3.Conglomerate What’s that?
- 18. HORIZONTAL Two corps. insame business merge 1 brewery buys out another EXAMPLE: 2 supermarkets, 2 food manufacturers
- 19. V E R T I C A L Two corps.involved in a supply chain merge EXAMPLE: Food manufacturer & a farm Google acquired mobile-device maker Motorola Mobility & will make smart phones and television set- top boxes. AMAZON’s Kindle Fire tablet represents its bridge between hardware & e- commerce. ORACLE bought Sun Microsyste ms & now champions engineered systems (integrated hardware- &-software devices). Software giant Microsoft now makes hardware for its Xbox gaming system http://bu siness.tim e.com/20 12/03/16 /how- apple- made- vertical- integratio n-hot- again-too- hot- maybe/
- 20. CONGLOMERATE HUGE 4 or moreunrelated businesses Example: P&G FOOD Pringles MAKEUP Cover Girl LAUNDRY DETERGENT TOOTHPASTE
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- 24. ANDREW CARNEGIE From ragsto riches Born in Scotland, emigrated to the States at the age of 13
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- 29. Which kind ofmerger? V E R T I C A L CARNEGIE STEEL COMPANY
- 30. One of thehighest profile philanthropists of his era With his fortune, he built Carnegie Hall, and founded the Carnegie Corporation of New York, Carnegie Endowment for International Peace, Carnegie Institution for Science, Carnegie Trust for the Universities of Scotland, Carnegie Hero Fund, & the Carnegie Museums of Pittsburgh, among others. Carnegie Mellon University Pittsburgh, PA en.wikipedia.org/wiki/Andrew_Carnegie
- 31. LAST, but notleast Conglomerate Merger 4 or more unrelated businesses Example: Famous examples from the 1960s include Ling-Temco-Vought, ITT Corporation, Litton Industries, TextroTeledyne, Gulf+Wester, AT&T, and Transamerica. What’s that? Walt Disney Co. & ABC
- 32. Walt Disney Co.& ABC Conglomerate Merger
- 33. PROCTER & GAMBLE Whichkind of merger? CONGLOMERATE Cosmetics
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- 35. PROCTER & GAMBLE PersonalCare Products
- 36. Household Care Products LaundryDetergent PROCTER & GAMBLE
- 37. Household Care Products DISHDETERGENT PROCTER & GAMBLE
- 38. Gov. uses antitrustlaws to foster competition What else is used? Direct regulation of business pricing & product quality.
- 39. Table 17 page161 REGULATORY AGENCIES Exist at LOCAL, STATE & FEDERAL levels Oversee many industries &services
- 40. FEDERAL TRADE COMMISION1914 Regulates: 2.Unfair competition methods in interstate commerce 3.Fraud in advertising FTCstands for
- 41. FOOD & DRUGADMIN. 1927 Regulates P_____ & S_____PURITY SAFETY Deals with 1. F 2. D 3. C FOOD DRUGS COSMETICS stands for
- 42. FEDERAL COMMMUNICATION COMMISSION FCC REGULATESTV/radio/telegraph/phone Partial- satellite transmissions & cable TV 1 9 3 4 stands for
- 43. SECURITIES & EXCHANGECOMMISSION
- 44. Equal Employment OpportunityCommission 1964 EEOCaims to reduce Discrimination based on 1. 2. 3. 4. 5. Religion Gender Race Nationality Age
- 45. Occupational Safety &Health Admin. 1970 Regulates the Workplace Ensures workers have safe & healthful working conditions
- 46. EPA 1970 Develops/enforces standards for: AIR,WATER, & TOXIC WASTE
- 47. NRC Nuclear Regulatory Commision Regulatesnuclear power industry Licenses & Oversees the 1 / 2 / 3 1974 Design/Building/Operation of Plants
- 48. page 162 Government regulationsaim to promote efficiency & competition WASN’T HAPPENING IN THE 80’s/90’s Government reduced regulations/control over business WHY? Regulations had actually DECREASED the competition
- 49. Which Regulatory Agency? FCC Federal Communications Commission Exampleof deregulation Competitive Pay-TV, Cable & Satellite systems followed deregulation
- 50. What would happento PRICES if the government quit it’s role of MERGER WATCHDOG What would happen IF profits became + high? More SELLERS would manage to enter the market How would this impact CONSUMERS? Eventual lower prices/+ competitive supply of goods & services $$$
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- 52. An ADVANTAGE ofFREE ENTERPRISE SYSTEM WAYS of ORGANIZING BUSINESSES 3 Basic Types 1. Sole Proprietorships 2. Partnerships 3. Corporations Can set up business in most profitable way
- 53. 3.Corporations can getloans/otherwise might not exist 1.Sole Proprietor – own boss/ take risks / $$$ • Which type is greatest in number? • Which has the greatest revenue? #1 2.Partners share responsibility/risk/$$$ #3
- 54. Many CORPORATIONS startedout as Sole Proprietorships/Partnerships GROWTH NEED $$$ Sell Stock Average Joe / an entrepreneur
- 55. MKT structures differ Freeenterprise system Degree of competition varies 1. # firms competing 2. Entry difficulty 3. # buyers 4. MKT info quality What are the 4 types of MKT structures
- 56. 1.Perfect Competition 2.Monopolistic Competition 3.Oligopoly 4.Monopoly Whichis also known as Pure Competition? #1 #1 #1 In which do sellers have identical products & no influence on price? Which is the most competitive? Which has 1 producer? #4
- 57. How MKTS are structured WHOCARES? COMPETITION SELLERS + responsive to CONSUMERS + Capable Producers are rewarded Scarce resources / used + efficiently BUYER gets BEST POSSIBLE price
- 58. SO if competition= lower prices Why have MONOPOLIES? LOGIC / Folks respond to incentives Example: Pharmaceuticals $$$/time in research Public benefits from new drugs Company recovers $$$
- 59. UTILITIES / Monopolies •Costly Startup • Multiple suppliers / unproductive • Better for consumer BUT by controlling available supply, monopolies can control market price. i.e. withhold output to drive price up SO government regulates what monopolies charge BELL TELEPHONE (AT&T) monopoly breakup Allowed other long-distance phone services into MKT
- 60. Now shall we goto page 165?