Understanding U.S. Antitrust Laws: The Sherman and Clayton Acts and Their Impact
This presentation outlines key aspects of U.S. antitrust laws, focusing on the Sherman Antitrust Act of 1890 and the Clayton Act of 1914. It details the illegal practices targeted by these laws, such as monopolies, price-fixing, and tying contracts. The Southwest also examines horizontal and vertical mergers, explaining how they can limit competition. The Herfindahl Index is introduced as a tool for measuring monopoly power, guiding government decisions on mergers. The presentation highlights notable blocked mergers like Staples and Office Depot and more.
Understanding U.S. Antitrust Laws: The Sherman and Clayton Acts and Their Impact
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Presentation Transcript
Micro Chapter 30 Presentation 1
Sherman Anti-Trust Act (1890) • All contracts, trusts, and restraints of free trade are illegal • Having or conspiring to have a monopoly is illegal • Also illegal to fix prices
Clayton Act (1914) • Strengthened the Sherman Act • Outlawed price discrimination • Prohibits tying contracts- when a producer requires you to buy one product and then another (Kodak requiring that they develop film) • Corporations can’t obtain a majority of their competition’s stock • No Interlocking Directorates- director of one firm can’t be on the board of his competition
Horizontal Merger (Integration) • When firms in the same industry merge and limit competition • EX- Exxon with Mobil
Vertical Merger (Integration) • A merger between firms at different stages of production • Ex- Oil company owning the oil wells, pipelines, oil refineries, and gas stations
Herfindahl Index • US government uses this when looking at monopoly power • Usually challenge a merger with index > 1800 • If the merger adds more than 100 points
Examples of Blocked Mergers • Staples and Office Depot • WorldCom and Sprint • DirectTV and Dish
