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Chapter 5 GOVERNMENT REGULATION OF COMPETITION AND PRICES

Chapter 5 GOVERNMENT REGULATION OF COMPETITION AND PRICES. Power to Regulate Business. Regulation by government has occurred primarily to protect one group from the improper conduct of another group.

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Chapter 5 GOVERNMENT REGULATION OF COMPETITION AND PRICES

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  1. Chapter 5GOVERNMENT REGULATION OF COMPETITION AND PRICES

  2. Power to Regulate Business • Regulation by government has occurred primarily to protect one group from the improper conduct of another group. • Until the middle third of this century, regulation of business was primarily directed at protecting competitors from misconduct of other competitors. • Beginning with the middle third of this century, regulation expanded in the interest of protecting consumers.

  3. Power to Regulate Business • The Sherman Antitrust Act prohibits conspiracies in restraint of trade and the monopolization of trade. • The Clayton Act prohibits mergers or the acquisition of the assets of another corporation when this conduct would tend to lessen competition or give rise to a monopoly.

  4. Regulation of Markets and Competition • Regulation of Prices. • Prohibited Price Fixing (Section 1 of Sherman Act). • Prohibited Price Discrimination (Clayton Act & Robinson-Patman Act). • Permitted Price Discrimination. • Prevention of Monopolies and Combinations (Sherman Act). • Monopolization (Market Power). • Tying.

  5. Power to Protect Business • Some industries are exempt from the Sherman Act. • To be illegal, restraint of interstate commerce must be unreasonable. • Court applies the “rule of reason”.

  6. Remedies for Anticompetitive Behavior • Criminal Penalties. • Sherman Act provides for fine or imprisonment. • Up to $10 million for corporation. • Up to $350,000 and/or prison up to three years. • Civil Penalties. • Individual treble damages. • Class Action suit.

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