ࡱ > Y [ X #` < bjbj5G5G .$ W- W- < @ @ @ @ T T 2 t t t t t t t t S S S S S S S $ RU h W S t t S t t S ; ; ; t t S ; S ; ; ; t h 1& @ . ; S S 0 T ; X 1 X ; ; X G t Z @ ; 4 B t t t S S 1 t t t T | | S An antitrust policy is the governments policy toward the competitive process. Although Americans generally are in favor of laissez-faire and government noninvolvement in business, there has simultaneously been a populist sentiment that fears bigness and monopoly. Trusts and cartels burst forth in the late 1800s. A trust or cartel is a combination of firms in which the firms have not actually merged, but act as a single entity. A trust sets common prices and governs the output of individual member firms. A trust can, and often does act like a monopolist. In the 1870s and 1880s, trusts were being form in railroads, steel, tobacco, and oil, as well as in many other areas of the economy. A number of acts were passed to curb monopolies. The first was the Sherman Antitrust Act. Public outage at the formation and activities and activities of trusts as standard oil led to the passage of the Sherman Act, the Clayton Act, and the Federal Trade Commission Act. The Sherman Antitrust Act of the 1890 was a law designed to regulate the competitive process. Its two main provisions are: A. Every contract, combination in the form of trust or otherwise, or conspiracy in restrain of trade or commerce.. is declared to be illegal. b. Every person who shall monopolize, or attempt to monopolize, or the combine or conspire with any other person or persons, to monopolize any part of the trade or commerce,,, shall be guilty of a misdemeanor. Three recent Antitrust Cases: a. The IBM Case: In 1967, the U.S. Department of Justice sued IBM for violation of antitrust laws charging that the company was unfairly bundling hardware, software, and maintenance services at a single price. b. The AT&T case: Up until 1982 AT&T was a regulated monopoly and controlled most long-distance and local telephone services. It also produced telephones and other communications equipments. AT&T was required to provide universal service so that it would not engage in cream skimming (providing service to low-cost areas and avoiding high-cost areas). In return for the control, AT&T was regulated by the FCC and state utility commissions. The AT&T case was resolved in 1984. c. The Microsoft case: Microsoft is the dominant player in the software industry, controlling over 50 percent of the world market for software and between 80 and 90 percent of the operating systems market worldwide. Since all software must be compatible with an operating system, Microsoft has an enormous competitive advantage for its other divisions. This led to calls for action, and the reports of monopolistically abusive acts by Microsoft, led the U.S. Justice Department to charge Microsoft with an antitrust violation. It charged Microsoft with: (1) Possessing monopoly power in the market for personal computing operating systems. (2) Tying other Microsoft products to its Windows operating system, and (3) Entering into agreement that keep computer manufacturers that install Windows, from offering software that competes with Windows software. Mergers, Acquisitions and Takeovers: The industrial structure of the U.S. economy has changed in the 1990s. The law allows firms to break up any way they like. Mergers on the other hand, must fall within the laws antitrust guidelines. Acquisitions and takeovers both result in the combining of the firms. Takeovers can be friendly or hostile. There are three types of mergers: horizontal, vertical, and conglomerate. A horizontal merger is the merging of two companies in the same industry. A vertical merger is a combination of two companies that are involved in different phases of producing the product. A conglomerate merger is the merging of two companies in unrelated industries. Industrial policy is an example of the government ownership in which government takes over the entire operations of a firm. In 1980s and early 1990s, some politicians argued that the country needs an industrial policy modeled on Japans MITI. In a way U.S. has always had an industrial policy. 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