This essay has been submitted by a law student. This is not an example of the work written by our professional essay writers.
Published: Fri, 02 Feb 2018
Controversy Over Labor Unions
Antitrust laws have always been perceived as ill-defined and sometimes controversial part of law. Whether economic or consumer wellbeing is its fundamental concern is still in question. Over the last decade it has become a major issue in business and this has led to creation of policies and laws to enable its enforcement. Antitrust laws are described as a collection of laws that ban anti-competitive activities (cartels) and unjust business activities (John B Baker, 2008).
There is no considerable uncertainty among economists that anti trust and competition laws have rooted themselves in many industrialized nations as a fundamental part of business procedure that contributes significantly to the enhancement and prosperity of countries. Nevertheless, the issue of how significant these gains of competition laws and procedures (considering the costs and overheads), has not until now gained interest from vast research by financial analyst and economists.
Proponents of antirust laws have greatly supported the Sherman act which addresses the behavior of multi-firms. It states that ‘’ each business combination in the appearance of a conspiracy or trust which is in restraint of commercial dealings will be prohibited’’
Sherman act supporters distinguish firms into two categories i.e. single firm and multiform. They see multi firms conduct to have more probable negative outcome than single firms. The Sherman act gives remedy to these negative effects of cartels but the ban does not attack monopoly tendencies but only when monopoly power is not gained by use of prohibited behavior (William Brett, 2006). Majority of companies would not favor rival companies and only want to maximize their profits thus forming a monopoly is usually preferred in order to achieve this goals. This is allowed except when the techniques used are not make consumers to be in a worse position. Gaining monopoly power is not prohibited; to the contrary a thriving competitor cannot be punished for being victorious. Therefore antitrust laws are not against monopolistic tendencies in a market as long as it’s achieved through having better skills in the industry.
Whereas the ban on anticompetitive behavior by multi firms oppose other policies “in restraint of trade” that on its own does not show that an agreement restrains commerce or trade. Under antitrust law, the degree of prohibition is restricted to only those arrangements which prove that restraint of trade is illogical.
Each arrangement regarding trade as well as each guideline of commercial trade can be controlled. The factual test of legality considers if the restraint applied simply regulates thus enhances competition or if it will purely stifle or even devastate competition.
Proponents of antitrust laws usually give examples of anticompetitive behavior such as evident price fixing. They place this type of behavior as obviously unfavorable to competition and that thorough analysis is pointless. Or else, antitrust plaintiffs must show, by “the specifics typical to the dealings to which the antitrust restraint is used”, the type of behavior challenged and state reasons why it is detrimental to competition among firms.(John N Vernon,2008)
Categories of activities that are frequently subject to antitrust analysis are:
Price fixing (ceiling or flooring): An arrangement among competing companies advertising and selling similar services or goods concerning pricing. Market allotment based on geography: An accord among competitors not to enter each other’s regions of operation. Rigging of bids: This is a category of market allotment and cost fixing that pertains to an arrangement whereby a faction of bidders will be chosen to succeed in the bidding process. Walker method fraud: This is the unlawful monopolization by preservation and illegal enforcement of a trademark or patent acquired through fraud.
Arguments in favor of antitrust laws are greatly influenced by consumer protection policies. Consumer protection policies mainly purpose to control categories of the business relationship among businesses and customers, for example by enforcing minimum principles of product quality, requiring all firms to reveal specific information regarding a service or product.(such as price, or warranty details), banning deceptive advertising, or liability regarding a product. Proponents of the antitrust laws argue that it’s the duty of governments to intervene in economies so as to ensure company practices are not detrimental to consumers or competing businesses.
On the other hand critics of antitrust laws argue that antitrust laws claim to stop monopolies and promote competition. Nevertheless, since their introduction, history has revealed that these laws don’t put a stop to monopoly power, but, instead, promote it by restricting competition. These rules allow the national authorities to control and limit commercial activities, including manufacture, pricing, and mergers, and service/product lines apparently in order to stop monopolies and encourage business competition (Fred .S Machesney ,2008). On the contrary, governments are seen as a basis of monopoly tendencies because it issues grants of legal benefits to unique interests within the economy.
The opponents of antitrust laws believe the solution for such monopoly tendencies lie in decontrolling and revocation of the antitrust laws. For example Microsoft is presently facing litigation charges for combining windows together with Internet Explorer and selling them as a single product so as to compel customers to use all Microsoft’s services. It is suspected that Microsoft is abusing antitrust rules since it does not permit people from installing some programs, instead of all critics of antitrust laws argue that consumers are contented to obtain an additional product at no further charges.
Opponents of antitrust also argue that the alleged rationale behind antitrust laws is to guard competition founded on the thought that an open uncontrolled trade will unavoidably enable the formation of monopoly powers. However, cartels cannot be formed in an open economy – the essential requirement of monopoly is well known to be closed entry only attainable government involvement through particular controls or subsidies. Critics argue that existence of impenetrable monopoly is only if they are sheltered by the state. Since the likelihood of substitution will always be there, intimidation by monopolists is non existent. Competing firms can expand alternatives for the monopolized commodity. Where there is no intimidation, others businesses can enter the industry and produce similar products. Concentration of industries frequently leads to greater competence on the part of 1 or several businesses in a particular industry. Therefore a decline in competitors is not automatically in restraint of trade except if it was achieved through deception.
Pricing has also stirred controversy predominantly among critics of antitrust action. They argue that if a business charges higher as compared to competing firms and it still draws customers, it is assumed to have monopoly power. On the other hand If a company imposes a lesser price then it is perceived to be trying to monopolize. And if a number of firms use similar prices government sees them as guilty of price-fixing. Either way if the prices are set at abnormally high levels, new competitors would enter the industry. In the long run, greedy setting of prices cannot exist since companies cannot incur losses for long durations and if the prices are afterwards increased then the hope of increased earnings will draw new entrants as well as closed businesses which can be reopened. Critics of antitrust laws also believe that there is no problem when it comes to price harmonization or other types of agreements for that matter. Firms which come together to maximize their earnings are similar to joint ventures, joint stock firms and partnerships (Charles. G Goetz 2008 ).. Furthermore, it is clearly known that monopolies formed through cartels are naturally unstable due to the inclination for the members within the cartel to deceive each other. There exists the likelihood that price harmonization may in fact progress the competence of the business activity because decrease of price inconsistency could decrease search expenses on the consumers side.
My opinion on antitrust laws is that they should be abolished. Antitrust limitations on acquisitions and mergers have the tendency of shielding present company assets and managers from the hope of proficient restructuring. There is no sinister motive in acquiring rival firms since no intimidation is involved. Mergers especially vertical ones are frequently prohibited on the bases that acquiring a raw materials manufacturer forecloses competitors of the manufacturer with regard to the raw materials supplies. Furthermore, it is frequently perceived that it isn’t right for a supplier of a product to unite with a retailer of the same product because this allegedly stifles competition in relation to distribution channels.
Deterrence of special distribution arrangements not only obstructs the growth of the nearly all efficient agreements for distributing products, but also obstructs a persons right to willingly bargain the most gainful contracts. Confidential deals should be completely accepted by law – there could be many other companies that are capable of producing rival products. Antitrust laws prohibit tying contracts –arrangements among sellers and buyers that tie the consumer to buy 1 or many more goods together with the one which the customer wants
In conclusion I believe that the methodologies most endangered by antitrust are the fundamental essentials of the competitive procedures. The results of antitrust limitations is to hurt customers and shield incompetent competitors. Antitrust directives are founded on an impractical economic model that assumes the composition of existing markets are similar to theoretical principle of perfect and pure competition model that is impossible to achieve in the real world. Antitrust laws will remain a controversial issue in business both in the short run and long run until they are amended.
Cite This Essay
To export a reference to this article please select a referencing style below: