Antitrust
September 17, 2009

Tonight’s Agenda
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Role Call
Review of Last Week, Current Events
Antitrust
Case Study: DeBeers
Wrap Up

Review of Last
Week

“People of the same trade seldom meet together, even for merriment and division, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
-- Adam Smith

“Perfectly Competitive Market”
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Consumers well-served.
Receive goods at lowest price possible.
Society able to choose among competing good with maximum efficiency.
Firms that do not produce what consumers want at a fair price are quickly eliminated.
Highly restrictive model applying stringent standards. Antitrust
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Perfect competition model is essentially static. Real world markets are extremely dynamic.
Perfect competition model is unsuitable as a benchmark.

Antitrust Laws
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Promote a competitive economy by prohibiting actions that restrain, or are likely to restrain, competition and by restricting the forms of market structure that are allowable.
Limit the activities of firms that have legally obtained monopoly power.
Intended to provide a general statutory framework to give the Justice Department, the FTC, and the courts wide discretion in interpreting and applying them. The Development of Antitrust
Laws
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Trust was a device for pyramiding control over several operating companies.
The Sherman Antitrust Act (1890) -- Enforced by the Department of Justice.
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Trust busting
Mainstay of US policy on competition

Federal Trade Commission Act (1914)
Clayton Act (1914)
-- Enforced by the Federal Trade Commission
(FTC)

Sherman Antitrust Act
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Passed in 1890
Prohibits contracts, combinations, or conspiracies in restraint of trade.
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Price fixing.
Parallel