...compete, they illustrate competitive prices and are motivated to demonstrate innovation and produce a product of higher quality as well as opening opportunities for the creation of jobs and new products to the market. However, sometimes individuals create a cartel in order to manipulate the market and the consumers to benefit solely the producers-they are essentially the polar opposite of competition. Cartels arise when a group of firms, or producers, decide to work together so that they may regulate the supply of a good or service and drive up the price. This eliminates any competition between manufacturers as they enter upon an agreement with one another and cooperate in terms of setting prices and restricting output. The individual firms work together and act as one firm, behaving similarly to a monopolist. The graph below illustrates how a cartel lowers output to raise the price and create a profit: When the individuals in the cartel cooperate with one another and lower their quantity from Qc to Qo, the price rises from Pc to Po and the firms now reap the rewards of areas “1” and “3” as profit. In comparison, when there is no cartel and the firms are competitive with one another, the quantity will rise back to Qc, the price will lower to Pc, and the firms will profit areas “3” and “4”. When an individual participates in a cartel, they violate section 4 of the Competition Act 2002: “Section 4(1) prohibits and renders void "all agreements between undertakings, decisions by...
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...Who Enforces the Antitrust Laws? The antitrust laws are enforced by both public and private parties. A. Government Enforcement The United States Department of Justice Antitrust Division (“DOJ”) and the Federal Trade Commission (“FTC”) share responsibility for investigation and litigation of cases under the Sherman Act; and, review potentially anticompetitive mergers under the Clayton Act. There is not a formal system by which the DOJ and the FTC divide enforcement responsibilities, the agencies devote resources to particular industries where they have investigated or litigated in the past. Typically the DOJ will review mergers in transportation industries, such as airlines or railroads, as well as the telecommunications industry. The FTC focuses its enforcement responsibility in the oil and gas, pharmaceutical, and health care industries. State attorneys general have authority to enforce federal and state antitrust laws. States investigating a matter arising under the federal antitrust laws will jointly investigate with either the DOJ or the FTC, or may conduct a separate investigation. Individuals or businesses that violate antitrust laws are subject to civil penalties that vary by state per violation for individuals, and vary by state per violation for corporations. In addition, state attorneys general have authority to seek restitution on behalf of the citizens of their states as a result of violations of either the federal or state antitrust laws. Some states allow Attorneys...
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...an antitrust law, the outcome must be determined by the courts, leaving the results open to subjective interpretation given the circumstances. Because these laws are general outlines for acceptable business practices, there are ways that they can be circumnavigated. Despite these challenges, antitrust laws are effective in reducing, although not eliminating, unethical business practices in the U.S. However their reach does not extend to many aspects of international business. The Sherman Act, passed by Congress in 1890, (“The Antitrust Laws,” n.d.) protects against a restraint of trade. In other words, it restricts individuals or businesses from carrying out a particular policy or agreement that prevents other businesses from competing fairly for a portion of the market. Non-compete agreements are one example of business practices that are called into question as they apply to this law. When a business wants to purchase one or a number of its competitors’ operations, The Sherman Act aims to prevent the purchasing company from restricting the sellers’ ability to compete in that market by another means. For example, the purchaser may not mandate that...
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...inferior products and artificially inflated prices for the consumer and is at times accomplished through unlawful collusion between competitors. A fair and open market where businesses compete in a non-monopolistic environment brings economic efficiency as businesses are encouraged to find more efficient methods of production stay in the market. Inefficient firms that fail to understand consumer needs, eventually lose in the market. If open market competition was nonexistent, cartels and monopolies would be free to distort the allocation of society’s resources for economic profit in the long run. This would result in economic loss to consumers as well as competitive harm to the economy. In the United States, the basic federal antitrust laws are: The Sherman Act of 1890, the Clayton Act (1914) and the Federal Trade Commission Act of 1914. The Sherman Act prohibits the restraint of trade and the creation of monopolies and is an important part of economic legislation in the United States. The Sherman Act prohibits any agreement among competitors to fix prices, rig bids or engage in other competitive activity. Corporations or individuals in violation of the Sherman Act face large fines and/or imprisonment and must make restitution to the consumers for overcharges. The Clayton Act of 1914 is a supplement to the Sherman Anti-trust act. It deals with specific types of restraints including exclusive arrangements, tie-in sales, price discrimination and mergers and acquisitions...
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...when received! * Liability for lost credit cards: $50 * Liability for lost ATM or Debit cards. Errors in billing. Fair Credit Reporting Act * Notification if denied credit or insurance on the basis of a credit report * On written request credit agency must Protection for debtors: The Fair Debt Collections Practices Act * This law place limits on what the professional debt collector can do when trying to collect money from you The Sherman Act of 1890: Two major parts * Sec. 1: restraint of trade * A. Per se violation * B. Rule of reason: factors… * Purpose of agreement * Power to achieve purpose * Horizontal restraint * Price fixing * Group boycott * Division of markets * Trade associations (OK) * Can’t use that organization to price fix, can’t set your prices * Vertical restraints (rule of reason) * Territorial...
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...practices. With anti-trust laws in place we are then warranted a since of security from unfair and anti-competitive business practices, unreasonable trade, and price discrimination. As though anything new that is introduced, laws and or regulations when newly introduced can become the product of skepticism. Typically the judgmental ears question the new laws purpose and what influence it will have, even though these new laws may be intended to foster fair and or competitive business practices. Although most of us do not recognize their value, anti-trust laws affect our daily lives in a multiplicity of ways. In 1890 Congress ordained the Sherman Antitrust Act, a law designed to restore competition and free enterprise by breaking up monopolies. This Act July 2. 1890 states the following: “This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.” The novel purpose for Sherman’s Act was to protect consumers from big business that was exercising immoral means to raise the prices of their product falsely, for example producing too few goods to help meet the consumers needs thereby driving up the products value and price. The government has throughout the years introduced new laws to help protect both the trade industry and consumers. In 1914 Congress passed two more laws that...
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...1, 2. After trial, the court found Microsoft had violated Section 2 by unlawfully maintaining its monopoly in the market for Intel-compatible PC operating systems ("OSs") and by unlawfully attempting to monopolize the market for internet browsers, and that it had violated Section 1 by illegally tying its Windows operating system and its Internet Explorer ("IE") browser. The court ordered Microsoft to submit a plan of divestiture that would split the company into an OS business and an applications business, and ordered interim conduct restrictions. Microsoft, 253 F.3d at 45.” (Weil & McMillan, 2003). The Sherman Antitrust Act prohibits agreements, contracts, combinations, and conspiracies that result in inhibiting or restraining free trade. The act is very broad and can include relationships or agreements that result in price fixing. The Act attempts to either prevent monopolies or break up a monopoly that has been created. Antitrust statutes can be enforced by the federal government through the U.S. Attorney, Federal Trade Commission, through the attorney general of each state, or by individual action. The antitrust provisions of the Sherman Antitrust Act have been used against the railroad industry, the major oil companies, telecommunications, and more recently companies in the high tech industry such as Microsoft. (Mallor, et. al., 2010). Issues: Did Microsoft maintain a monopoly for their product (PC OS system) in violation of the Sherman Act Section 2? Did Microsoft...
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...practice laws or the Antitrust laws, I feel that they are effective. They are setup to make things somewhat fair in the business world and allowing companies to be competitive, at the same time protecting consumers. These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices (FTC). They also are setup to benefit the consumer, by having incentives for businesses to operate, keep prices down, and by keeping the quality up. These laws also, make it fair to the other companies and stop companies from monopolizing. By setting up the law of stopping monopolies, has also ensured there is effective economy. This was done in the late 1890’s with the Sherman Antitrust Act. The act's primary goal was to limit the expansion of monopolies, the restriction of free trade (competition) and the imposition of price fixing by industry members or any combination of business practices that led to the restriction of trade (Heakel, 2010). This allows for more competition, which has helped the consumer able to get the best price for their money and also allowing the consumer to have a choice in where to buy a product. So, basically there are many sellers busily competing against one another to sell a particular kind of product or service to paying customers, no seller will be able to take unfair advantage of the buyers, but rather each seller will be obliged to offer its goods or service on attractive terms, and each will be responsive and efficient in...
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...public prosecution of Santiago has imposed legal charges on the three main Drug Retailers of the country, Farmacias Ahumada (FASA), Cruz Verde and Salcobrand. These companies were charged of Collusion, it means that they decided to raise and fix the prices of their products in a similar way so they would had a bigger margin and take advantage of the competition and consumers. But the Drug Retailers where not the only ones, five Pharmaceutical Companies; Laboratorio Chile, Garden House, Medipharm, Recalcine and Grunenthal were also involved in this “agreement” and would face trial with the same charges. The consequences for this crime in terms of prison that the executives involved could have to face where 61 days to 3 years plus the determined fines. The Allegation made by the Chilean Economic authorities got all this investigation started, so the public prosecution would not be taking this matter lightly, through this fear and pressure these companies had to start thinking what are their statements going to be towards the prosecution arguments. FASA couldn’t take the pressure and during the investigation gave a confession declaring themselves guilty of all charges and dictating that there was an arrangement to establish the prices in a way that all companies were beneficiated. This statement was rejected by the other two companies and didn’t gave much credibility to the prosecution, in fact this was believed to be an strategy to reduce charges, so they decided to leave it in...
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...harms buyers who may have the opportunity to buy at competitive prices. It also reduces the production, which causes a deadweight loss. Excessive market power also raises issues of equity and justice, because if a company has too much monopoly power, it makes profit at the expense of consumers. A monopoly is a situation in which there is a single supplier or seller of a good or service for which there are no close substitutes. Economists and others have long known that unregulated monopolies tend to damage the economy by (1) charging higher prices, (2) providing inferior goods and services and (3) suppressing innovation, as compared with a competitive situation (i.e., the existence of numerous, competing suppliers of the good or service).[1] In theory, the Government or State could collect the excess profits that the company obtained through taxes and then redistribute it among the buyers of the product. However, this redistribution is usually not feasible. It is difficult to ascertain what proportion of the profits of an enterprise is attributable to monopoly power and it is even more difficult to locate all buyers and reimburse them an amount proportional to their purchases. How can society, then, limit the market power and prevent the anti-competitively use of it? In the case of a natural monopoly, i.e. an electricity/power company, the solution is a direct regulation of the price. But more generally, the solution is to prevent companies from...
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...Marketing, Advertising, & Product Safety 1.-the nature of advertising lotteries -they are a monopoly without competitors so they only have 2 strategies (1) recruit new players and (2) make existing players spend more -they chose second option to play into peoples gambling addictions -targeted lower income groups and were deceiving with their message by presenting only winning awards and not how much people lose -target poor because they have the most to gain and restrictions would deprive them of life changing opportunities -DECEPTION What did I learn about the case presentation? We learn that the marketing of lotteries is deceptive. A lottery has its own benefit and disadvantage that is selling hope and regressive form of taxation. The advertising of lotteries only focus on the maximum reward and it may attract consumers to buy lotteries who believes that lotteries would help them to become rich. The marketing of lotteries targeted most players with low educational experience. It will make the poor people more suffer rather than make them more rich or some sort of way out of their poor life. - What did I learn about myself? In our opinion, lottery is bad because it depends on the luck. If we want to gain something we must do our best and put some efforts. For me, buying lotteries maybe is one way to make you become rich. But why don’t we depend our own effort to become rich. - What are my thoughts about the issues discussed in tutorial? The advertisements of lotteries...
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...antitrust laws were put into act. The business owners were more often than less, only looking to make a profit no matter what that took. Thankfully, in 1890 Congress passed the first antitrust law, the Sherman Act as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” This law states that, “This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.” (www.ourdocuments.gov/, 2014) A law designed to restore competition and free enterprise by breaking up monopolies. The original intention of the Sherman Antitrust Act was to protect consumers from big businesses that were using unscrupulous means to raise prices artificially, such as intentionally producing too few goods to meet consumer demand and thereby driving up the products' value and price. (www.ftc.gov, 2014) Since then there have been other antitrust laws put into act such as, in 1914 when Congress passed an additional two antitrust laws called the Federal Trade Commission Act which created the FTC, and the Clayton Act. The Federal Trade Commission Act established a government commission aimed at preventing unfair and anti-competitive business practices....
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...chance of succeeding. (Bovee and Thill p. 39). We will discuss each of these laws throughout the paper and hopefully answer the question that was originally asked. The United States laws that are in place currently are typical effective as control measures to ensure fair business practices are followed. Determining the success or failure of specific legislation or regulations can be relative to what angle you are looking from. With anti-trust laws we are insured safeness from unreasonable trade, price discrimination and unfair and anti-competitive business practices. The Sherman Anti-Trust Act In 1890, Congress enacted the Sherman Anti-Trust Act, which is a law designed to restore competition and free enterprise by breaking up monopolies. The Act of July 2, 1890 (Sherman Anti-Trust Act) states that: “This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.” (The Act of July 2, 1890 pg. 1) The original intention of the Sherman Antitrust Act was to protect consumers from big businesses that were using unscrupulous means to raise...
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...detergent price fixing Unilever and Procter & Gamble (P&G), the consumer goods giants, have been handed a €315.2m (£280m) fine for their involvement in a pan-European price-fixing ring. By Jonathan Sibun The Telegraph, 13 Apr 2011 The European Commission (EC) found that the two companies, together with Germany's Henkel, had colluded to fix the price of washing powder in eight continental European countries between January 2002 and March 2005. Unilever Unilever has agreed to pay €104m and P&G €211m following the investigation which was launched in June 2008. The scale of the fines reflect the size of the groups' businesses in the eight countries. Henkel was spared a fine after it informed the EC of the cartel's existence. P&G's fine was reduced by 50pc after it co-operated with the EC's investigation, with Unilever receiving a 25pc reduction after subsequently also co-operating. "Companies should be under no illusion that the commission will pursue its relentless fight against cartels, which extract higher prices from consumers than if companies compete fairly," said Joaquín Almunia, EC vice-president. A Unilever spokesman said no one had been fired as a consequence of the EC investigation but that a number of the staff involved had left in the interim. The EC said the cartel was formed after the three companies worked together to improve the environmental impact of their products. "The environmental objective, however, did not require them to co-ordinate prices or other...
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...Price Fixing in the Auto Supply Industry Price Fixing in the Auto Supply Industry Introduction Antitrust laws are set into place with the goal of preventing monopolization, promoting competition within markets and allowing for the efficient allocation of resources. These goals are meant to support the economic well being of society by allowing for less of an efficiency loss, as well as less lost income from the consumer (McConnell, Brue & Flynn, 2012, p. 375). There are companies that break such antitrust laws, either knowingly or unknowingly, and therefore find themselves in the midst of an investigation. The Investigation of Tokai Rika Co. In early February of 2010, the Federal Bureau of Investigation raided the United States offices of three auto suppliers to auto manufacturers as part of an ongoing antitrust investigation (“Auto parts”, 2010). Price fixing and covert collusion through cartels results in new firms not entering the industry, excessive profit by those involved in collusion, as well as loss of income by the consumer (McConnell, Brue & Flynn, 2012, pp. 230-231). The suppliers involved are the only ones who benefit due to the maximization of their profits. Price-fixing is easiest within an Oligopoly where there are a few dominant producers; making discussion and cooperation in price setting is easier. The Investigation Results The FBI investigation of Tokai Rika CO. led to charges against the company of anti-competitive conduct; price-fixing...
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