Week 14 - Antitrust and Anti-Competitive Behavior

8/14/2019 Week 14 - Antitrust and Anti-Competitive Behavior

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Find examples in China of:Mergers

Acquisitions

Spin-offsDivestitures

Joint Ventures





To make businesses compete fairly

Why?



Consumers - through lower prices,

better quality and greater choice.

Businesses - by giving them the

opportunity to compete on price and

quality, in an open market and on a

level playing field, unhampered by

anticompetitive restraints.



U.S. EU ChinaWhat islawcalled?

Anti-Trustlaw

Anti-CompetitionLaw

Anti-MonopolyLaw

Who/What is themainfocus?

Howactions of onebusinessaffectotherbusinesses

How actionsof abusinessimpactconsumers

Mergersbetweencompanies



Generally a company must have atminimum a 50 percent share in aproperly defined relevant market.

American antitrust law permits acompany to hold a monopoly, but itforbids a company from

leveraging its dominance torestrict competition.



When only one firm provides a productor service, and

it has become the only supplier not

because its product or service is superiorto others, but by suppressing

competition with anticompetitive

conduct.

The Act is not violated simply when one

firm's vigorous competition and lower

prices take sales from its less efficient

competitors - that is competition working



Four main areas:

2.agreements between competitors

3.contractual arrangements between

sellers and buyers

4.the pursuit or maintenance of monopoly power

5.Mergers that threaten thecompetitive process



An agreement among competitors toraise, fix, or otherwise maintain theprice at which goods or services are

sold. All companies raise prices bythe same amount or to the sameprice.



Companies accused: Hershey,Cadbury, Mars and Nestle.

Together they control 75 percent of the

U.S. chocolate market. Accused of conspiring to raise

chocolate candy prices by about 10percent in December 2002, 6 percent inDecember 2004 and 5 percent in April2007.



British Airways and Virgin Atlanticagreed to settle a U.S. price-fixing suit

over fuel surcharges

Sharp, LG, and Chunghwa Picture Tubespled guilty to charges that they

collaborated to fix the price of LCD

displays, including those for the AppleiPod, Motorola Razr phone, and Dell

products.



An arrangement or agreement inwhich a seller will sell a product to a

buyer only if the buyer will also buy

another product.Example: requiring a bookstore to buy

an unpopular title before allowing them

to purchase a bestseller.



by being forced to buy anundesired good (the tied good) inorder to purchase a good they

actually want (the tying good). They would prefer that the goods besold separately.



Charge – Consumer must buy iPod inorder to download iTunes.

Apple has an 80 percent share of the

market for legal digital music filesand more than 90 percent of themarket for portable hard-drive digital

music players.



What was Microsoft accused of doingin the U.S. case?



Microsoft abused monopoly power inits handling of operating systemsales and web browser sales.

Can Microsoft lawfully integrateother pieces of software intoWindows?

Who is harmed if Microsoft does this?



In 1998 Microsoft’s web browser,Internet Explorer, was a small playercompared to Netscape and other

browser programs. By the end of 2006, Netscape’smarket share of browsers had fallen

from over 90% in the mid 1990s toless than 1%.

Why?



Microsoft had “bundled” its InternetExplorer program into Windows, soevery Windows user had a copy of IE.

This unfairly restricted the market forcompeting web browsers that wereslow to download over a modem or

had to be purchased at a store.



offering several products for sale asone combined product.



Merging of Microsoft Windows andInternet Explorer was the result of innovation and competition

The two programs were now thesame product and impossible todisentangle or untie, and

Consumers were now getting all thebenefits of IE for free.



The browser was still a distinct andseparate product which did not needto be tied to the operating system.

IE was not really free because itsdevelopment and marketing costsmay have kept the price of Windows

higher than it might otherwise havebeen.



Break up Microsoft into 2 companies–Operating System

Software Overturned on appeal Settlement required Microsoft to

share its application programminginterfaces with third-party companiesso they could write programs that

would work on Windows.



Did not require Microsoft to removeits web browser from its Windowsoperating system.

So – Microsoft was free to add(bundle) other software into Windowsin the future.

Did it do this?



Trying to extend its desktopmonopoly into the market forworkgroup servers. How? By

keeping secret the code that letsthese two types of computers “talk”to each other.

Involved bundling Windows MediaPlayer into Windows.



Microsoft ordered to offer both aversion of Windows without WindowsMedia Player and the information

necessary for competing networkingsoftware to interact fully withWindows desktops and servers.



What is the battle between these twogiants?

What is each good at?



Microsoft – dominant position inweb-browser and operating systemsoftware

Google – dominates internet-searchbusiness



June, 2007 – Microsoft agreed tocreate a way for users to choose adefault desktop search engine. Case

dismissed.



Level playing field (para. 7)- fair

competition, where no advantage is shownto either side.

(Comes from the requirement for fairness ingames which are played from end to end of a field and where a slope would give oneteam an advantage)

In the wake of (para. 16)- as a result of,

following directly Struck a deal (para. 16)- reached an

agreement



To squash (para. 25)- to overcome (adifficult situation), often with force

Play its trump card (para. 25)- use anadvantage, weapon, etc., that is kept in

reserve until needed Arguments will be raging (para. 27) -

very intense discussions or arguments Cry foul (para. 27) - to say that

something which has happened is unfairor illegal

In tandem (para. 29) - one following or

behind the other; at the same time

Week 14 - Antitrust and Anti-Competitive Behavior

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