The Clayton Act also states that mergers that could create monopolies for a product or service are prohibited. The Federal Trade Commission Act deals with interstate commerce, but does not lay criminal charges. An open and free market is essential to a prosperous economy. When companies compete for customers, it gives them the benefits of greater choice, lower prices, better quality and more innovation. The laws of the competitive market are enforced by the FTC, the Federal Trade Commission. The antitrust laws they enforce benefit all consumers. Unilateral effects. The FTC often challenges mergers between competing companies that offer tight substitutes on the grounds that the merger will eliminate favorable competition and innovation.
In 2004, the FTC did just that by challenging a merger between General Electric and a competing company because the competing company manufactured competitive non-destructive testing equipment. To advance the merger, GE has agreed to divest its non-destructive testing equipment business. There are three companies in an industry, and all three decide to act tacitly like a cartel. Company 1 wins the current auction as long as it allows Company 2 to win the next auction and Company 3 the next one. Each company plays this game so that they all retain the current market share and price, thus preventing competition. Pricing is one of the most common ways in which people and businesses violate antitrust laws. Pricing occurs when competitors agree on the amount they charge for a product or service. Just because many competitors seem to charge the same price for a product or service doesn`t mean they necessarily set prices illegally.
Prices are often based on market conditions, and while a competitor may increase or decrease a price based on what someone else is asking for, this does not mean that both competitors have agreed to charge a specific price. This often happens, for example, at competing gas stations, as stations may increase or decrease their price because they have seen that the station across the street has done the same. Unless both stations have agreed to charge the same price for gasoline, this practice is not illegal. Antitrust laws protect competition. Free competition benefits consumers by guaranteeing lower prices and new and better quality products. In a freely competitive market, any competing company will generally try to attract consumers by lowering its prices and increasing the quality of its products or services. Competition and the associated profit opportunities also encourage companies to find new, innovative and more efficient production methods. Usually, when most people hear the term “cartel,” they think of monopolies. Monopolies refer to the dominance of an industry or sector by a firm or firm while eliminating competition. Violating antitrust laws has cost consumers billions of dollars.
When companies merge to create a monopoly on a product or service, a consumer has limited choice. The company can then charge whatever it wants for its product or service. The manipulation of the tender is mainly linked to the union of two undertakings to apply for a contract in order to ensure the final result of the award of the contract. This practice is costly for governments. Another way for companies to get consumers to pay more is to assign customers based on geographic or similar areas in order to reduce competition. The Sherman Antitrust Act was passed in 1890 and has since been considered the most important law in terms of competition in the free market. It prohibits “any treaty, any combination in the form of trust or otherwise or conspiracy, aimed at restricting trade or commerce between different states or with foreign nations.” This means that it is illegal for a single company to create a monopoly in an industry by engaging in practices that affect competition. Since 1890, the Sherman Antitrust Act has been considered the most important law that expresses our national commitment to a free market economy in which competition without private and governmental restrictions leads to the best results for consumers. Congress cared so much about this commitment that there was only one vote against the bill. While it may seem that mergers allow large companies to become larger and charge consumers more, mergers can often be good for consumers and the economy. Indeed, the merged entity often becomes more efficient, allowing it to offer services to consumers at a lower price than if the two companies remained separate.
In addition, companies sometimes struggle to operate independently, but when two companies merge, the larger company can become stronger. Vertical mergers. Mergers between buyers and sellers can improve cost savings and business synergies, which can lead to competitive prices for consumers. However, if the vertical concentration may have a negative impact on competition because a competitor does not have access to the supplies, the FTC may impose certain provisions prior to the completion of the concentration. For example, when it acquired an ethanol termination operator, Valero Energy had to divest certain businesses and form an information firewall. In other cases, mergers can make markets less competitive, hurt consumers by restricting choice and raising prices. .