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8/14/2019 Week 14 - Antitrust and Anti-Competitive Behavior
http://slidepdf.com/reader/full/week-14-antitrust-and-anti-competitive-behavior 1/30
Find examples in China of:Mergers
Acquisitions
Spin-offsDivestitures
Joint Ventures
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To make businesses compete fairly
Why?
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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.
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U.S. EU ChinaWhat islawcalled?
Anti-Trustlaw
Anti-CompetitionLaw
Anti-MonopolyLaw
Who/What is themainfocus?
Howactions of onebusinessaffectotherbusinesses
How actionsof abusinessimpactconsumers
Mergersbetweencompanies
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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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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What was Microsoft accused of doingin the U.S. case?
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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?
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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?
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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.
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offering several products for sale asone combined product.
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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.
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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.
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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.
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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?
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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.
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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.
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What is the battle between these twogiants?
What is each good at?
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Microsoft – dominant position inweb-browser and operating systemsoftware
Google – dominates internet-searchbusiness
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June, 2007 – Microsoft agreed tocreate a way for users to choose adefault desktop search engine. Case
dismissed.
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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
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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