What Is an Antitrust Policy?

The framework of antitrust policy is the accumulation of several major laws and a century of judgment. In recent years, with the exploration of economists, antitrust policy has evolved from the "big is bad" philosophy to economic antitrust. While emphasizing the inherent antagonism of oligarchs, economic analysis believes that only in a deregulated world can large companies have the most incentive to reduce prices and improve quality. Deregulation means that there are few restrictions on entering the market and the market is open to foreign competitors. In this regard, the reason why antitrust policy should be retained is because it also needs to deal with the worst abuse of market power.

Antitrust policy

Sherman Act (1890)

The "Civilian Party Movement" and its social calls in 1890 led Congress to pass the Sherman Act, making it the United States

Although the basic laws of antitrust are clear, it is not easy to apply them to specific market structures and enforcement methods. The actual law is developed through the interaction of economic theory and actual case law. ^[3]

Illegal behavior: Some of the earliest antitrust regulations dealt with illegal behavior. The court declared that certain types of collusion were illegal in nature and that there was no reason to justify such acts. Violators must not defend themselves on the pretext of pursuing a purpose worth pursuing or the need to alleviate difficulties. The most important violations in nature are agreements between competitors that set prices, limit production, or divide markets. Such agreements have the effect of raising prices and reducing output.

Other restricted acts include--

Predatory pricing: A business sells a product at a price below its production cost (commonly understood as marginal cost or variable average cost). The anti-predatory pricing view holds that "big companies can use their financing channels to lower prices, crowd out smaller competitors, and then raise prices."

Bundled contract or agreement: In this case, the company will only sell product A if the buyer purchases product B (the buyer needs product A).

Price discrimination: For some reasons that have nothing to do with cost or competition, companies sell the same products to different customers at different prices.

It is worth noting that these behaviors are illegal by themselves, not by the industrial structure in which they are located.

Structure: Although fixed pricing and other illegal acts are serious, the most obvious antitrust case is not related to the behavior, but to the structure. These cases may be for understanding large-scale companies or preventive anti-merger measures, the purpose of which is to cancel mergers between large companies already on the agenda. The first wave of antitrust activities in accordance with the Sherman Act focused on dissolving existing monopolies. In 1911, the Supreme Court ordered the American Tobacco Company and Standard Oil Company to separate into separate companies. At the same time, the Supreme Court announced an important "reasonable rule": Only unreasonable restrictions on trade (mergers, agreements, etc.) fall within the scope of the Sherman Act and should be considered illegal.