Question

3. Analyze the impact of an anti-trust law on real wage and structural production in the medium run.

Answer 1

Many countries have broad laws that protect consumers and regulate how companies operate their businesses. The goal of these laws is to provide an equal playing field for similar businesses that operate in a specific industry while preventing them from gaining too much power over their competition. Simply put, they stop businesses from playing dirty in order to make a profit. These are called antitrust laws. Antitrust laws also referred to as competition laws, are statutes developed by the U.S. government to protect consumers from predatory business practices. They ensure that fair competition exists in an open-market economy. These laws have evolved along with the market, vigilantly guarding against would-be monopolies and disruptions to the productive ebb and flow of competition.

Antitrust laws are applied to a wide range of questionable business activities, including but not limited to market allocation, bid rigging, price fixing, and monopolies. Below, we take a look at the activities these laws protect against.

If these laws didn't exist, consumers would not benefit from different options or competition in the marketplace. Furthermore, consumers would be forced to pay higher prices and would have access to a limited supply of products and services.

The Big Three Antitrust Laws

1. The Sherman Anti-Trust Act intended t prevent unreasonable "contract, combination or conspiracy in restraint of trade," and "monopolization, attempted monopolization, or conspiracy or combination to monopolize." Violations against the Sherman Anti-Trust Act can have severe consequences, with fines of up to $100 million for corporations and $1 million for individuals, as well as prison terms up to 10 years.
2. The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or deceptive acts or practices." According to the Supreme Court, violations of the Sherman Anti-Trust Act also violate the Federal Trade Commission Act. Therefore, even though the FTC cannot technically enforce the Sherman Anti-Trust Act, it can bring cases under the FTC Act against violations of the Sherman Anti-Trust Act.
3. The Clayton Antitrust Act addresses specific practices that the Sherman Anti-Trust Act may not address. According to the FTC, these include preventing mergers and acquisitions that may "substantially lessen competition or tend to create a monopoly," preventing discriminatory prices, services and allowances in dealings between merchants, requiring large firms to notify the government of possible mergers and acquisitions, and imbuing private parties with the right to sue for triple damages when they have been harmed by conduct that violates the Sherman and Clayton acts, as well as allowing the victims to obtain court orders to prohibit further future transgressions.

At their core, antitrust provisions are designed to maximize consumer welfare. Supporters of the Sherman Act, the Federal Trade Commission Act, and the Clayton Antitrust Act argue that since their inception, these antitrust laws have protected the consumer and competitors against market manipulation stemming from corporate greed. Through both civil and criminal enforcement, antitrust laws seek to stop price and bid rigging, monopolization, and anti-competitive mergers and acquisitions.