Monopolies are market structures that take advantage of the entire market for given product/service and control dynamics in the market. Monopolistic rights confer numerous business advantages to product/service providers. On the part of a consumer, however, monopolistic business is likely to oppress a consumer since they are free to set price and even quality of product/services (Choi, 2007). The United States has set up regulations that ensure a consumer is protected from illegal activity of such businesses.
The antitrust law was set up by both federal and state governments. There are various legal acts that are specific to different stipulations of the law such as the Sherman Act, Clayton Act, and the Robinson-Patman Act, which is also the enabling legislation for the Federal Trade Commission. It was first set in 1890, when the first part of the Sherman Act was implemented. It is set to protect a consumer and enhance fair competition in the market (Kwoka & White, 2003). This leads to a healthy growth of the economy. Therefore, federal and state governments control the economy (Evans, 2002).
Public Policy Considerations for Antitrust Law
According to public policy considerations, the antitrust laws are enacted to provide fair business activity and hinder civil violations.
The Clayton Act deals with the issue of mergers. Mergers are business contracts that bind two individual companies. A merger means that market will be dominated by one provider. This will create a monopolistic market for newly formed merger implying that a customer is at risk (Koki & White, 2003).
The Sherman Act which is the original antitrust law that was set in 1890 aims at preventing monopolies by preserving open and free competition. According to the public policy consideration in this case, competitors aim at giving quality services at a low cost in order to win a larger market share (Kwoka & White, 2003). All this is in favor of a consumer. However, the flip-side is a situation that is difficult to control. Therefore, the antitrust law seeks to protect a consumer but not a competitor.
The Robison Patman Act on its part addresses the issue of price discrimination that comes about when competitors aim to gain a larger market shares (Kwoka & White, 2003). Pricing is a marketing strategy. A provider can tap a target market by altering the methods in which shelf-prices are determined. For instance, if a company has a large cash reserve, it can make lower shelf prices so that a consumer is attracted to buy specific product. By providing a product at such a price for a reasonable amount of time, a provider gets customer’s loyalty and monopolistic powers on the market.
The first part of the Sherman Act protects a customer against certain anticompetitive agreements that are done on the part of competitors. Like in the case of the Clayton act, the threat in this case is evident taking into considerations competitors who control a larger portion of the market share. Since they are restrained from forming mergers, such companies could decide to manipulate market in other ways (Kwoka & White, 2003). For instance, if they split market in the way that each company controls its portions, monopolism will still exist. This act, therefore, mandates the Federal Trade Commission to review contracts that companies make and ensures that they do not violate rights of consumers or customers..
The Cartwright Act in California deals with other rules concerning the protection of consumer from competitors. It provides norms of making contracts between buyers and sellers. The act demands that providers supply goods that are up to standard and bear a mark of quality. The act also requires that consumers should know their rights. For instance, they should know about warranties and make claims when they deem necessary. They should know the quality of products they intend to purchase before they do so. The same act protects consumer form false advertising on the part of competitors. They may use advertising as a luring tool to gain trust and loyalty of a potential buyer (Kwoka & White, 2003).
The Case of Gasoline
Company that sells gasoline for less cost violates the antitrust law since one is believed to have the intention of restraint of trade for other competitors. It is a violation of the Robison Patman Act by price discrimination (Kwoka & White, 2003). If a company intends to sell gasoline at a low price, it will be required to express their intent and provide arguments to the Federal Trade Commission, which will evaluate the case and make a decision on the same (Choi, 2007).
The Federal Trade Commission (FTC) and the U.S. Department of Justice Antitrust Division are two bodies responsible for enforcing the antitrust law and overseeing corporate trade practices perform an important function in regulating economy.
However, there are limitations to the rule. These have been listed as agricultural corporations, labor unions and banks. In addition joint agreements and mergers that concern professional football, basketball, baseball, and hockey leagues also fall under this exception to the rule.
Some laws allow certain set of companies to have an exception to the antitrust law. For instance, the Newspaper Act of 1970 allows for antitrust immunity, though limited to newspapers (law.cornell.edu).
Moreover, government under some considerations may grant monopolies. For instance, in a case when other competitors are deemed totally impractical industries like infrastructure and utilities have monopolistic companies (Evans, 2002).