Competition and Monopolies for Texas Tech High

1. The 3 Stooges
Chapter 9 Lesson 4
Section 3 page 158
COMPETITION &
MONOPOLIES

2. WHO
encourages competition in the economy?
The government
encourages competition in the economy.
Federal laws & regulatory agencies
MONOPOLIES have no competition.
Can they be forced to act more competitively?
Example: Federal Trade Commission

3. ANTITRUST LEGISLATION
Followed the rise of big businesses

4. After the CIVIL WAR
fueled industrial
expansion

5. OIL
Drove competition out of business
&
Pressured customers NOT to buy from RIVALS
NOTORIOUS

6. Owned by
JOHN D. ROCKEFELLER
What was his secret? Is he to be placed on a pedestal for
others as a "CAPTAIN OF INDUSTRY?" Or should he be
demonized as a "robber baron." A ROBBER BARON, by
definition, was an American capitalist at the turn of the
19th century who enriched himself upon the sweat of
others, exploited natural resources, or possessed unfair
government influence.
America's first billionaire.
http://www.ushistory.org/us/36b.asp

7. Got Standard Oil’s board members
onto boards of rivals
SOessentially the same people controlled both companies
= reduced temptation to compete with each other
INTERLOCKING
DIRECTORATE
= Majority of 1 board serves as board of rival company

8. Growing public pressure
Against his oil monopoly, or trust.
1890
Congress passes the Sherman Antitrust Act
Important ANTITRUST LEGISLATION
= Federal & state laws preventing new monopolies from
forming & breaking up those already existent

9. Sherman Antitrust ActVAGUE
1914 Country
needs
better
antitrust
provisions
Prohibits/limits certain specific business practices that
lessened competition substantially.
The
Clayton
Act
substantially  UNCLEAR!
Federal government decides if the merger of 2
corporations will lessen competition.

10. Table page 159 Antitrust
Legislation
Federal Laws
& Functions

11. Sherman Antitrust Act
1890
Outlawed agreements & conspiracies
restraining interstate trade.
Illegal to monopolize
any part of interstate
commerce.
Even attempts.

12. CLAYTON Act 1914
PRICE DISCRIMINATION restricted
?
Selling a good
at different
prices to
different
people
Sellers cannot prevent
buyers from dealing with
competitors.
OUTLAWED
1.
2.
Interlocking
directorates
betw. rivals
Mergers that
substantially reduce
competition

13. Set up the FTC / an independent antitrust agency
19 14
To take
private
companies
to court
for unfair
trade
practices

14. ROBINSON-PATMAN ACT 1936
Amendment to the Clayton act of 1914
STRENGTHENEDLaw against charging different prices for same
product to different buyers

15. Celler-Kefauver ANTIMERGER Act
1950
STRENGTHENEDLaw against firms joining together to CONTROL
too large a part of the market

16. Hart-Scott-Rodino ANTITRUST IMPROVEMENTS Act
1976
1. Restricted mergers
that would reduce
competition
2. Required big corps.
planning to merge to
notify the FTC /Dept. of
Justice, who’d decide
whether to challenge
the merge under the
terms of the Clayton
act of 1914

17. In general ANTITRUST LAWS address the harmful effects
of mergers
r
a combined co. resulting when
one corp. buys more than ½ the
stock of another, thus gaining
control of 2nd corporation.
3 TYPES of MERGERS
1. Horizontal
Large corp. made up of
smaller corps dealing in
unrelated businesses
p. 160
2
V
e
r
t
I
c
a
l
3.Conglomerate
What’s that?

18. HORIZONTAL
Two corps. in same business merge
1 brewery buys out another
EXAMPLE:
2 supermarkets, 2 food manufacturers

19. V
E
R
T
I
C
A
L Two corps. involved in a supply chain merge
EXAMPLE: Food
manufacturer
& a farm
Google acquired
mobile-device
maker Motorola
Mobility & will
make smart
phones and
television set-
top boxes.
AMAZON’s Kindle
Fire tablet
represents its
bridge between
hardware & e-
commerce.
ORACLE
bought Sun
Microsyste
ms & now
champions
engineered
systems
(integrated
hardware-
&-software
devices).
Software
giant
Microsoft
now makes
hardware for
its Xbox
gaming
system
http://bu
siness.tim
e.com/20
12/03/16
/how-
apple-
made-
vertical-
integratio
n-hot-
again-too-
hot-
maybe/

20. CONGLOMERATE
HUGE
4 or more unrelated businesses
Example:
P&G
FOOD
Pringles
MAKEUP
Cover
Girl
LAUNDRY
DETERGENT
TOOTHPASTE

21. Mergers on
page 161
HORIZONTAL
V
E
R
T
I
C
A
L
CONGLOMERATE

22. DAIMLER-BENZ

23. HORIZONTAL
MERGER
Which kind of merger?

24. ANDREW CARNEGIE
From rags to riches
Born in Scotland, emigrated to the States at the age of 13

25. CARNEGIE STEEL COMPANY
bought
?

26. Mines

27. RAILROADS

28. SHIPS

29. Which kind of merger?
V
E
R
T
I
C
A
L
CARNEGIE STEEL COMPANY

30. One of the highest profile
philanthropists of his era
With his fortune, he built Carnegie Hall, and founded
the Carnegie Corporation of New York, Carnegie
Endowment for International Peace, Carnegie
Institution for Science, Carnegie Trust for the
Universities of Scotland, Carnegie Hero Fund, & the
Carnegie Museums of Pittsburgh, among others.
Carnegie Mellon University
Pittsburgh, PA
en.wikipedia.org/wiki/Andrew_Carnegie

31. LAST, but not least
Conglomerate Merger
4 or more unrelated businesses
Example:
Famous examples from the 1960s include Ling-Temco-Vought, ITT
Corporation, Litton Industries, TextroTeledyne, Gulf+Wester, AT&T, and
Transamerica.
What’s
that?
Walt Disney Co. & ABC

32. Walt Disney Co. & ABC
Conglomerate Merger

33. PROCTER & GAMBLE
Which kind of merger?
CONGLOMERATE
Cosmetics

34. PROCTER & GAMBLE
Food

35. PROCTER & GAMBLE
Personal Care Products

36. Household Care Products
Laundry Detergent
PROCTER & GAMBLE

37. Household Care Products
DISH DETERGENT
PROCTER & GAMBLE

38. Gov. uses antitrust laws to foster
competition
What else is used?
Direct
regulation of
business pricing
& product
quality.

39. Table 17 page 161
REGULATORY AGENCIES
Exist at LOCAL,
STATE &
FEDERAL levels
Oversee
many
industries
&services

40. FEDERAL TRADE COMMISION 1914
Regulates:
2.Unfair competition methods
in interstate commerce
3.Fraud in advertising
FTCstands for

41. FOOD & DRUG ADMIN. 1927
Regulates P_____ & S_____PURITY SAFETY
Deals with
1. F
2. D
3. C
FOOD
DRUGS
COSMETICS
stands for

42. FEDERAL COMMMUNICATION COMMISSION
FCC
REGULATES TV/radio/telegraph/phone
Partial- satellite transmissions & cable TV
1
9
3
4
stands for

43. SECURITIES & EXCHANGE COMMISSION

44. Equal Employment Opportunity Commission
1964
EEOCaims to reduce Discrimination based on
1.
2.
3.
4.
5.
Religion
Gender
Race
Nationality
Age

45. Occupational Safety & Health Admin.
1970
Regulates the Workplace
Ensures workers have safe & healthful working conditions

46. EPA
1970
Develops/enforces standards for:
AIR, WATER, & TOXIC WASTE

47. NRC
Nuclear Regulatory Commision
Regulates nuclear power industry
Licenses & Oversees the 1 / 2 / 3
1974
Design/Building/Operation of Plants

48. page 162
Government regulations aim to promote efficiency & competition
WASN’T HAPPENING IN THE 80’s/90’s
Government reduced regulations/control over business
WHY?
Regulations had actually DECREASED the competition

49. Which
Regulatory
Agency?
FCC
Federal Communications Commission
Example of deregulation
Competitive Pay-TV, Cable & Satellite systems
followed deregulation

50. What would happen to PRICES if
the government quit it’s role of
MERGER WATCHDOG
What would happen IF profits became + high?
More SELLERS would manage to enter the market
How would this impact CONSUMERS?
Eventual lower prices/+ competitive
supply of goods & services
$$$

51. Winding up
page 163
Discussion/Exercises

52. An ADVANTAGE of FREE ENTERPRISE SYSTEM
WAYS of ORGANIZING BUSINESSES
3 Basic
Types
1. Sole Proprietorships
2. Partnerships
3. Corporations
Can set up business in most profitable way

53. 3.Corporations can get loans/otherwise might not exist
1.Sole Proprietor – own boss/ take risks / $$$
• Which type is greatest in number?
• Which has the greatest revenue?
#1
2.Partners share responsibility/risk/$$$
#3

54. Many CORPORATIONS started out as
Sole Proprietorships/Partnerships
GROWTH
NEED $$$ Sell Stock
Average Joe / an entrepreneur

55. MKT structures differ
Free enterprise system
Degree of competition varies
1. # firms competing
2. Entry difficulty
3. # buyers
4. MKT info quality
What are the
4 types of
MKT structures

56. 1.Perfect Competition
2.Monopolistic Competition
3.Oligopoly
4.Monopoly
Which is also known as Pure Competition? #1
#1
#1
In which do sellers have identical products & no
influence on price?
Which is the most competitive?
Which has 1 producer? #4

57. How MKTS
are structured
WHO CARES?
COMPETITION
SELLERS + responsive to CONSUMERS
+ Capable Producers are rewarded
Scarce resources / used + efficiently
BUYER gets BEST POSSIBLE price

58. SO if competition = lower prices
Why have MONOPOLIES?
LOGIC / Folks respond to incentives
Example: Pharmaceuticals $$$/time in research
Public benefits from new drugs
Company recovers $$$

59. UTILITIES / Monopolies
• Costly Startup
• Multiple suppliers / unproductive
• Better for consumer
BUT by controlling available supply,
monopolies can control market price.
i.e. withhold output to drive price up
SO government regulates what monopolies charge
BELL TELEPHONE (AT&T) monopoly breakup
Allowed other long-distance phone services into MKT

60. Now shall we
go to page
165?