Economics / Unit 5: Market Structures and Competition
5.6 Antitrust Laws and Regulation
Notes
Antitrust laws aim to promote competition and stop businesses from abusing market power.
- Sherman Antitrust Act (1890): banned contracts and combinations that restrain trade and banned attempts to monopolize.
- Clayton Antitrust Act (1914): banned specific practices and allowed the government to block mergers that would greatly reduce competition. The Federal Trade Commission (FTC) was also created in 1914.
- Standard Oil was broken up in 1911. AT&T's phone monopoly was broken up in 1984.
- Today the Justice Department and the FTC review large mergers and can sue to stop them.
- Regulation sets rules for business conduct, such as safety standards. Deregulation removes rules to encourage competition; for example, the Airline Deregulation Act of 1978 let airlines set their own fares and routes.
- Supporters of regulation say it protects consumers and workers; critics say too much regulation raises costs and slows innovation.
Practice
The Sherman Antitrust Act of 1890 was designed mainly to:
It was the first major federal law against monopolies and trusts.
Two of the three largest cell phone companies plan to merge. Which agency would most likely review the deal for its effect on competition?
These agencies enforce antitrust laws and can challenge mergers.
The Airline Deregulation Act of 1978 is an example of:
Airlines gained freedom to set fares and routes, and new airlines entered the market.
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