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Antitrust Laws Are Ineffective Essay

3930 words - 16 pages

Imagine a world where individuals can provide a good or service to consumers, and in return be compensated. They might do a very good job and even make a considerable profit. Other individuals, seeing the success of this industry, would try to enter the market in order to compete. This idea is the very basis of free market and capitalist economies. But sometimes there are situations where an individual will have a product or service that is better, cheaper, or quicker than everyone else; so much so that they are the only ones that can effectively provide it. When this occurs, competing businesses and giant government entities will stop at nothing to shut it down.
The Sherman ...view middle of the document...

The Clayton Act of 1914 was created to add further substance to the Sherman Act. The purpose of the Clayton Act was to help clarify the language of its parent Sherman Act. The Clayton Act prohibits mergers or acquisitions that are likely to lessen competition. The act outlawed specific practices designed to monopolize a market including price discrimination, exclusive agreements, tying contracts, mergers, and interlocking directorate. The act carries no criminal penalties.
To ensure consistent and predictable implementation of competition policy, the Federal Trade Act was created. The Federal Trade Commission Act of 1914, prohibits unfair methods of competition in interstate commerce, but carries no criminal penalties. It also created the Federal Trade Commission to police violations of the Act. (U.S. Department of Justice, 1996) The federal trade commission is made up of five bipartisan bodies that are appointed by the President of the United States.
Traditionally, the government did not interfere with businesses. Many of the founding fathers rejected any government interference in commerce, viewing such practices as tools for granting special privileges and excluding competition. As explained by economist Peter Dooley(2000), the British embraced “a system of government policy based on commercial favoritism, grants of monopoly privilege, restraints on trade, government subsidies, discriminatory taxes and similar forms of state intervention in the marketplace.” According to historian Norman Risjord(1994).This policy is called Mercantilism; where the nation prosperity is dependent upon its supply of capital; that lasted from the 15th -18th century. Author of the Declaration Of Independence and one of the founding fathers, Thomas Jefferson regarded this system as “an ‘unnatural’ policy that provided government awards to ‘parasites.’”(Risjord, 1994)
These awards spawned enduring monopolies, created and protected by the government. The United States antitrust laws were formed out of fear that consumed the U.S. in the years after the Civil War. Starting with an era known as the “Gilded Age,” the United States underwent a period of great advancements in social, industrial, and economic growth (Cashman,1993), thanks in large part to the booming railroad industry. In 1862, the first transcontinental railroad, connecting the Pacific and Atlantic lines, were being constructed. Railroads quickly became the premiere method of transportation and the rail owners took full advantage of the people who utilized it by an “unfair” tactic known as price discrimination. Small businesses and farmers were charged more for using the railroads because they had a relatively inelastic demand for service than larger businesses.
In 1911, Standard Oil also engaged in “unfair” practices. Led by J.D. Rockefeller, Standard Oil began buying out many smaller oil companies and formed unions with other larger oil companies. Together, these companies formed a...

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