Antitrust, Mergers, and

Chapter Global Competition

9

Business
and
Society

POST, LAWRENCE, WEBER

 Figure 9-1
The 10 largest global corporations,
1999-2000
By sales By profits By market value
Rank (billions of U.S. $) (billions of U.S. $) (billions of U.S. $)
Exxon Mobil Hutchison Whampoa General Electric
1 185.5 14.3 520.3
General Motors General Electric Intel
2 173.2 10.7 416.7

Wal-Mart Citigroup Cisco Systems

3 166.8 10.1 395.0

Ford Motor Royal Dutch/Shell Microsoft

4 162.6 8.6 322.8
Daimler Chrysler Exxon Mobil Exxon Mobil
5 151.0 7.9 289.9
Mitsui Bank of America Vodafone Airtouch
6 129.8 7.9 278.0
Mitsubishi Microsoft Wal-Mart
7 127.1 7.8 256.7
Toyota Motor IBM NTT
8 119.7 7.7 247.2

Itochu Philip Morris Nokia

9 112.8 7.7 242.2
General Electric Cheung Kong Royal Dutch/Shell
10 111.6 Holdings 213.5
7.6
 Figure 9-2
Comparison of multinational corporations’
sales and the gross domestic product
of selected nations
 Economic objectives of antitrust laws

1) The protection and preservation of competition

2) To protect the consumer’s welfare by prohibiting

deceptive and unfair business practices.

3) To protect small, independent business firms from the

economic pressures exerted by big business competition.

4) To preserve the values and customs of small-town America.

 Figure 9-3a

Major federal antitrust laws

Sherman Act Forbids restraint of trade and monopoly

Clayton Act Forbids price discrimination, tying contracts,

anticompetitive mergers, and interlocking
directorates

Federal Trade Forbids unfair competition and deceptive

Commission Act business practices

Antitrust Requires premerger notification and permits

Improvements Act state suits on behalf of consumers against
price fixing
 Figure 9-3b

Federal antitrust enforcement

Federal Private State

Justice Federal
Trade Persons and Attorneys
Department Courts
Commission Companies General

• Investigation • Lawsuits • Investigation • Consent decrees

• Guidelines • Lawsuits • Court opinions
• Advisory opinions and decisions
• Informal settlements
• Lawsuits
 Key antitrust issues
Monopoly:
• Does domination of an industry or a market by one or a few large
corporations necessarily violate antitrust laws?
• Critics claim that economic concentration can eliminate effective
price competition, reduce consumer choices, inhibits innovation, and
concentrates profits in too few hands. Others claim the opposite is true.

Innovation:
• Focus in antitrust policy.
•In today’s economy, regulators have increasingly promoted competition
to foster technological innovation. Thus, the rationale for bringing
antitrust actions is to spur innovation in many cases.

High technology business:

• Economy has changed in the information age from when antitrust laws
were crafted.
• Are the basic principles of antitrust law applicable today?
 Figure 9-4
Value of mergers and acquisitions,
1985-1999
1400
1200
Billions of dollars

1000
800
600
400
200
0
1985 1987 1989 1991 1993 1995 1997 1999
Year
Source: “M & S Profile” published annually by Mergers and Acquisitions.
 Forces driven mergers in
the 1990s and 2000s
Technological change: The need to keep ahead of advances in biotechnology
drove many mergers in the pharmaceutical and chemical industries.

Changes in the regulatory environment: Telecommunications deregulation

led to a wave of mergers among long-distance phone companies, cable
operators, and regional carriers. Mergers also resulted in anticipation of
regulatory changes in the health care industry. Many financial services firms
merged in response to changes in federal law.

Globalization: Many companies found it difficult to compete on the world

stage as a result of globalization and subsequently merged.

Stock price appreciation: The long bull market of the late 1990s contributed
to the merger wave.