Antitrust Regulations and Business Law Antitrust Regulations Essay

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Antitrust Regulations and Business Law

Antitrust regulations regulate economic activity in a way that encourages competition and discourages collusion between competitors. This collusion could be the result of horizontal mergers, price fixing, or even vertical contracts, which act to exclude competitors from a market. Antitrust regulations and actions are often hot button issues within the economics community as well as the business law field. Many different cultures have varying ides and understandings of these issues and may deal with them in completely different ways. This can, and does occur within the framework of U.S. business relations and exchanges, especially on the internet. As technologies change and adapt, antitrust laws and regulations need to be changed as well.

There is a mountain of evidence suggesting that while the current U.S. antitrust laws are quite effective on the macro level, many of these regulations were put in place before the economics of firms and competitive advantages were fully understood (Millon, 2009). Authors Sidek and Teece (2009) argue the same, stating that a more robust understanding needs to be arrived at before antitrust regulations can adequately control and regulate the markets in a way that benefits both the consumer and the producer (589).

Another common aspect of antitrust regulation concerns monopolies. Often times these can take the form of a company offering a good or service at a lower price when it is bundled. This type of antitrust behavior is not uncommon within the tech and IT industries, as evidenced a decade ago with Microsoft's antitrust lawsuit. This type of behavior also deters entry and induces exit of competition because the competition has to lower their price to compete with the monopoly. However, on the other side of the argument, bundling helps companies achieve preferred distribution for their products in many markets that require intensive distribution plans and huge amounts of resources. (Greenlee, Reitman, and Sibley, 2009). Often times companies will work to ride the line between monopoly and bundling in order to minimize their exposure to high distribution costs (Sidek and Teece, 2009).

Antitrust regulations have often been the subject of controversy as many business lawyers and economics scholars clash over the true intention of such regulations. Some business lawyers feel as though antitrust regulations are aimed at the overarching action of doing business, which some economics academics believe the focus is, and should be on each different entity that is doing business- the consumer, producer, manufacturer, and seller (Greenlee, Reitman, and Sibley, 2009). The former argument points to the law and related antitrust regulations as having a redistributive legacy, which to some business lawyers is a conflict of interest within the body of the law and the judiciary. Author Millon (2009) writes:

[There exists] a common thread that runs through law-and-economics business law scholarship. Working largely independently of each other, economically oriented scholars working in different areas have argued that the law should focus on the interests of a single constituency -- shareholders in corporate law, creditors in bankruptcy law, and consumers in antitrust law. Economic analysts thus have rejected arguments advanced by "progressive" scholars working in each of these areas that the law should instead concern itself with the full range of constituencies affected by business activity. The law-and-economics single constituency claim rests in part on skepticism about judicial competence, but the underlying premise is an objection to the use of law for redistributive purposes.

This statement can be viewed as a criticism of the current system of antitrust regulation within the Chicago School of economic thought. From a business law perspective, this criticism is relevant in that these regulations have been, and will continue to need to be adapted and changed as technologies and understandings change as well.

Millon (2009) goes on:

The primary value is efficiency, defined in terms of market-generated outcomes. It is argued here that this political commitment implies a strong tendency toward maintenance of the existing distribution of wealth, and that even more importantly, the single constituency claim may actually have redistributive implications. In each of these areas of business law, however, a regressive program favors owners of capital against those who are generally less well off, such as workers and small-business owners. In this way, the Chicago School of thought surrounding antitrust regulations has taken a back seat to a more dynamic understand and attempt to more accurately regulate and operate the markets within the U.S.

The U.S. regulatory bodies have also tried to come up with other alternatives to the still relatively static realm of antitrust law. One of these alternatives involves consumer choice, which reflects an absolute Capitalism that Americans have been known to appreciate. Authors Averitt and Lande (2007) explain, this consumer choice as a means of market regulations as being better than trying to regulate price and efficiency, especially for matter of non-price competition. Instead, this new model would value variety and circumstances that can be well assessed by consumer behavior, irrespective of the firm's behavior in price setting or bundling (Averitt and Lande, 2007, 175). This would be a bottom-up approach instead of the top-down approach the FTC and other regulatory bodies have supported for nearly one hundred years.

Millon's statements are quite compelling for anyone interested in the implications of antitrust regulations and their relationship to business law in the U.S. Also quite compelling is the notion that a set of laws has a specific economic or moral principle tied to it. In this case, the idea that antitrust regulations are a catalyst for the redistribution of wealth shows that there is more than one way to view this argument. He is also saying that from an enforcement perspective, the current antitrust laws rely heavily on the specificities and idiosyncrasies of the judiciary.

Sidek and Teece (2009) agree with Milton by adding, "Moreover, a complicating factor in the transformation of the law is the fact that the federal courts have, by embracing the reasoning in the Merger Guidelines promulgated several decades ago by the Antitrust Division and the Federal Trade Commission (FTC), caused antitrust case law to ossify around a decidedly static view of antitrust." (590). This suggests that the authoritative bodies within the U.S. government that regulate the markets and enforce antitrust laws are inherently flawed due to the lack of accurate and complete information as to the true economic behavior of firms in certain markets. Apparently when these academics speak, the governments listen, because in 2009, the FTC solicited comments and suggestions from the public relative to these types of regulatory actions and their results on many small to large sized firms doing business in the U.S. (Sidek and Teece, 2009). During this time the FTC also reviewed the case law surrounding these areas of antitrust regulation and consulted with many business attorneys and business owners to help establish a more accurate and adaptive policy stance.

From a business law perspective, the ever-changing world of technology represents an area where antitrust regulation has no clear focus or application, at least as far as the internet and communications-based media are concerned. This is largely because the internet has allowed large groups of people, both buyers and sellers, to come together in a virtual space to conduct business (Pressey and Ashton, 2009). It is far more difficult to identify and enforce antitrust regulations online, and as many scholars will admit, these market conditions can work to damage competitiveness of the entire market, even outside of internet sales and purchases. One alternative may be, as Averitt and Lande (2007) suggest, to allow consumer choice to play a more active role in the politics and dynamics of online antitrust and monopoly issues. This would allow for the multi-cultural influences to remain intact wile, at the same time, ensuring the U.S. antitrust values would be supported as well.

More specifically, authors Pressey and Ashton (2009) explain that websites like Linked-In and other social media sites encourage people to develop specific relationships with customers that can often include monopolies and other antitrust behavior. Also, because the internet, specifically these social media sites are international, it is difficult to enforce such regulations due to the differing nature of many different cultures. In China and Japan, where collusion is more culturally acceptable and normal, U.S. entrepreneurs and firms are able to circumvent the current antitrust regulations and policies (Pressey and Ashton, 2009). As technology inevitably advances, these and other business law concerns will likely come to the forefront of the economics and business communities.

In fact, Chinese companies are even influencing the way business law in the U.S. is adapting to these changes. Author Farmer (2010) explains, The life of the law has not been logic: it has been experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of public policy...have had a good deal more to do than the syllogism in determining the rules by which men should be governed. The law embodies the story of a nation's development through many centuries, and it cannot be dealt with…

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