Anti-Trust Law the American Dream

Anti-Trust Law

The American Dream is a concept that is followed around the world. It is a concept based on the premise that if one has a good idea, and is willing to work hard one can achieve great success. Years ago, when America was in its infancy this held true without government interference but in more recent history it has become entirely too competitive to achieve the American Dream in some areas of business without some protection of the marketplace. The anti-trust laws are in place for the purpose of protecting the market place. It protects not only the small competitors from being taken out of business by predatory pricing attempts by the big league businesses, it also protects the consumer by protecting the free trade of competition in the market place.

For one to understand how antitrust laws apply to the scenario of gasoline pricing and other specific aspects of business it is important to have a basic understanding of what anti-trust laws do and how they protect the business and the public.

Antitrust laws are laws that are designed to protect the integrity of the market place in several areas. The best way to explain how they work is to compare it to a poker game. In a poker game the person who has 5,000 chips is not allowed to put all 5,000 in and call if it is know that the opponent only possesses 1,000 chips. This prevents the person with the larger amount of chips from bully forcing the opponent out of the game regardless of how great his or her hand may have been.

Anti-trust laws have the same working premise built into them. Their purpose is to prevent businesses from using unfair tactics or practices that are virtually impossible for the others in that field to compete with for the purpose of taking over the entire industry and creating a monopoly.

Public policy considerations that support the use of anti-trust laws are the beliefs of society that the American Dream should be possible for those who want to achieve it. Society also backs the use of anti-trust laws because society wants to protect itself from diminished competition in the marketplace that would open the possibility for monopolies to begin and prices to become fixed at very high rates.

An example of controversial issues surrounding anti-trust laws is the below cost selling of products. Antitrust questions arise when a business is caught pricing products below cost for the purpose of driving competitors out of the market. At this point the door is open to again raise the prices and raise them to a higher rate than they would dare to do had the competition been able to remain in the market.

Mega-giants such as Microsoft and Wal-Mart have been sued periodically and accused of breaking the anti-trust laws by pricing below cost to drive competitors out of business.

While below cost pricing is for the most part against anti-trust laws, Wal-Mart and others have successfully defended themselves by proving they only did it when they were matching the price of a competitor that started the below cost pricing.

This is an exception to the anti-trust laws and allows below cost pricing ot occur.

Predatory pricing (also known as Destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors (Antitrust below cost pricing (http://en.wikipedia.org/wiki/Predatory_pricing).If the other firms cannot sustain equal or lower prices without losing money, they go out of business."

The difficulty is in proving that the below cost pricing or the seriously below market pricing is for the sole purpose of driving the competition out of business and not just pricing competitively for the purpose of selling the product at a reduced cost to consumers.

One of the reasons it is against the anti-trust laws to do this is because it places large businesses like Wal-mart and Microsoft at an unfair advantage because they have enough capital to get through lean times caused by below cost pricing long enough to drive the small business competitors out of business.

Many states have laws against selling gasoline below a legal limit that is set by the government for that purpose.

Several years ago when the price of gas was on the rise companies began realizing that if they offered gas at a reduced rate it would lure consumers into their business and allow them to purchase other goods.

One example was suit filed against Kroger in which the store was accused of violating antitrust laws when it priced its gas below cost.

The store argued that it was not doing so to drive other gas stations out of business but to entice consumers to stop for gasoline and then come into the store and purchase groceries.

Because of the impact the reduced gasoline prices was having on surrounding suppliers of gasoline the stores were ordered to raise their per gallon price to meet or exceed the minimum standards set by law.

Kroger's defense was that it was one of the only ways it could be competitive among the many discount grocery stores in the area.

New York recently went through an anti-trust issue with gasoline sales by ordering a reduction in competitive stations opening in areas where there was already a saturation of stations (Proposed New York Gasoline Legislation Could Harm Consumers, Says FTC Staff (http://www.ftc.gov/opa/2002/08/nygas.htm).

Consumers argued against this mandate as they felt the additional stations would bring healthy competition and drive the prices down that the consumer would pay.