Antitrust Practices And Market Power Term Paper

Length: 3 pages Sources: 2 Subject: Economics Type: Term Paper Paper: #28201889 Related Topics: Antitrust, Oligopoly, Monopoly, Litigation
Excerpt from Term Paper :


Case Background

One recent antitrust action has been between the United States Justice Department and the credit card companies. The government has argued that American Express has hindered competition in the credit card market. At issue are rules that AMEX imposes on retailers to prevent them from offering incentives to customers to use other cards (Longstreth, 2014). This is not the first time that credit card companies have faced antitrust action, either. In 2012, Mastercard and Visa entered into a settlement worth $7.25 billion, regarding alleged price fixing of the interchange fees that are paid by merchants when customers use Mastercard or Visa for their purchases. Interchange fees are paid by the store to the credit card company. When these two companies always charge the same fees, it opened up the possibility of antitrust legislation, with accusing of collusion. The settlement meant that the companies were not officially found of any wrongdoing (Grossman, 2012).

Costs to the Market

There are costs associated with antitrust behavior, and that is why the government has pursued these cases. The credit card industry is a complex ecosystem that includes store cards, but third-party cards operate under oligopoly conditions, with three companies (Mastercard, Visa and American Express) holding a commanding share of the market (Heggestuen, 2014). There are high barriers to entry in this industry, because the companies require a vast amount of marketing. In the fees case, if Mastercard and Visa act identically to each other, that means instead of there being three major companies in the industry for competitive purposes there are two. In the Amex case, that was Amex trying to leverage its market power to unfairly gain advantage, restricting competition.

Such activities inherently have a cost to the market. The industry is an oligopoly, or if a broader view of the payment ecosystem is considered, a state of monopolistic competition. This makes a difference in terms of antitrust legislation, because two companies colluding will affect the market, but there is also a finer line between collusion and oligopolistic competition, where the main industry players compete directly against each other and react to each other's moves.

In either case, the market will be most efficient when firms are competing. Under full competitive conditions, the market should operate at close to its maximum efficient level. When Amex seeks to restrict competition, that takes some consumer resources away from competitors to a less efficient Amex. When Mastercard and Visa engage in price-fixing, that similarly…

Sources Used in Documents:


Grossman, J. (2012). $7.25 billion antitrust credit card fee settlement receives approval. Lexis Nexis. Retrieved November 15, 2014 from

Heggestuen, J. (2014). Emerging payment technologies will create new winners and losers in the giant credit card industry. Business Insider. Retrieved November 15, 2014 from

Longstreth, A. (2014). U.S., Amex duel at antitrust trial over credit card fees. Reuters. Retrieved November 15, 2014 from

Cite this Document:

"Antitrust Practices And Market Power" (2014, November 15) Retrieved August 15, 2022, from

"Antitrust Practices And Market Power" 15 November 2014. Web.15 August. 2022. <>

"Antitrust Practices And Market Power", 15 November 2014, Accessed.15 August. 2022,

Related Documents
Antitrust Economics Antitrust Practices and Market Power:
Words: 1089 Length: 3 Pages Topic: Education - Computers Paper #: 87064272

ANTITRUST Economics Antitrust practices and market power: Technology, social networking sites, and anti-competitive behavior Q1.Why was/were the firm(s) investigated for antitrust behavior? IBM, AT&T, Microsoft, Intel, Google, Twitter, and Facebook are all technology companies that have been accused of operating as de facto and de jure monopolies: in other words, of engaging in blatant violations of the Sherman Antitrust Act or of substantially limiting market competition to such a degree that a monopoly has been

Market Power and Antitrust Practices
Words: 715 Length: 2 Pages Topic: Education - Computers Paper #: 85571251

Antitrust Practice and Market Power Antitrust Practices and Market Power government promulgates antitrust law to prohibit unfair business practices in the United States and enhancing competitions within the U.S. marketplace. Several business practices are considered illegal under the antitrust law and these practices include illegal monopoly, price fixing, illegally discouraging competition, and bid rigging. For example, Sherman Antitrust Act of 1890 prohibits monopolizing the interstate commerce, bid rigging, and price fixing. Moreover,

Antitrust Practices and Market Power
Words: 439 Length: 2 Pages Topic: Economics Paper #: 42839269

Antitrust Practices and Market Power It is important to realize the reason that Microsoft was investigated for possibly violating antitrust laws at the turn of the millennium. The company had established something of a natural monopoly of the software market (which is distinct from a government monopoly), and was leveraging its considerable market power to systematically eliminate its competition. It is legal to establish a monopoly in any given industry; yet

Antitrust Practices and Market Power
Words: 767 Length: 2 Pages Topic: Education - Computers Paper #: 93248715

Microsoft Antitrust Case Antitrust Practices and Market Power Antitrust case: 2001 antitrust Microsoft settlement Microsoft Windows is such a ubiquitous piece of software, it is virtually impossible to imagine using a computer without it. Even though many people dislike the system, to function in contemporary life requires most students and workers to be familiar with the product. This lack of de facto choice has led Microsoft to become the subject of numerous antitrust

Market Dominance
Words: 663 Length: 2 Pages Topic: Education - Computers Paper #: 40993660

Antitrust Practices and Market Power The modern business environment is increasingly characterized by the proliferation of emerging monopolies in various industries. One of the industries that have experienced an increase in budding monopolies is Information Technology, particularly with the growth and development of social media and networks. Technology companies have rapidly developed into monopolies because of the connection between attractive business opportunities. The growth of leading technology companies into monopolies has

Antitrust Law Remedies in Intellectual Property Cases
Words: 4477 Length: 15 Pages Topic: Law - Legal Issues Paper #: 15746593

Antitrust and Intellectual Property Antitrust Law Remedies in Intellectual Property Cases In any research paper it is important to first define the terms used prominently in order to make sure that the reader understands what is being said. In this case, the two terms that require definition are antitrust and intellectual property. According to a definition from Cornell University Law School "Trusts and monopolies are concentrations of economic power in the hands