Antitrust investigation case study and market power analysis

Online AntiTrust Issues

Antitrust law is a United States legal code that helps to maintain market competition by regulating anti-competition actions by organizations. The Sherman Act of 1890 was one of the first attempts to restrict large companies who fixed price, output and then manipulated demand to maximize their products. Standard Oil was one of the prime early examples of a company that controlled markets to the point that the government felt was detrimental to the entry of other competitors (Bork, 1993). In our current example, companies like Facebook and Google are being investigated, similar to Microsoft and AT&T, for controlling the Internet search process and/or network effects. This does not stop with Facebook and Google, but moves into many of the giant e-tailers (Amazon, EBay, etc.) that often use predatory or collusive practices to force customers into either advertising on their site, pricing to their scale, or in the case of Amazon, using predatory pricing on its e-books in order to capture market share. Now, combine all this with the vast amount of personal data (demographics and psychographics) these companies collect, all for free, based on browsing, purchasing, and repeat behaviors from consumers, and it is easy to see why many of these entities are under investigation for antitrust behavior (Fox, 2013).

Part 3- We live in a capitalistic society, based on Adam Smith's Wealth of Nations and the idea that the individual should have a role in society to both produce and consumer products. Part of the idea of production driving wages, then those wages purchasing goods and services, and so on is the idea that there is competition in the marketplace. A monopoly is a situation in which one business tends to dominate the market, making entry and exit strategies difficult for others. The purpose of the monopoly is both in defining and regulating the way competition exists within the market. Imperfect competition, for instance, is a situation where conditions for perfect competition, or equality in market power, cannot exist -- as in most areas in the modern era. A monopoly tells us that one major seller of a good or service is in control of the market, while an oligopoly is a small number of organizations that may or may not collude with each other to ensure profit. In the oligopoly, there are usually a number of similar businesses that offer the same product or service, but instead of just one company dominating the market, a few large organizations control it, making it difficult for market entry of new players (Monopoly, 2005). The monopoly "owns" the market -- as in Amazon.com, for instance, holding about 85% of the e-book market, meaning publishers and other companies must adapt to Amazon's system or be unable to compete (Knapp, 2011).

One recent and prominent example of the government asserting that a corporation was being monopolistic was that with Microsoft. When Microsoft gained over 90% share in its operating system (OS), web browser (I Explorer) and office software (Word, Excel, Outlook, etc.), the government sued. On one hand, Microsoft bundled its products in such a manner that computer manufacturers "had" to include them in their product in order to sell hardware. On the other, definitions of monopolies hold that there is only one producer -- and clearly, there are many operating systems, and consumers do have a choice. Simply because Microsoft was easier and consumers simply stayed with it because it was there, or it worked -- and then third parties wrote applications for it, causing a cycle of more and more consumers required to run MS products. Was this bad for society? Perhaps it stifled innovation or the pace of evolution of computer products. Nevertheless, the Judge in the case found Microsoft guilty and ordered a fine paid (Is Microsoft, 2009; Department of Justice 2012).