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Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment Essay

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Updated: May 21st, 2019

Abstract

Antitrust and unfair trade practices have caused a lot of debate for along time. Trade practices that are considered unfair include monopoly, formation of cartels and predatory pricing. Monopolies usually dictate over prices of goods that are in the market because in most markets, monopolistic organizations are the sole suppliers or producers.

Cartels usually agree on prices that they set for consumers so that consumers have no choice but to buy the products or services at the prices set by the cartels. This proposal will look at unfair trade practices and antitrust cases in relation to corporate organizations.

Corporate companies should remain responsible and transparent to allow accountability of their actions and allow consumers to feel positive effects of fair trade practices such as availability of commodities and fair prices for goods and services. The paper will also look at methods which can be used to allow collection of accurate data concerning antitrust laws and unfair trade practices in relation to corporate organizations.

Governments in different countries have the responsibility of formulating policies to ensure that trade carried out in the country is fair. Fair trade promotes availability of commodities and services to consumers get them at the right place and at the right time. Fair trade also promotes growth and development of businesses as organizations try to come up with new ways through which they can attract and retain as many clients as possible.

Introduction

Antitrust laws in the United States of America have the intent of making trading fair and ensure that all the people involved are treated as they should be. The antitrust laws were enacted by the legislative part of the government because they felt that trade is beneficial to all the stakeholders that are involved.

One of the beneficiaries would be the government and the economy because if trade was to thrive, then the government could rake in revenue in form of taxes while the society would benefit if the economy thrives as many jobs would be available and the prices of commodities available in the market would be affordable (Posner, 2001).

Most governments have the intention of protecting the consumer by ensuring that there is fair competition among business traders. When there is fare competition like absence of predatory pricing, goods and services are available to consumers at the right prices, at the right time and at the right quantity.

The fairness in trade practices in the market should be applicable to both the producer and the consumer. Monopolies and mergers that might lead to oppression of the consumer in terms of prices or unfair trade practices are not recommended. Any contract agreements that might be made between a seller and buyer are strongly advised against.

According to Tirole (1989), corporate power is the ability held by organizations to enable them to influence the activities of the society and its people, the government and the overall economy based on the resources that these organizations have control over.

When the capability of the corporate organizations to influence the society is high, the corporate power that they hold also increases. Antitrust laws are set mainly to protect small business organizations from big business organizations. Antitrust laws have been associated with the growth and development observed in many industries due to the promotion of fair competition.

Many organizations have had to come up and invest in innovation so that they can stay on top of available competition which encourages growth and development in different business sectors. This innovation has especially been observed in the technology industry. According to Areeda (2011), these days, there has also been an increase in the number of mergers that are taking place in the country; both vertical and horizontal mergers.

According to Dabbah (2003) ,vertical mergers usually take place when different companies in different lines of business decide to come together and cut on costs they incur when there is prospects of making more money once they are together than when they are apart. The vertical mergers might involve companies that are in different stages of production even though they might be in the same line of business. Horizontal mergers usually take place between companies or organizations at the same level of production of services or goods.

There are three major federal antitrust law in the United States of America. These antitrust laws include; The Sherman Anti trust Act, the Clayton act and the Robinson Patman Act. The Regulatory body created under the Robinson Patman Act seeks to enforce the laid down rules by the government. Corporate organizations are expected to be responsible in the way that they carry out their business organizations (Cheeseman, 2009).

This is especially done so for corporate organizations that may have the responsibility of serving many people. Big corporate organizations would be expected to be transparent so that they can easily be accountable for their actions to the members of the society, to the larger corporate community and to the government.

There are many corporate organizations that are charged with the responsibility of serving a large number of people, and they are expected to do so responsibly without taking advantage of consumers since the consumers might have no other service providers or suppliers of commodities that they might go to (Dabbah, 2003).

Corporate organizations may have a responsibility when it comes to public services like telecommunications services, provision of electricity and water service. Such organizations have to be responsible because in most cases, they might be the only ones in a region that might have the facilities needed to provide services to the members of the society.

Corporate organizations have the responsibility of not taking advantage of individuals that need their services in the community. In light of protection of the public from any corporate organizations that might take advantage of them, the United States government passed the Sarbanes- Oxley Act in the month of June in 2001 (Sullivan & Sheffrin, 2003).

The act was due to highly ranked corporate organizations that were getting bankrupt due to unethical practices that they were engaging in such as Enron inflation of their assets. The accountants at Enron highly inflated their assets so that the organization could appear as if it was really doing well when in real sense it was in financial trouble.The Sarbanes Oxley was seen as one that might result in accountability and transparency by corporate organizations in terms of the information that they give to the public.

As a result of the act, many managers especially those in big internationally known companies, have had to ensure that they are well aware of all the activities that go on in organizations to increase accountability for employees and for the decisions that are made in the organization. After the Enron accounting scandal in 2001, corporate firms were banned from having auditors that were also their clients as was the case with Enron with their auditors Arthur Andersen (Hylton, 2003).

Problem Statement

The areas that are defined by the antitrust act are not clear as they should translate to competitiveness that occurs between firms. Lack of clarity contributes to carrying out of business activities that might be classified as illegal for corporate organizations.

Research Questions

  1. Approaches on how lack of clarity of antitrust laws and emerging issues impact business organizations in the country
  2. Factors on how the existing antitrust laws impact the operations of corporate organizations especially those with high levels of innovation like the technological and insurance industries that both need innovation in order to achieve successful growth and development.

Literature Review

There have been many antitrust economics proposals that have been proposed to solve problems that have come up on the basis of the economy and the antitrust laws that have been made into law over the years.

Many sources of literature including business journals and economics textbooks some of which use complex models and mathematical formulas have been dedicated to the explanation of the antitrust laws and their effect on the behavior and actions of firms. Theoretical and applied economics have been made use of using different approaches such as the structural approach (Allan, 2010).

Most of the economic models that have been proposed have tried to utilize different models to explain the competition that occurs in organizations and the connection to antitrust laws applied.

Some models such as the heuristic model propose that an organization’s structure should be the main focus to determine how business is conducted. The determination of strategic actions that are taken by an organization should have minimal influence over classification of types of businesses involved in corporate competition for market positions (Dabbah, 2003).

A combination of theories that are applicable to micro, macro and meso levels have been used in availble literature to try and explain the innovation that usually occurs in organizations in relation to innovation that most people thought had been restricted by implementation of antitrust laws in the country.

The dynamic methods of analyzing markets makes use of antitrust concepts that are utilized in corporate organizations. The antitrust laws are in use in corporate environments to install and maintain healthy competition, and in the protection of buyers from being expolited by suppliers,sellers and producers (Areeda, 2011).

The antitrust laws also serve to protect smaller organizations from being exposed to predatory pricing that might push the smaller organizations from business. Using the dynamic theory to analyze markets and corporate organization, monopoly is not seen as a threat to competition between different businesses that are in the same line of production or in the same industry. Using the dynamic approach, monopoly is viewed as coming into play due to competition that exists in the market.

For example, businesses that are in the same line of activities might decide to merge their operations in order to cut on costs and take advantage of economies of scale that would be available because of the increase in capital from the resulting company. Companies might be involved in vertical or in horizontal mergers. Un-equilibrium might result in the market but using the progressive dynamic theory, the state of un-equilibrium is viewed as an expected consequence of competition between organizations (Tirole, 1989).

People are expected to have strong opinions about antitrust and unfair trade practices that usually exist in the markets. This is a sensitive issue for people because in most cases, it results in unfair trade practices and affects productivity of affected businesses, the economy and living standard of individuals. Awareness of the antitrust laws that exist and their effects on the public and economic activities that are affected has an impact on the public and how they perceive corporate organizations (Posner, 2009).

Corporate organizations should therefore ensure that, the effects of the antitrust laws and corporate competition portray them in a positive manner for the benefit of their business and to gain a positive effect on their profit margins. Competition across all lines of businesses and industries has gone global. Corporate organizations need to develop strategies so that they can survive amid the competition that has moved from a national to an international level (Dabbah, 2003).

For an organization to ensure that it remains gloablly competitive, it should come up with clear goals and objectives for the employees to perform effectively. Organizations are also supposed to adopt and implement workable policies that foster gains for growth and development in the organization and therefore, maintain or increase profit margin. Once policies have been put in place, an organization should ensure that the necessary resources needed for the achievement of the organization’s objectives are available.

The management of an organization should perform an analysis and performance evaluation to determine the areas which the organization can work on in order to improve or maintain its relevance. The quality of performance in an organization should be taken seriously and be considered a continous and not temporary process.

Most of the time, organizations that have all the necessary resources would perform highly in comparison to other organization, but they would need to recognize that they have the resources that can give them a competitive advantage over other organizations.

Many organizations are introducing ways through which they can develop strategies to remain competivie in their respective lines of business. Some organizations use simple analysis techniques such as SWOT analysis and Porter’s model to diagnose their weak areas and improve on them while expoiting their strenghts so as to be among the top leaders in the business (Posner, 2001).

After conducting analyses of their organizations, majority of the businesses strategically implement proposed solutions. In doing so, organizations are able to plan for outcomes that may hinder progress and thefore, remove the obstacles early enough and enable these organizations emerge successfull. Analysis also enables an organization to have more control over problems that they may encounter while impementing policies to achieve the vision and mission of the organization. (Hylton, 2003).

Many organizations have been able to capitalize on the needed importance on the strenghts and capabilites that they hold in comparison to other organizations have enabled them to stay afloat especially when there is a lot of competition from other companies that are in the industry as the company in question. A good example is the Motorolla Company that has been able to shift its focus from the manufacture of electronic goods such as televisions, to telephone handsets (Allan, 2011).

Therefore, by being able to take advantage of the emotions that consumers have over business practices by various organizations, a company can be able to maximize on returns in terns of profits made.Clyde (1997), cites that, organizations should conduct research on ways and the time periods that they should implement their business strategies so that they can take advantage of competition in the market and the concept of antitrust laws applied.

Researchers in organizations are able to find out the business situations and the best seasons that they can take advantage of and maximize on by gathering and utilizing the information that they get from clients. For example, personnel in an organization that interact with clients such as customer care executives can easily gauge how clients perceive the organizations and they have the capability of finding out why clients’ preception are how they are.

Organizations can therefore use such information to benchmark themselves against other similar organizations and be able to take the necessary action in order to maintaain or improve on the types of services that are delivered to clients according to Cheeseman ( 2009).

Some of the research that has been carried out on the effectiveness of organizations have been found to be negative. This might result to poor outcomes especially to personnel of organizations who might feel that they have done excellent work only to be informed that there are research findings carried out in the field that show that their work has not been done as properly as it should be done (Hylton, 2003).

Such results can have a negative effect on the morale of the human resources resulting in reduced productivity in an organization leading to low profit margins. Organizations should therefore, be prepared for negative feedback from clients and prepare their staff for such feedback to avoid unnecessary loses for the organization (Tirole, 1989).

The Monopoly, Oligopoly and Market Power in antitrust policy

On the basis of antitrust laws, monopoly in business is seen as a means of attempting to cash in on the possible greatest amount of profits available in a market especially when such an organization is the only producer or supplier of commodities or sole provider of services in high demand such as sewerage or electirity services or the sale of necessities such as sugar or milk (Sullivan & Sheffrin, 2003).

The government failed to make a case against Microsoft on the charges of monopolization which left many members of the society wondering about the purpose and effects of the antitrust and unfair trade practices that have been established by the government.

The case led many people to feel that situations that have recently been thought of as being a monopoly are situations that promote business competition in the line of business or industries that they occur. Recent court cases and their outcomes have shown that practices such as predatory pricing are the kind of practices that are considered to be unfair trade practices.

An example is a court case popularly known as Matsushita Electric Industrial Co. vs Zenith Radio Corporation which led to a conclusion that portrayed predatory pricing as an unfair trading practice, most of the time it is not used and even when used, it might not be successful.

Courts have made it illegal for businesses that supply products to companies of being selective in the prices that they charge for the commodities that they sell. For example, a company that sells supplies and still uses the supplies to make finished products, cannot sell the supplies to a competing company at a higher price as this would be an unfair practice (DiLorenzo, 1985).

Oligopoly involves a few and mostly powerful organizations involved in the provision of services or selling of products. Most of the oligopolistic organizations usually decide to share profits even if it is against the expense of the consumer.

Such cartels are common in the petroleum provision industry whereby, the organizations responsible for selling the products might collude to sell their products at high prices yet they know that consumers would have nowhere else to go to get the needed commodity, and there are no subsitutes for such products (Sullivan & Sheffrin, 2003).

Antitrust laws reforms

Most economists argue that the antitrust laws are of no use and they have no basis of being applied in the corporate market which they further illustrate y giving examples of the current market whereby, those in power seem to ignore the monoplostic events that proceed in nation. It is argued that, economists who are the people on the ground when it comes to effects of the different types of organizations on an economy, were not consulted when the antitrust laws were drafted (Dabbah, 2003).

Trusts that led to the formation of the Sherman act were shown to have had an effect that was negative to what was originally intended in the first place. DiLorenzo (1985) showed the antitust laws that were established and were infact, contibuting to the expansion of monopolies and cartels. This is because monopolistic organizations were able to expand their production throughout the nation and this resulted in reduction of prices resulting in more products being availble.

The antitrust laws had suggested that monoplies and cartels would not be able to grow for their effects to be felt nationwide which was what was being experienced. Examples of organizations that have thrived even though they have been at different times considered monoplies include Walmart and Microsoft. Many powerful companies also propose the formation of mergers that would potentially lead to the opression of consumers but the law seems to ignore the fact that these organization are formed (Allan, 2011).

Research Design

Population and sample

The research would be carried out through surveying of individuals that would take part in the research study. The twenty individuals that would take part in the study would be selected through random sampling method. This method would reduce the chances of a bias when selecting people to take part in the survey. The names of the invidividuals would be selected from a group of people whose names would have been inputed in the computer.

The data for the survey would be collected through indepth oral interviews. The information collected from the interview surveys would then be transcibed into a form that can be analyzed qualitatively. Where applicable, qualitative analysis of the data would also be applied.

The research survey will be conducted under the assumption that the participants of the study do not observe antitrust and unfair trade practices. The researchers will try and separate the information given based on whether it is an opinion, a fact or just a feeling (Clyde, 1997).

The research survey also intends to design the questions in a manner that it can be able to measure the level of knowledge of individuals concerning antitrust laws. The research survey also intends to establish the difference between an individual behavior and attitude to the knowledge that they might hold of the antiturst laws.

Knowledge of the participants unfair trade practices that might exist will also be attempted to be linked to participants’ performance at the workplace and the effect on their perception of different organizations that exist in their line of business, and those that might be considered under different types of classifications by different people such as which organizations might be thought of as a monoploly and cartels in th participants line of business and nationally in general (Cheeseman, 2009).

Investigative techniques

The research survey intends to gather information concerning antitrust laws and practices that are carried out on unfair trade practices. The research has an intention of finding out the strategies that are practiced in organizations in perpetuation of good customer practices and the promotion of fair trade practices in a line of business or in an industry. Practices of different organization and the effects of their practices on clients will also be considered (Clyde, 1997).

Data collection

The research will be conducted in a period of twenty months. Literature review composition will be conducted in the first six months of this time together with the collection of data with the intent of coming into terms with the problem that has been stated in the research proposal.

The putting together of information in the literature review and collection of data will enable better understanding of the problem statement and therefore, offer better chances of understanding the problem and presenting it in a clearer manner. The availble funds and personnel will be invested in coming up with high quality research questionnaires. The questionnaires form an important part of being able to get the necessary and required information for the study.

The next eight months will be allocated to the pilot study of the survey. Longer time is allocated for this part of the survey to account for unforseen events such as harsh weather which might result in delayed dissemanation of the questionnires for the pre testing period. Questionnaires to be used in the study will also be distributed to the participants during this time. Data that will be collected will be evaluated and analyzed to give information that clearly relates to the problem statement and the research questions (Sullivan & Sheffrin, 2003).

The last six months will be filled up with presentation of the collected information. The results of the research surveys will be compiled into a report. The report made on an academic basis will be used in the academic defense of the questions that may be asked on how the economy might be affected by antitrust laws and the effects of unfair trade practices. The report will be used as a case study with special focus on the details of anti trust and unfair trade practices and their efffects on corporate organizations (Sullivan & Sheffrin, 2003).

Data Analysis Plan

Questionnaires were administered to participants by the researchers through hand delivery and via e-mail. The primary data would be obtained from these questionnaires. A deeper study into the antitrust and unfair trade practices would be expansive so that it is not expected that it would cover all the intended material. The research survey will involve the allocation of questionnnaires to the twenty participants chosen to participate in the study via random sampling technique. The study is therefore, deductive.

Assumptions of the study

The antitrust and unfair trade pracitces information obtained in the study is presumed to be representative of all areas of busineses and of all industries.

Limitations of the Study

A lot of time is expected to be consumed in the collection of information for the literature review. The information must be from peeer reviewed sources to ensure authenticty of the research study and its content. Some of the information might not be availble to the public for example, the antitrust case about the microsoft vs US governement case concerning antitrust is availble in bits and pieces from books. A critical analysis of the case would be necessary in order to include the information in the literature review (Areeda, 2011).

Conclusion

This paper has discussed antitrust and unfair trade practices that have been characterized by businesses in the United States for quite some time. An example is the Enron accounting scandal that exposed some of the inflation techniques that firms use in order to make their balance sheets appear as if they are in order.

This is an unethical accounting practice. Several antitrust reform laws have also been explored. From the study carried out above, the results are expected to give more information about antitrust and unfair trade practices that are usually carried out in organizations and from the results, a conclusion on the research survey can be made.

Corporate organizations are expected to have enacted and followed policies that show that they are ethical in the way that they carry out their business activities. This is supposed to encourage better business practices and promote positive attitude and behavior from both internal and external clients.

The research survey has an intention of carrying out a study and giving accurate and timely information about antitrust and unfair trade practices that are carried out by corporate organizations and how they affect the particular organization, other corporate organizations and the whole corporate image and business environment.

When there is fair trade in a country, there is healthy competition among organizations. Competition encourages organizations to stay focused on serving their customers which compells them to provide high quality goods and services at the right place and the right time. Therefore, proper guideliness should be established and enacted by the government to ensure that fair trade practices are observed by competing organizations in the industry.

References

Allan, F. (2010). A Model of Antitrust Regulatory Strategy. New York, NY: Irvine Publishers.

Areeda, P.E. (2011). Fundamentals of Antitrust Law, 4th edition. Oxford: Aspen Publishers.

Cheeseman, H. (2009). The Legal Environment of Business and Online Commerce, 6th edition. New Jersey: Prentice Hall.

Clyde, W. (1997). Antitrust Policy as Corporate Welfare. New York, NY: Irvine Publishers.

Dabbah, M. M. (2003). The Internationalization of Antitrust Policy. New York, NY: Cambridge University Press.

DiLorenzo, T. J. (1985). “The Origins of Antitrust: An Interest-Group Perspective.” International Review of Law and Economics Journal, 5:73–90.

Hylton, N. (2003). Antitrust Law: Economic Theory and Common Law. New York, NY: Cambridge University Press.

Posner, R. A. (2001). Antitrust Law, 2nd ed. Chicago: University of Chicago Press.

Sullivan, A., & Sheffrin, S. M. (2003). Economics: Principles in action. New Jersey: Pearson Prentice Hall.

Tirole, J. (1989). The Theory of Industrial Organization. Massachusetts: The MIT Press.

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IvyPanda. 2019. "Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment." May 21, 2019. https://ivypanda.com/essays/antitrust-and-unfair-trade-practices-the-dynamic-corporate-environment-essay/.

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IvyPanda. (2019) 'Antitrust and Unfair Trade Practices: The Dynamic Corporate Environment'. 21 May.

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