Monopolies are a danger to society as well as to the business environment. Governments plan interventionist policies to curtail the growth of natural or cartel monopolies in order to keep the business environment stable. Antitrust acts enacted by governments are believed to improve consumer welfare (Crandall & Winston, 2003; Stigler, 1982). Government interventions are aimed at controlling natural monopolies so that the prices in the market do not become exceedingly high. This paper looks into the policies and regulations that the US government took to control the growth of monopolies.
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The monopolies in the US have a long history beginning with the colonial administrations (Investopedia, 2010). With the growth of corporations in the new word, there arose extreme forms of capitalism and rampant price-fixing that hampered the well-being of the people. The first attempt to regulate businesses was in 1887 with the Interstate Commerce Act (Stanford, 2013). However, the act to control the growth of monopolies came three years later. The Sherman Antitrust Law was passed in 1890 to check the growth of monopolies in the US, which was probably the first attempt to curb monopolies through government control in the country (Investopedia, 2010; Stanford, 2013).
It is believed that the Sherman Act opened the road for “jurisprudence regarding monopoly, cartels, and oligopoly” (Kovacic & Shapiro, 2000, p. 43). The act aimed at declaring illegal all forms of monopolies and violation of the act was treated as a crime (Kovacic & Shapiro, 2000, p. 43). In 1903, the country saw a few major corporate mergers when the Roosevelt government was in power. The government broke the merger of the Northern Securities, and then the Supreme Court broke Standard Oil in 1911 into 34 small firms (Markovich, 2013).
In 1914, President Woodrow Wilson brought in the Clayton Antitrust Act and Federal Trade Commission (FTC) to strengthen up the government’s fight against emerging monopolies (Markovich, 2013). This law increased the strength of the antitrust law that limited the scope of companies to indulge in anti-competitive behavior (Spengler, 1950).
Many US companies like the IBM encountered troubles with the antitrust law. For instance, in 1936, a marketing strategy undertaken by IBM ran into troubles with the antitrust law (Chang, 1995). After this, the FTC was given independent powers to control, regulate, and investigate monopolies. Price discrimination was controlled as a strategy to curtail monopolies by the US government with the Robinson-Patman Act of 1936 (Rowe, 1951). Overall, the US government has been instrumental in developing antitrust laws to curtail the growth of monopolies in the country.
Stigler (1955) makes a distinction between the kind of antitrust laws based on their objective – preventive and corrective. He believes that both the Sherman and the Clayton Act are corrective antitrust laws and do not have any measures to prevent the development of monopolies in the economy (Stigler, 1955). The typing-clauses and the price discrimination corrective clauses were adopted as measures to prevent the spread of monopoly rather than preventing them from appearing.
The antitrust laws post-1992 became extremely strong, and there arose various preventive measures. The regulative tools became more of a guideline to prevent monopolies through mergers. In recent times, the monopoly control body of the country has increasingly aimed at controlling intellectual property rights and patents in order to stop the growth of monopolies in the country.
Chang, H. F. (1995). Patent scope, antitrust policy, and cumulative innovation. The RAND Journal of Economics, 34-57.
Crandall, R. W., & Winston, C. (2003). Does antitrust policy improve consumer welfare? Assessing the evidence. The Journal of Economic Perspectives 17(4), 3-26.
Investopedia. (2010). A History Of U.S. Monopolies. Web.
Kovacic, W. E., & Shapiro, C. (2000). Antitrust Policy: A Century of Economic. Journal of Economic Perspectives 14(1), 43–60.
Markovich, S. J. (2013). U.S. Antitrust Policy. Web.
Rowe, F. M. (1951). Price Discrimination, Competition, and Confusion: Another Look at Robinson-Patman. The Yale Law Journal 60(6), 929-975.
Spengler, J. J. (1950). Vertical integration and antitrust policy. The Journal of Political Economy 58(4), 347-352.
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Stanford. (2013). History of Antitrust regulation. Web.
Stigler, G. J. (1955). Mergers and Preventive Antitrust Policy. University of Pennsylvania Law Review 104(2), 176-184.
Stigler, G. J. (1982). The Economists and the Problem of Monopoly. The American Economic Review 72(2), 1-11.