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Eco 9/3

Eco 9/3. Government Policies Toward Competition. Anti-Trust Legislation. After the Civil War, trusts (monopolies) controlled industries, like John D. Rockefeller’s Standard Oil.

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Eco 9/3

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  1. Eco 9/3 Government Policies Toward Competition

  2. Anti-Trust Legislation • After the Civil War, trusts (monopolies) controlled industries, like John D. Rockefeller’s Standard Oil. • Rockefeller placed members of Standard Oil’s board on boards of competing firms, creating interlocking directorates.

  3. Sherman Anti-Trust Act(1890) • Protected trade against unlawful monopoly. Ineffective. • Antitrust legislation- laws to break up monopolies and prevent new ones.

  4. Clayton Act • Further limited business practices that lessened competition. • Outlawed price discrimination- selling same goods to different buyers at different prices. • Outlawed interlocking directorates and some mergers.

  5. Securities and Exchange Commission (SEC) • Federal regulatory agency that reviews mergers, regulates the stock market.

  6. Mergers • Antitrust legislation often restricts mergers. • Merger- when one corporation joins with another.

  7. Horizontal Merger • When two corporations merge that are in the same business.

  8. Vertical Merger

  9. Vertical Merger • When corporations merge that are in related, but different businesses. Ex: Paper company buys the lumber mill that supplies it; Oil company buys fleet of ships that transport it.

  10. Conglomerate • Huge corporation involved in various unrelated business. Ex: Proctor & Gamble (P&G)

  11. Conglomerate

  12. Regulatory Agencies • Government agencies that regulate pricing, product quality, mergers. Federal Trade Commission (FTC) Food and Drug Administration (FDA) Federal Communications Commission (FCC) Securities and Exchange Commission (SEC)

  13. Deregulation • Gov’t wants to increase efficiency and competition, but over-regulation had actually decreased competition. • 1980s-1990s- gov’t deregulated industries, or reduced regulations. With deregulation of the TV industry, pay-TV, cable, satellite TV were born.

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