University:
Massachusetts Institute of Technology
Course:
15.992 | S-Lab: Laboratory for Sustainable Business
Academic year:

2023
Views:

341

Pages:

2
Author:

Nigel Sherman

The Law of Corporate Finance and Financial Markets Antitrust Antitrust/Fair Competition Intro-main concerns Merger-Varta Bosch Airline Monopolization – Microsoft Mechanics of M&A Joint Venture Exemptions • • • • • • • Antitrust law = default If government says you have to do it, then that’s that i.e. only one hospital Trend in financial services is that gov’t has been pulling back US is an outlier in the antitrust realm but EU is shifting towards us. Dual system between public and private system Who administers the antitrust laws? Three evils: 1.) Collusion: 2 or more economic players who are supposed to be competing but figure they would do better if they didn’t; agreement to fix prices. “Bright line” • 2.) Monopolization: the entity that is so big that is can abuse its power. rule of reason” analysis o almost never sanctioned by criminal charges o a.) “market power” o b.) “abuse of monopolization most people are big because of super skills • • • 3.) M&A Before you engage in M&A you have to get approval in advance. More speculative inquiry Forward-looking • Varta Bosch “Markets” product defn. geographic • • • • • • • • • the party goes in to seek approval will define the market very broadly How do you measure market power? Look at market share: Barriers to entry/ “wing player” o This is more complicated in the international area Microsoft is a world-wide monopoly Collision-Airlines: o Some big airlines are floating big prices to see how other companies will react in the future. o Signaling behavior: gov’t has a hard time proving this o You can follow the market in prices, just not facilitate it. o Trade associations is a big problem o The very 1st company that comes forward in collusion will get more lenient offenses. (extends to companies not individuals) Other collision: somebody has a good lawyer In an antitrust case, if the person doing the suing wins, he gets 3 times damages and attorney’s fees. The law is designed to keep the bad people away and favors the complaining party “game of chicken” • Monopolization-Microsoft • Why would you say that in this case market power = market shower? o Network effect (every time a consumer uses the product it makes it more valuable because other people use it.) o Market share + network effect = market power • • • Example 1: Alcoa steel manufacturer Example 2: Studios have bad movies o Studios have a monopoly; b/c independent studios can’t sell you a really good movie. Example 3: IBM gave colleges computers for really cheap, but competitors said IBM was not being nice by selling cheap mainframes because putting them in college is encouraging people to use computers.