Antitrust laws promote rivalry by restricting a company’s ability to dominate a specific market. This frequently entails dismantling monopolized businesses and ensuring mergers and acquisitions do not unduly concentrate market power or create monopolies (Twin, 2023). The purpose of antitrust laws is to safeguard and encourage rivalry in all business spheres. The three critical pieces of legislation in the evolution of antitrust enforcement are the Clayton Act, the Federal Trade Commission Act, and the Sherman Act. Agreements between rival businesses to rig bids, set prices or salaries, or distribute clients, employees, or markets are illegal under the Sherman Act. The Clayton Act seeks to shield consumers from unfair commercial practices and to encourage fair competition (United States Department of Justice, 2015). “Unfair techniques of rivalry” and “unfair or deceptive activities or practices” are prohibited by the Federal Trade Commission Act (Federal Trade Commission, 2024). Additionally, one prominent example: The DOJ and eight US states sued Alphabet’s Google in January 2023 on antitrust grounds, claiming that their search engine giant illegally monopolizes the market for digital advertising. According to the lawsuit filed, Google has engaged in anti-competitive, discriminatory, and illegal behavior to eradicate or significantly lessen any challenge to its hegemony over online marketing technology.
Moreover, market concentration indicates consolidated market shares among a small number of companies. It occurs when Search prices are lower, making it more difficult for ineffective manufacturers to thrive, forcing them to combine or abandon the sector and leading to increased concentration, technological changes, and The growing significance of marketplaces where “winner takes all.” Types of mergers; “horizontal,” “vertical,” “market extension,” “product extension,” and “conglomerate” mergers (Types of Mergers. (n.d.). The “Herfindahl-Hirschman Index (HHI)” is a standard tool for measuring market concentration.
The market shares of each company that competes in a particular market are squared, and the numbers are added together for all companies to determine the HHI, which has an index of “0 to 10,000”. Throughout the 1990s, there has been an increase in market concentration for hospitals and health insurers. “Hospital sectors were heavily concentrated in 65 percent of Metropolitan Statistical Areas (MSAs) between 1990 and 2006. Over the last twenty-five years, from 1994 to 2019, there was a general decline in concentration. Between 1994 and 2019, the HHI at the 90th percentile fell from 5,325 to 4,5702, while the median HHI dropped from 2,265 to 1,945”.
Complaints have been raised concerning the growing concentration of health insurance companies and providers in national markets and possible adverse effects on healthcare costs and efficiency. The most significant rise in concentration was seen among general practitioners, partly due to hospitals and medical services purchasing general practitioner groups (Fulton, 2017). “Consumer welfare” offers a precise yardstick for determining when consumer-beneficial corporate practices also help employees and suppliers monetarily (Why Consumer Welfare Remains the Standard for Antitrust. (n.d.)). “First developed in the 1960s, consumer-welfare jurisprudence began to be progressively embraced by federal juries in the mid-1970s.” After the “Sherman Antitrust Act of 1890” was passed, politics and judicial activism became out of control for a while till, in the course of the 1970s, everybody reached an agreement, and antitrust was returned to its original foundational ideas (Springboard, 2020). Antitrust has evolved after then to emphasize consumers more. Because it is unambiguous and in the customer’s best interests, customer protection has remained the benchmark.
Businesses such as Google and Amazon are more challenging to regulate because they gather copious amounts of information and utilize it across all their services to enhance tools, continue expanding, and penalize rivals. There is also the network impact to consider (Chen, 2019). They obtain much of this data by acquiring smaller businesses, but “they fail to understand what truly motivates data-driven merge. Numerous experts hold the customer welfare standard responsible for allowing this to occur. High levels of market concentration can have various effects on both customers and workers. High levels of competition, shrinking revenue margins, an increased risk of “acquisitions and mergers,” particularly for small businesses, increased customer value, and inhibiting creativity are a few of these.
References
A Brief History Of The Consumer Welfare Standard. (2020, May 28). Springboard – Tech Empowering the Next Wave of Opportunity. https://springboardccia.com/2020/05/28/a-brief-history-of-the-consumer-welfare-standard/
Chen, A. (2019, June 5). Regulating or breaking up Big Tech: an antitrust explainer. MIT Technology Review; MIT Technology Review. https://www.technologyreview.com/2019/06/05/135080/big-tech-breakup-regulation-antitrust-apple-amazon-google-facebook-doj-ftc-policy/
Federal Trade Commission. (2024). The Antitrust Laws. Federal Trade Commission. https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws
Fulton, B. D. (2017). Health care market concentration trends in the United States: evidence and policy responses. Health Affairs, 36(9), 1530–1538. https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2017.0556
OECD. (n.d.). Market concentration – OECD. Www.oecd.org. https://www.oecd.org/competition/market-concentration.htm
Opinion | Why Consumer Welfare Remains the Standard for Antitrust. (n.d.). WSJ. Retrieved February 20, 2024, from https://www.wsj.com/articles/antitrust-competition-consumer-welfare-standard-rule-law-ftc-11649284057
Twin, A. (2023, January 31). Antitrust Laws: Keeping Healthy Competition in the Marketplace. Investopedia. https://www.investopedia.com/terms/a/antitrust.asp
Types of Mergers. (n.d.). Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/valuation/types-of-mergers/
United States Department of Justice. (2015, June 25). Antitrust Laws And You. Justice.gov. https://www.justice.gov/atr/antitrust-laws-and-you
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