Questions For Corporate Concentration: List 5 Reasons Why Co

Questions For Corporate Concentration1 List 5 Reasons Why Competition

Questions for Corporate Concentration 1. List 5 reasons why competition is important. (p 302) a. b. c. d. e. 2. What is the argument in favour of allowing for large business and corporate concentration (i.e., mergers that reduce the number of firms creating few but much larger companies) (p 303) a. b. c. 3. What is the counter argument against question 2? (pages 160, 162, 165) a. b. c. 4. Do freer markets ensure competition or efficiency? (p . Find three reasons why the Combines Investigation Act failed? (p 302) a. b. c. 6. What are the goals of the Competition Act (1986)? a. b c. 7. What is the purpose of the Bureau of Competition, what government department does it report to and how are unresolved issues handled? (p 165, 303) a. b. c. d. 8. How successful has the Bureau of Competition been in resolving disputes over mergers compared with the Combines Investigation Act? a. b. 9. Read the case study on p 161-2 and answer questions #3-5. Q3. Q4. Q5. 10. Read the attached case on Microsoft and answer questions 1-5. 11. Take into consideration all of the information that you have gathered from this question sheet and the case studies. In a properly structured, one to two-page double-spaced report, use the information to answer Q6 on page 162. This report will be handed in on Wednesday. The Microsoft Case The Federal Trade Commission in the United States began investigating Microsoft in June 1990. In 1993, The United States Justice Department took over the investigation and, in 1994, the Justice Department and Microsoft signed a consent decree stating that Microsoft cannot require computer makers that license its operating system to license any other software products. In other words, if a computer manufacturer installed a Microsoft operating system, the manufacturer would not be required to install any other Microsoft software, such as an internet browser. In 1997, the Justice Department stated that Microsoft had violated the decree by bundling Internet Explorer with Windows 95. The defence given by Microsoft was that internet browsers are an integrated part of the operating system. Microsoft was required to separate the internet browser from the operating system. In 1998, Microsoft agreed that computer makers could install Windows 98 without the Internet Explorer icon. In 1998, a new charge against Microsoft was investigated, alleging that the company used its monopoly power to thwart competition. In November 1999, a judge ruled that Microsoft had monopoly power with its Windows operating system and had used it anti-competitively, violating the Sherman Antitrust Act by tying its internet browser to its operating system. A mediator was appointed to settle the case, but mediation failed by April 1999. Judge Jackson concluded that Microsoft maintained its monopoly power through anti-competitive means. Consequently, he ordered that Microsoft be split into two companies: one for Windows OS and another for applications software such as Word, Excel, and Internet Explorer. The possibility of appeals could delay this process. Historically, monopolies like Standard Oil and AT&T were split due to monopoly charges, creating regional monopolies or local phone companies respectively. Questions: 1. Do you believe that Microsoft acts as a monopoly in Canada? 2. Is Microsoft a natural monopoly? 3. How did Microsoft maintain its monopoly despite competition, according to the US Justice Department? 4. Search the internet to find the current status of Microsoft's appeal. 5. What does this case suggest about Microsoft's intention to acquire Yahoo?

Paper For Above instruction

The issue of corporate concentration and competition remains central to understanding the dynamics of modern markets. Competition is vital because it encourages innovation, improves efficiency, lowers prices, enhances consumer choices, and prevents monopolistic practices that can harm the economy. This paper explores the importance of competition, the arguments for and against large corporate mergers, and the implications of monopoly power, particularly examining the Microsoft case within broader legal and economic contexts. Drawing from various sources, this analysis seeks to evaluate the effectiveness of legal frameworks like the Competition Act and the role of regulatory bodies in maintaining market fairness.

The Importance of Competition

Competition acts as a catalyst for innovation by incentivizing firms to develop new products and improve existing offerings. As Porter (1980) emphasizes, competitive markets foster technological advancement and productivity growth. Additionally, competition helps regulate prices through market forces, ensuring that consumers are not exploited by monopolists. According to Stiglitz (1989), competitive markets lead to more efficient resource allocation, benefiting society at large. Furthermore, competition enhances consumer choice, empowering consumers with a variety of options aligned to their preferences, which promotes consumer welfare and satisfaction.

Arguments for Large Business and Corporate Concentration

Proponents argue that mergers and corporate concentration can lead to economies of scale, reducing production costs and increasing efficiency. This, in turn, can result in lower prices and better products for consumers, as noted by Bain (1956). Also, large firms can allocate resources more effectively towards research and development, fostering innovation that smaller firms might be unable to afford. Supporters claim that mergers can increase international competitiveness, enabling firms to better compete in global markets. Finally, some argue that market concentration can stabilize industries by removing fragile competitors, leading to more predictable investments and economic stability.

Counterarguments Against Corporate Concentration

Conversely, critics contend that increased corporate concentration diminishes competition, leading to monopolistic or oligopolistic market structures. This can result in higher prices, reduced innovation, and decreased consumer choice, according to Stigler (1964). Monopolies can use their market power to erect barriers to entry for new competitors, entrenching their dominance. Furthermore, monopolistic practices can lead to economic inefficiencies, such as lack of incentive to reduce costs when competition is weak. The Microsoft case exemplifies how dominant firms may utilize anti-competitive strategies to maintain power, illustrating the dangers of unchecked concentration.

Markets and Efficiency

Free markets are often associated with efficiency, but this outcome is not guaranteed. Market failures such as externalities, information asymmetries, and natural monopolies can hinder optimal efficiency. Hayek (1945) argued that markets allocate resources efficiently through the price mechanism, but only under conditions of perfect competition. However, in reality, markets may lack perfect competition, leading to inefficiencies. For example, natural monopolies like utility companies may require regulation to prevent abuse of market power. The debate centers on whether allowing greater market freedom truly results in better allocation of resources or whether intervention is necessary.

The Role and Limitations of Competition Laws

The Combines Investigation Act aimed to prevent anti-competitive practices but faced criticism for its ineffectiveness. As McGowan (2002) discusses, the Act failed due to limited scope, lack of enforcement power, and outdated legal frameworks that could not adequately address complex corporate mergers and anti-competitive conduct. The Competition Act of 1986 was introduced to modernize and strengthen legal tools, focusing on promoting competitive markets and regulating mergers. Its goals include protecting consumer interests, encouraging innovation, and maintaining market efficiency.

The Role of the Bureau of Competition

The Bureau of Competition operates under the Competition Act and is responsible for enforcing laws against anti-competitive practices. It reports to the Competition Tribunal and the Competition Commissioner, who investigate allegations of anti-trust violations. When disputes remain unresolved, the tribunal functions as an arbitration body, making binding decisions. This structure aims to provide a transparent and effective mechanism for resolving competition issues and preventing the abuse of market power. The Bureau's effectiveness depends on timely investigations and enforcement actions, which have improved since the enactment of the Competition Act.

Effectiveness of the Bureau Compared to Past Laws

The Bureau of Competition has been more successful in resolving disputes over mergers than its predecessor, the Combines Investigation Act. The modern legal framework allows for more comprehensive investigations, including complex merger reviews, with the power to impose remedies or block acquisitions that threaten market competition. Studies by the Canadian Competition Bureau (2019) show increased enforcement actions and greater deterrence of anti-competitive conduct compared to earlier legislation. These improvements reflect a more proactive approach towards maintaining competitive markets.

Analysis of Case Studies and Case Law

The case of Microsoft provides a pertinent example of how large technology firms can leverage their dominant positions to restrict competition. The US Justice Department's findings that Microsoft maintained monopoly power through tactics such as tying Internet Explorer to Windows illustrate the dangers of unchecked corporate concentration. The legal actions taken, including the proposed split of the company, highlight the importance of vigilant regulation. This case underscores the need for policies that balance encouraging innovation with preventing anti-competitive behavior, especially in rapidly evolving technological industries. Similarly, historical cases like Standard Oil and AT&T demonstrate how breaking up monopolies can restore competitive dynamics, resulting in more innovation and consumer choice.

Conclusion

The debate surrounding corporate concentration and competition is complex, involving economic, legal, and ethical considerations. While large firms can achieve efficiencies and foster innovation, unchecked dominance risks harming consumers and economic diversity. Legal frameworks like the Competition Act and institutions such as the Bureau of Competition are vital in ensuring a fair marketplace. The Microsoft case exemplifies the ongoing challenges of regulating dominant firms in high-tech industries and highlights the importance of vigilant enforcement. Ultimately, fostering genuine competition requires a balanced approach that encourages innovation while preventing monopolistic abuse, ensuring sustainable and equitable economic growth.

References

• Bain, J. S. (1956). _Barriers to new competition: Their character and consequences in manufacturing, mining, services, and public utilities_. Harvard University Press.
• Canadian Competition Bureau. (2019). _Annual Report on Competition Enforcement_. Vancouver: Government of Canada.
• Hayek, F. A. (1945). The use of knowledge in society. _The American Economic Review_, 35(4), 519–530.
• McGowan, J. (2002). Competition law and policy in Canada. _Canadian Journal of Law and Jurisprudence_, 15(1), 45–71.
• Porter, M. E. (1980). _Competitive Strategy: Techniques for analyzing industries and competitors_. Free Press.
• Stiglitz, J. E. (1989). The economic structure of monopolistic competition. _The American Economic Review_, 79(2), 183–188.
• Stigler, G. J. (1964). A theory of oligopoly. _Journal of Political Economy_, 72(1), 44–61.
• United States Department of Justice. (1994). _Microsoft Corporation Antitrust Litigation_. Washington, DC.
• United States v. Microsoft Corporation. (2001). _U.S. District Court Decision_.
• Canadian Competition Act. (1986). _R.S.C., c. C-34_.