Antitrust Laws

Antitrust Laws



Antitrust Laws


Antitrust laws are part of a set of competition laws that were designed to regulate market competition by checking monopolistic tendencies exhibited by companies. Antitrust laws have effectively worked to create a level playing field within the United States for small and large companies likewise. Small and medium enterprises (SMEs) are able to compete fairly with large multinationals within the same sector. The three tenets of antitrust laws serve to bar agreements or activities that confine free trading and rivalry between businesses, prohibit damaging conduct exhibit by a dominant firm and to oversee acquisitions and mergers that may threaten the competitive process. However, certain multinationals have persisted in maintaining monopolistic tendencies. This paper analyses real life examples of such multinationals and the subsequent reactions by agencies responsible for maintaining competition standards in the industry.

Competition, GlaxoSmithKline and Paxil Drug

            Federal antitrust administrators in the past sought to look into the operations of the giant pharmaceutical company, SmithKline Beecham concerning the attempts at limiting the effect of generic competition after they launched their highly lucrative drug Paxil. Of all the medical products, the anti-depressant topped the company’s sales charts at approximately $2.1 billion that represented a massive raise in the profit margins from the year before (Blumenthal, 2013). Conducted by the FTC, the investigation was set up to establish whether SmithKline was participating in activities that interfered with generic options to Paxil from emerging into the market. Particularly, the FTC was questioning a practice among generic drug producers and brand name to come to a consensus on delaying the adopting lower priced drugs in the market. Several legal barriers that exist within the pharmaceutical industry that stops many emerging companies from entering into the mainstream market (Cooper & Finkelstein, 2007).

These barriers typically protect long-standing businesses and suppress emerging ones. Some of the most common barriers include economies of scale, capital requirements, regulatory policies and high switching costs. These barriers to entry are exceptionally high due to the high profit margins in the industry. Numerous large firms have formidable manufacturing capabilities that cannot be easily replicated. In addition, they own widespread patents that assure the safety of their assets while they protect their brands using excessive marketing budgets (Blumenthal, 2013). Given that most emerging pharmaceutical companies can anticipate a sharp reprisal from established opponents in the industry, the general threat of entry into the international marketplace is comparatively low when placed against other international industries.

Several ethical dilemmas exist in such an industry and competitive situation. One, the high level of competition in the pharmaceutical industry opens the gates for lower product quality as well as lower standards. Drug producers will seek out alternatives to lowering production and research expenditure with a view to maximizing profits. This was the case with GlaxoSmithKline in their Chinese subsidiary where bribery was extensively used by the employees to acquire clients. The company also simultaneously forged important reports on the medical results for Paxil tests (Blumenthal, 2013).

T-Mobile and Sprint Merger

Ideally, acquisitions and mergers frequently produce several social benefits. Mergers have the ability to create better administration and technical expertise to utilize underused property. Furthermore, they also can generate economies of scale and increase quality. The looming merger between Sprint and T-Mobile expressed optimism that it would reveal such benefits to its customers and shareholders. However, the upcoming merger generated a lot of concern amongst customers since the likelihood of an acquisition could dispirit company executives from acting in ways that would capitalize on profits (Areeda, Kaplow & Edlin, 2004). Mergers can also shift the ownership from a hands-on and effective management to one that fails to address shareholders’ concerns. In such a situation, the merge would translate into financial losses for the investors (Coffey, Holbeche, & Garrow, 2003).

The most important threat to consumers and investors is that mergers pose little risk to competition. A critical time when merger choices should be reviewed by consumer advocated is during the merger proposal stage. At this phase, forecast market trends can be analyzed to establish how the merger will affect both parties financially. Another major apprehension with telecommunications acquisitions and mergers is that they can create technological stagnation in the long-term when one company dictates the market. In the potential merger between Sprint and T-Mobile, most speculators opted to purchase shares from their rival company, AT&T (Choi, 2007). This is because the two companies were still growing and a potential merger would only destabilize the new entity.

In the possible merger between Sprint and T-Mobile, several ethical dilemmas exist. One, there is possibility that rights of employees can be violated during the merger. When two companies merge, the new entity formed may introduce new policies and regulations that normally violate the rights of employees. The period after a merger is characterized by lean budgets and extensive work that affects the rights of employees mostly negatively. New executives tend to infringe on the rights of employees and may lead to discontentment and lower productivity (Blumenthal, 2013). The next possible ethical dilemma is concerned with the position held by shareholders during the acquisition period. On one hand, shareholders are uncertain of the changes that will be adopted by the new administration while on the other hand; ready to contribute financially to maintain the company running.


Areeda, P., Kaplow, L., & Edlin, A. S. (2004). Antitrust Analysis: Problems, Text, Cases (Sixth Ed.). New York: Aspen. pp. 684–717.

Blumenthal, W. (2013). Models for merging the US antitrust agencies. Journal of Antitrust Enforcement. 1 (1): 24–51.

Choi, J. (ed.) (2007). Recent Developments in Antitrust: Theory and Evidence. The MIT Press.

Coffey, J., Holbeche, L., & Garrow, V. (2003). Reaping the benefits of mergers and acquisitions: In search of the Golden Fleece. Oxford: Butterworth-Heinemann.

Cooper, C. L., & Finkelstein, S. (2007). Advances in mergers and acquisitions: Vol. 6. Amsterdam: Elsevier JAI.

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