Big business as we would recognize it today, developed in the steel, petroleum a
ID: 1201658 • Letter: B
Question
Big business as we would recognize it today, developed in the steel, petroleum and electrical industries during the late 1800's and early 1900's. Government's response to "big business" were the antitrust laws such as the Sherman Act, Clayton Act, and Federal Trade Commission Act. Rulings in antitrust cases have established two precedents, the rule of reason and the per se rule. If the rule of reason is applied to an antitrust case, to be found guilty a firm must not only have a large market share, the firm must have also practiced some type of prohibited behavior. If the per se rule is applied, to be found guilty a firm only has to have a large market share. Address the following: In light of the past recent few year’s events with the auto and financial industry, which precedent would you advise courts follow and why?
Explanation / Answer
Various rulings in Anti-trust legislations throughout the world have established two precedents, the rule of reason and the per se rule. If the rule of reason is applied to an antitrust case, to be found guilty a firm must not only have a large market share, the firm must have also practiced some type of prohibited behavior. If the per se rule is applied, to be found guilty a firm only has to have a large market share.
In the light od the recent few year's events with the auto and financial industry, I would advise the courts to follow the Rule of reason rather than the per se rule.
The reason for my choice is that it has been seen in the past that a number of companies have been targeted only because of their large market share. However, having a large market share does not necessarily imply that the company should be put under scrutiny. A large market share could, in fact, imply that the company is performing its activities in the best possible manner and are delivering maximum satisfaction to their customers.
The rule of reason is a better precedent as it considers both - the market share as well as the fact that the firm has practiced some type of prohibited behaviour. The practice of the prohibited behaviour can be taken as a basis of a scrutiny.
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