Blaw Help: Bubbly Bottling Company is engaged in the soft-drink bottling and dis

Question

Blaw Help: Bubbly Bottling Company is engaged in the soft-drink bottling and distribution industry in the states of New York and New Jersey. The firm currently has about 40 percent of the market for these products and related services. Carbonate Distribution Corporation competes with Bubbly in the same states. Carbonate has about 35 percent of the market. If Bubbly were to acquire the stock and assets of Carbonate, would Bubbly be in violation of any of the antitrust laws? If so, which one? Discuss fully.

Explanation / Answer

Section 7 of the Clayton Act prohibits the type of action by Bubbly suggested in this question - a horizontal merger that would increase market concentration. Other factors include the overall concentration of the relevant market, that market's history of tending toward concentration, and whether the merger is apparently designed to establish market power or restrict competition. Most of these factors are present. Thus, the major antitrust law being violated in Section 7 of the Clayton Act.

Section 7 prohibits any person or business organization from acquiring the stock or asset in other business where the result would be a significantly increased market share. The removal of a competitor who controls 35 percent of the market (Carbonate) combined with 40 percent held by acquiring company (Bubbly) definitely could drive out the remaining small competitors and be a barrier to future entrants in this market.

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