Anti-Trust Laws, Business Combinations, and Market Concentration

Anti-Trust Policy: Should Big Tech Be Broken Up?
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Anti-Trust Policy: Should Big Tech Be Broken Up?
Background Discussion
Anti-trust laws prevent unlawful mergers and business practices, leaving courts to establish the illegal ones based on each case’s facts. Anti-trust policy in the United States (U.S.) has evolved from the 1890 Sherman Act to the 1914 Federal Trade Commission (FTC) Act. The FTC culminated into the ratification of the Clayton Act. Despite undergoing revisions overtime, the aforementioned acts remain the primary anti-trust regulatory standard that apply in the contemporary times. More specifically, the Sherman Act prohibits any conspiracy, agreements, or a combination of these tailored to restrain commerce, including attempted domination, domination, or combination or conspiracy to dominate the market. The FTC Act illegalizes unfair competition methods and unjust or deceptive practices or acts. The Clayton Act focuses on specific practices not banned under the Sherman Act, including interlocking directorates and mergers. In addition, it is essential to note that the Clayton Act has been amended twice: in 1936 through the Robinson-Patman Act and later in 1976 by the Hart-Scott-Rodino Antitrust Improvements Act (Federal Trade Commission, n.d.).
What types of mergers/business combinations exist?
These fundamental business combinations/merger types exist: vertical, horizontal, and conglomerate mergers. A vertical business combination is a merger between two firms operating at different phases of the production process for a given finished product. A horizontal merger is a business combination between companies operating within the same space, thus the need to merge and leverage market share potential gains. A conglomerate is the merging of two or more firms operating in completely different businesses falling under a particular business group, typically involving the parent firm and its subsidiaries (Sharma & Goswami, 2019).
What has been the general trend in market concentration over the past 20 years?
Market concentration and profit margins have augmented across industries over the past two decades in the U.S. There have been deteriorations in private investment and labor share, as illustrated in figure 1. Noteworthy, negative concentration has been more prevalent in the country over the previous two decades. Recent upsurges in concentration are predominantly linked to declining ...