Only available on StudyMode
  • Download(s): 121
  • Published: January 23, 2014
Read full document
Text Preview

Research Paper – Antitrust

The purpose of this paper is to discuss antitrust law with regard to federal regulations. In the form of a case study, this paper will examine the legal obstacles faced by the merger proposal between US Airways Group Inc. and American Airlines' parent corporation AMR. The focus of the paper is to examine the legal hurdles posed by antitrust laws used to block the merger and then briefly explore possible ethical issues associated with allowing US Airways Group Inc. and AMR to merge. Antitrust Laws

There are three core federal antitrust laws in effect today in our US legal system. They are the Sherman Act, The Federal Trade Commission Act, and the Clayton Act ("Antitrust", n.d.). The Sherman Antitrust Act (Sherman Act, July 2, 1890, ch. 647, 26 Stat. 209, 15 U.S.C. § 1–7) is an antitrust law primarily aimed at prohibiting the formulation of monopolies by making them a felony offense. As the Sherman Act evolved the US Supreme Court decided that monopolies in and of themselves are not bad and do not automatically violate the Sherman Act. Instead, it is the particular actions taken to obtain or maintain monopolistic positioning that is illegal ("Sherman", 2008). The Federal Trade Commission Act (15 U.S.C. § 45: US Code - Section 45: Unfair methods of competition unlawful; prevention by Commission) has a primary duty of prohibiting actions within commerce that are deemed unfair to competition ("15 U.S.C. § 45", n.d.). The Clayton Act (15 U.S.C.A. § 12 et seq. [1914]) is an addition to the antitrust laws primarily used today to prohibit certain types of business practices making them illegal when their usage severely restricts competition and/or creates a monopoly. The practices specifically addressed in the Act are price discrimination, making it illegal to sale the same product to different people in the same market at different prices; tying and exclusive dealing contracts, making it illegal to forbid a shopper from shopping with competitors; corporate mergers, the acquisition of competing head to head companies by one company; and interlocking directorates, the members of which are common members on the boards of directors of competing companies ("Clayton act", 2008). The Enforcers

The federal antitrust laws are enforced by the Federal Trade Commission and the U.S. Department of Justice. They both open up and conduct antitrust investigations. In situations involving the airline industry the Department of Justice has jurisdiction in matters pertaining to antitrust laws. There are other regulatory agencies that also must give approval before certain mergers can take place. In these instances The Federal Trade Commission and the Department of Justice provide support to the agencies. Individual states may also work in conjunction with the two federal agencies to enforce its state's antitrust laws. Additionally, the states can file antitrust lawsuits on behalf of its citizens or the state. This is usually done through the state's attorney general office. Individuals and businesses can also initiate antitrust complaints and file suits to have the antitrust laws enforced ("The federal government", n.d.). Mergers

Section 7 of the Clayton Act addresses the antitrust laws concerning mergers. Mergers are not inherently bad or illegal. So long as the merger doesn't cause a significant increase in prices, a serious reduction in quality of goods and services, and doesn't deter innovation. Mergers become a problem when they significantly lessen competition or lead to a monopoly. When head to head competitors propose a merger it will usually sets off antitrust alarm bells that most likely will lead to an investigation by one of the federal agencies ("Mergers", n.d.).

External Obstacles
In 2005, US Airways and AMR publically proposed a merger that was met with a great deal of resistance. The government has the responsibility to regulate mergers to ensure the...
tracking img