Question

Provide an example for one of the components for the Clayton Act.

What is the purpose of the Celler-Kefauver Act?

Give an example of the three types of mergers?

What is the difference between social and industrial regulations? Give examples of each.

Answer 1

Solution (1) :

The Clayton Antitrust Act was enacted by the United State in 1914, to control business practices and to provide a uniform opportunity to all by defining the unethical business practices that have to be avoided by corporates for protecting all identity in the long term by making a fair competition and equal opportunity for all they mainly look on monopolies, price-fixing and various issue especially to uphold the rights of labor, even they framed laws for anticompetitive mergers to protect consumers empowering them for their rights and maintaining the rights of labor through various measures to protect their interests, so there are 26 sections describing different norms for ethical business practices. To Provide an example for one of the components of the Clayton Act, we can examine the seventh section, which mainly handles with mergers and acquisition so if we want to look on it we can take the example of tire industry which are very limited in number and in earlier days they mainly create a cartel to increase their profit while they have to provide their bidding for any order whereas after the implementation of all these laws to protect the consumer in the market now it has totally been eradicated which keeps the market competitive

Solution (2) :

Actually, the government enacted this law in addition to the Clayton Act which was proposed during the first decades of the 19th century, while we have Clayton act to protect any unfair practice but still there is a need to even further enhance the law by making some changes thus in 1950 government came up with Celler-Kefauver Act, to create some additional restrictions for strengthening the Clayton Antitrust Act and Sherman Antitrust Act, basically, the main purpose behind this act is to look on unfair practices in the industry by prohibiting the acquisition through share markets thus it prohibits one company from acquiring the stock or assets of another firm if this can reduce the competition in the market, it also put a measure on all types of mergers across industries, rather then just looking on a specific industry-oriented horizontally mergers.

Solution (3) :

So if we look at the various merger and acquisition we have basically three main types of the merger which mainly depends on the industry-specific need, which includes horizontal mergers helpful in increasing the market share, vertical mergers which can exploit existing synergies more efficiently, and finally, the concentric mergers which mainly expands the product range of the firm to expands their market.

Horizontal Mergers:

A horizontal merger is mainly preferred by those firms that have similar products in the same market, they are mainly competing in an oligopoly market and have a high opportunity to earn, so horizontal mergers are common in oligopoly industries having fewer firms with high market opportunity to explore since the market opportunity is high as here the competition tends to be higher between the firms and there would be high synergies and potential that can be captured in the market and thus firms can enhance their revenue by merging in such an industry which have only a few players and high potential in the market in near future. if we look carefully at the market there are only a few players in the beverage industry like Coca-Cola and Pepsi thus this would be the best example of a horizontal merger in nature, even  the merger of HP and Compaq would be the best example of a horizontal merger

Vertical Mergers:

A vertical merger is mainly opted for increasing the revenue of the firm by increasing their reach in the market share, in this kind of merger we mainly combine two different companies which are involved in producing the same goods like a car (chassis) and tire manufacturers which are required to assemble a complete car at different stages of production, vertical mergers mainly help to prevent any disruption in the business by providing a smooth transition in the manufacturing process.

Concentric Mergers:

Concentric mergers, they are also known as congeneric mergers, which mainly occur between companies which are not only in the same industry but even serving the same customers but have different products to offer and this type of merger mainly took place to provide a one-stop solution to their customer for a better experience, the best example would be the merger of the banking giant Citicorp with financial services company Travelers Group in the late 19th century.

Solution (4) :

Industrial regulation is mainly defined as the different norms and other types of government laws that define how a particular industry has to work ethically by protecting the rights of the customer, and other competitors to provide an equal opportunity to all they also define rules for firms entry and exits if there is a need for any specific industry to provide an opportunity for all, while social regulation mainly includes regulations to provide better environmental control in nature, health and safety regulations for all along with consumer using the products, it also mentions clear rules pertaining to the restrictions on product labeling and advertising for all.