113-548: Kinney Services Inc. was an American conglomerate company from 1966 to 1972. Its successor was Warner Communications . Kinney National's predecessors were Kinney Service Corporation and National Cleaning Contractors Inc., whose merger began in January 1966 and was completed in August of the same year. National Cleaning Contractors was founded in 1886 by Louis Frankel and Max Sweig as National Window Cleaning & House Renovating Co., and
226-429: A market inefficiency , which undervalues the true strength of these stocks. In her 1999 book No Logo , Naomi Klein provides several examples of mergers and acquisitions between media companies designed to create conglomerates to create synergy between them: A relatively new development, Internet conglomerates, such as Alphabet , Google's parent company belong to the modern media conglomerate group and play
339-458: A bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed, "per Dieu, if the plaintiff were here, he should go to prison until he had paid a fine to the King". The court denied the collection of a bond for the dyer's breach of agreement because the agreement
452-480: A disorienting and demoralizing experience for executives at acquired companies—those who were not immediately laid off found themselves at the mercy of the conglomerate's executives in some other distant city. Most conglomerates' headquarters were located on the West Coast or East Coast , while many of their acquisitions were located in the country's interior. Many interior cities were devastated by repeatedly losing
565-540: A focus in Asia.) In Japan, a different model of conglomerate, the keiretsu , evolved. Whereas the Western model of conglomerate consists of a single corporation with multiple subsidiaries controlled by that corporation, the companies in a keiretsu are linked by interlocking shareholdings and a central role of a bank. Mitsui , Mitsubishi , Sumitomo are some of Japan's best-known keiretsu, reaching from automobile manufacturing to
678-427: A general rule that the state may not aid or subsidize private parties in distortion of free competition and provides exemptions for charities , regional development objectives and in the event of a natural disaster . Leading ECJ cases on competition law include Consten & Grundig v Commission and United Brands v Commission . India responded positively by opening up its economy by removing controls during
791-470: A major role within various industries, such as brand management . In most cases, Internet conglomerates consist of corporations that own several medium-sized online or hybrid online-offline projects. In many cases, newly joined corporations get higher returns on investment , access to business contacts, and better rates on loans from various banks. Similar to other industries many companies can be termed as conglomerates. Antitrust Competition law
904-579: A new separate company focused on its parking and cleaning businesses; National Kinney Corporation was formally founded in September 1971. On November 22, 1971, Kinney Services also bought Television Communications Corporation (which was renamed as Warner Cable in 1973), including its recording studio operations of 1,210,500 common shares. Kinney National also owned wood flooring manufacturer Circle Floor from Seymour Milstein and Paul Milstein , when Kinney's predecessor bought it in 1964 for $ 15 million, with
1017-532: A number of significant theoretical, legal and practical challenges. Antitrust administration and legislation can be seen as a balance between: Chapter 5 of the post-war Havana Charter contained an Antitrust code but this was never incorporated into the WTO's forerunner, the General Agreement on Tariffs and Trade 1947. Office of Fair Trading Director and Richard Whish wrote sceptically that it "seems unlikely at
1130-475: A product so much that one's smaller competitors cannot cover their costs and fall out of business. The Chicago school considers predatory pricing to be unlikely. However, in France Telecom SA v. Commission a broadband internet company was forced to pay $ 13.9 million for dropping its prices below its own production costs. It had "no interest in applying such prices except that of eliminating competitors" and
1243-625: A small slice of many companies in a fund rather than owning shares in a conglomerate. Another example of a successful conglomerate is Warren Buffett 's Berkshire Hathaway , a holding company which used surplus capital from its insurance subsidiaries to invest in businesses across a variety of industries. The end of the First World War caused a brief economic crisis in Weimar Germany , permitting entrepreneurs to buy businesses at rock-bottom prices. The most successful, Hugo Stinnes , established
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#17330846428531356-500: A system of Industrial Monopoly Licenses, similar to modern patents had been introduced into England. But by the reign of Queen Elizabeth I , the system was reputedly much abused and used merely to preserve privileges, encouraging nothing new in the way of innovation or manufacture. In response English courts developed case law on restrictive business practices. The statute followed the unanimous decision in Darcy v. Allein 1602, also known as
1469-615: Is a way for national authorities to coordinate their own enforcement activities. Under the doctrine of laissez-faire , antitrust is seen as unnecessary as competition is viewed as a long-term dynamic process where firms compete against each other for market dominance . In some markets, a firm may successfully dominate, but it is because of superior skill or innovativeness. However, according to laissez-faire theorists, when it tries to raise prices to take advantage of its monopoly position it creates profitable opportunities for others to compete. A process of creative destruction begins which erodes
1582-498: Is also decreased, further decreasing social welfare by creating a deadweight loss . Sources of this market power are said to include the existence of externalities , barriers to entry of the market, and the free rider problem . Markets may fail to be efficient for a variety of reasons, so the exception of competition law's intervention to the rule of laissez faire is justified if government failure can be avoided. Orthodox economists fully acknowledge that perfect competition
1695-471: Is also known as Pareto efficiency after the Italian economist Vilfredo Pareto and means that resources in an economy over the long run will go precisely to those who are willing and able to pay for them. Because rational producers will keep producing and selling, and buyers will keep buying up to the last marginal unit of possible output – or alternatively rational producers will be reduce their output to
1808-614: Is an evil... After Mill, there was a shift in economic theory, which emphasized a more precise and theoretical model of competition. A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare . This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry . By this term economists mean something very specific, that competitive free markets deliver allocative , productive and dynamic efficiency. Allocative efficiency
1921-544: Is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatization of state owned assets and the establishment of independent sector regulators, among other market-oriented supply-side policies. In recent decades, competition law has been viewed as a way to provide better public services . Robert Bork argued that competition laws can produce adverse effects when they reduce competition by protecting inefficient competitors and when costs of legal intervention are greater than benefits for
2034-554: Is commonly known as trust busting . The history of competition law reaches back to the Roman Empire . The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law . National and regional competition authorities across
2147-577: Is considered a tool to stimulate economic growth. In Korea and Japan , the competition law prevents certain forms of conglomerates . In addition, competition law has promoted fairness in China and Indonesia as well as international integration in Vietnam. Hong Kong 's Competition Ordinance came into force in the year 2015. As part of the creation of the ASEAN Economic Community, the member states of
2260-472: Is currently China's largest civilian-run conglomerate by revenue. In South Korea , the chaebol is a type of conglomerate owned and operated by a family. A chaebol is also inheritable, as most of the current presidents of chaebols succeeded their fathers or grandfathers. Some of the largest and most well-known Korean chaebols are Samsung , LG , Hyundai Kia and SK . In India, family-owned enterprises became some of Asia's largest conglomerates, such as
2373-414: Is difficult to prove at what point a dominant firm's prices become "exploitative" and this category of abuse is rarely found. In one case however, a French funeral service was found to have demanded exploitative prices, and this was justified on the basis that prices of funeral services outside the region could be compared. A more tricky issue is predatory pricing . This is the practice of dropping prices of
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#17330846428532486-581: Is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation . These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT multilateral negotiations,
2599-678: Is more than 50 percent of countries with a population exceeding 80,000 people. 81 of the 111 countries had adopted their competition laws in the past 20 years, signaling the spread of competition law following the collapse of the Soviet Union and the expansion of the European Union . Currently competition authorities of many states closely co-operate, on everyday basis, with foreign counterparts in their enforcement efforts, also in such key area as information / evidence sharing. In many of Asia's developing countries, including India, Competition law
2712-415: Is necessary to determine whether a firm is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer". Under EU law, very large market shares raise a presumption that a firm is dominant, which may be rebuttable. If a firm has a dominant position, then there is "a special responsibility not to allow its conduct to impair competition on
2825-608: Is seldom observed in the real world, and so aim for what is called " workable competition ". This follows the theory that if one cannot achieve the ideal, then go for the second best option by using the law to tame market operation where it can. A group of economists and lawyers, who are largely associated with the University of Chicago , advocate an approach to competition law guided by the proposition that some actions that were originally considered to be anticompetitive could actually promote competition. The U.S. Supreme Court has used
2938-462: Is the direct predecessor to modern competition law later developed in the US. It is based on the prohibition of agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. It effectively prohibited agreements designed to restrain another's trade. The 1414 Dyer's is the first known restrictive trade agreement to be examined under English common law. A dyer had given
3051-413: Is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law (or just antitrust ), anti-monopoly law , and trade practices law ; the act of pushing for antitrust measures or attacking monopolistic companies (known as trusts )
3164-404: Is whether a concentration (i.e. merger or acquisition) with a community dimension (i.e. affects a number of EU member states) might significantly impede effective competition . Articles 106 and 107 provide that member state's right to deliver public services may not be obstructed, but that otherwise public enterprises must adhere to the same competition principles as companies. Article 107 lays down
3277-555: The Aditya Birla Group , Tata Group , Emami , Kirloskar Group , Larsen & Toubro , Mahindra Group , Bajaj Group , ITC Limited , Essar Group , Reliance Industries , Adani Group and the Bharti Enterprises . In Brazil the most important conglomerates are J&F Investimentos , Odebrecht , Itaúsa , Camargo Corrêa , Votorantim Group , Andrade Gutierrez , and Queiroz Galvão. In New Zealand, Fletcher Challenge
3390-491: The Association of South-East Asian Nations (ASEAN) pledged to enact competition laws and policies by the end of 2015. Today, all ten member states have general competition legislation in place. While there remains differences between regimes (for example, over merger control notification rules, or leniency policies for whistle-blowers), and it is unlikely that there will be a supranational competition authority for ASEAN (akin to
3503-709: The Case of Monopolies , of the King's Bench to declare void the sole right that Queen Elizabeth I had granted to Darcy to import playing cards into England. Darcy, an officer of the Queen's household, claimed damages for the defendant's infringement of this right. The court found the grant void and that three characteristics of monopoly were (1) price increases, (2) quality decrease, (3) the tendency to reduce artificers to idleness and beggary. This put an end to granted monopolies until King James I began to grant them again. In 1623 Parliament passed
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3616-750: The Economic liberalisation . In quest of increasing the efficiency of the nation's economy, the Government of India acknowledged the Liberalization Privatization Globalization era. As a result, Indian market faces competition from within and outside the country. This led to the need of a strong legislation to dispense justice in commercial matters and the Competition Act, 2002 was passed. The history of competition law in India dates back to
3729-688: The European Commission was no longer the only body capable of public enforcement of European Union competition law . This was done to facilitate quicker resolution of competition-related inquiries. In 2005 the Commission issued a Green Paper on Damages actions for the breach of the EC antitrust rules , which suggested ways of making private damages claims against cartels easier. Some EU Member States enforce their competition laws with criminal sanctions. As analysed by Whelan , these types of sanctions engender
3842-563: The Statute of Monopolies , which for the most part excluded patent rights from its prohibitions, as well as guilds. From King Charles I , through the civil war and to King Charles II , monopolies continued, especially useful for raising revenue. Then in 1684, in East India Company v. Sandys it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in
3955-721: The Treaty of Rome , also known as the EC Treaty, which established the European Economic Community (EEC). The Treaty of Rome established the enactment of competition law as one of the main aims of the EEC through the "institution of a system ensuring that competition in the common market is not distorted". The two central provisions on EU competition law on companies were established in article 85, which prohibited anti-competitive agreements, subject to some exemptions, and article 86 prohibiting
4068-641: The United States , conglomerates became popular in the 1960s as a form of economic bubble driven by low interest rates and leveraged buyouts. However, many of them collapsed or were broken up in the 1980s due to poor performance, accounting scandals, and antitrust regulation. In contrast, conglomerates have remained prevalent in Asia, especially in China , Japan , South Korea , and India . In mainland China , many state-affiliated enterprises have gone through high value mergers and acquisitions , resulting in some of
4181-474: The World Trade Organization (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis. Competition law has failed to prevent monopolization of economic activity. "The global economy is dominated by a handful of powerful transnational corporations (TNCs). ... Only 737 top holders accumulate 80% of
4294-517: The frontier of its possible production . Dynamic efficiency refers to the idea that business which constantly competes must research, create and innovate to keep its share of consumers. This traces to Austrian-American political scientist Joseph Schumpeter 's notion that a "perennial gale of creative destruction" is ever sweeping through capitalist economies, driving enterprise at the market's mercy. This led Schumpeter to argue that monopolies did not need to be broken up (as with Standard Oil ) because
4407-572: The highest value business transactions of all time. These conglomerates have strong ties with the government and preferential policies and access to capital. During the 1960s, the United States was caught up in a "conglomerate fad " which turned out to be a form of an economic bubble . Due to a combination of low interest rates and a repeating bear-bull market , conglomerates were able to buy smaller companies in leveraged buyouts (sometimes at temporarily deflated values). Famous examples from
4520-476: The 1880s controlled several markets, including the market in fuel oil , lead and whiskey . Vast numbers of citizens became sufficiently aware and publicly concerned about how the trusts negatively impacted them that the Act became a priority for both major parties. A primary concern of this act is that competitive markets themselves should provide the primary regulation of prices, outputs, interests and profits. Instead,
4633-440: The 1960s include Gulf and Western Industries , Ling-Temco-Vought , ITT Corporation , Litton Industries , Textron , and Teledyne . The trick was to look for acquisition targets with solid earnings and much lower price–earnings ratios than the acquirer. The conglomerate would make a tender offer to the target's shareholders at a princely premium to the target's current stock price. Upon obtaining shareholder approval,
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4746-487: The 1960s when the first competition law, namely the Monopolies and Restrictive Trade Practices Act (MRTP) was enacted in 1969. But after the economic reforms in 1991, this legislation was found to be obsolete in many aspects and as a result, a new competition law in the form of the Competition Act, 2002 was enacted in 2003. The Competition Commission of India , is the quasi judicial body established for enforcing provisions of
4859-618: The 1980s, General Electric also moved into financing and financial services , which in 2005 accounted for about 45% of the company's net earnings. GE formerly owned a minority interest in NBCUniversal , which owns the NBC television network and several other cable networks . United Technologies was also a successful conglomerate until it was dismantled in the late 2010s. With the spread of mutual funds (especially index funds since 1976), investors could more easily obtain diversification by owning
4972-404: The Act outlawed anticompetitive practices, codifying the common law restraint of trade doctrine. Rudolph Peritz has argued that competition law in the United States has evolved around two sometimes conflicting concepts of competition: first that of individual liberty, free of government intervention, and second a fair competitive environment free of excessive economic power . Since the enactment of
5085-493: The CEO of Garden State National Bank . Conglomerate company A conglomerate ( / k ə ŋ ˈ ɡ l ɒ m ə r ə t / ) is a type of multi-industry company that consists of several different and unrelated business entities that operate in various industries. A conglomerate usually has a parent company that owns and controls many subsidiaries , which are legally independent but financially and strategically dependent on
5198-542: The Chicago school approach in several recent cases. One view of the Chicago school approach to antitrust is found in United States Circuit Court of Appeals Judge Richard Posner 's books Antitrust Law and Economic Analysis of Law . Robert Bork was highly critical of court decisions on United States antitrust law in a series of law review articles and his book The Antitrust Paradox . Bork argued that both
5311-749: The Clayton Act, and in the European Union, under the Merger Regulation 139/2004 (known as the "ECMR"). Competition law requires that firms proposing to merge gain authorization from the relevant government authority. The theory behind mergers is that transaction costs can be reduced compared to operating on an open market through bilateral contracts. Concentrations can increase economies of scale and scope. However often firms take advantage of their increase in market power, their increased market share and decreased number of competitors, which can adversely affect
5424-498: The Competition Act. The Anti Monopoly Law of China came into effect in 2008. For years, it was enforced by three different branches of government, but since 2018 its enforcement has been the responsibility of the State Administration for Market Regulation . The People's Daily reported that the law had generated 11 billion RMB of penalties between 2008 and 2018. By 2008, 111 countries had enacted competition laws, which
5537-793: The European Union), there is a clear trend towards increase in infringement investigations or decisions on cartel enforcement. Competition law is enforced at the national level through competition authorities, as well as private enforcement. The United States Supreme Court explained: Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for
5650-612: The Hart–Scott–Rodino Antitrust Improvements Act of 1976 , mergers and acquisitions came into additional scrutiny from U.S. regulators. Under the act, parties must make a pre-merger notification to the U.S. Department of Justice and Federal Trade Commission prior to the completion of a transaction. As of February 2, 2021, the FTC reduced the Hart-Scott-Rodino reporting threshold to $ 92 million in combined assets for
5763-477: The Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain. In continental Europe, competition principles developed in lex mercatoria . Examples of legislation enshrining competition principles include the constitutiones juris metallici by Wenceslaus II of Bohemia between 1283 and 1305, condemning combination of ore traders increasing prices;
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#17330846428535876-596: The Milsteins remaining as managers of the unit until 1971 before the sale. Due to a financial scandal involving price fixing in its parking operations, Kinney National spun off its non-entertainment assets on August 7, 1971 as the National Kinney Corporation , and renamed the remaining Kinney Services as Warner Communications Inc. on February 10, 1972. Steve Ross was the company's sole CEO , president , and chairman . Directors included Charles A. Agemian ,
5989-586: The Municipal Statutes of Florence in 1322 and 1325 followed Zeno 's legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed "to prevent losses resulting from monopolies and improper contracts which many merchants and artisans made in the Netherlands". In 1553, Henry VIII of England reintroduced tariffs for foodstuffs, designed to stabilize prices, in
6102-533: The Prevention and Suppression of Combinations formed in restraint of Trade was passed one year before the United States enacted the most famous legal statute on competition law, the Sherman Act of 1890. It was named after Senator John Sherman who argued that the Act "does not announce a new principle of law, but applies old and well recognised principles of common law". The Sherman Act of 1890 attempted to outlaw
6215-457: The Sherman Act enforcement of competition law has been based on various economic theories adopted by Government. Section 1 of the Sherman Act declared illegal "every contract, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." Section 2 prohibits monopolies , or attempts and conspiracies to monopolize. Following
6328-572: The United States, became the first European countries to adopt fully fledged competition laws. At a regional level EU competition law has its origins in the European Coal and Steel Community (ECSC) agreement between France, Italy , Belgium , the Netherlands , Luxembourg and Germany in 1951 following the Second World War. The agreement aimed to prevent Germany from re-establishing dominance in
6441-598: The United States, some of the examples are The Walt Disney Company , Warner Bros. Discovery and The Trump Organization (see below). In Canada, one of the examples is Hudson's Bay Company . Another such conglomerate is J.D. Irving, Limited , which controls a large portion of the economic activities as well as media in the Province of New Brunswick . Some cite the decreased cost of conglomerate stock (a phenomenon known as conglomerate discount ) as evidential of these disadvantages, while other traders believe this tendency to be
6554-595: The abuse of dominant position. The treaty also established principles on competition law for member states, with article 90 covering public undertakings, and article 92 making provisions on state aid. Regulations on mergers were not included as member states could not establish consensus on the issue at the time. Today, the Treaty of Lisbon prohibits anti-competitive agreements in Article 101(1), including price fixing . According to Article 101(2) any such agreements are automatically void. Article 101(3) establishes exemptions, if
6667-469: The collusion is for distributional or technological innovation, gives consumers a "fair share" of the benefit and does not include unreasonable restraints that risk eliminating competition anywhere (or compliant with the general principle of European Union law of proportionality ). Article 102 prohibits the abuse of dominant position , such as price discrimination and exclusive dealing. Regulation 139/2004/EC governs mergers between firms. The general test
6780-465: The common market". Similarly as with collusive conduct, market shares are determined with reference to the particular market in which the firm and product in question is sold. Then although the lists are seldom closed, certain categories of abusive conduct are usually prohibited under the country's legislation. For instance, limiting production at a shipping port by refusing to raise expenditure and update technology could be abusive. Tying one product into
6893-557: The conditions prevailing overseas. The development of early competition law in England and Europe progressed with the diffusion of writings such as The Wealth of Nations by Adam Smith , who first established the concept of the market economy . At the same time industrialisation replaced the individual artisan , or group of artisans, with paid labourers and machine-based production. Commercial success became increasingly dependent on maximizing production while minimizing cost. Therefore,
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#17330846428537006-455: The conglomerate usually settled the transaction in something other than cash, like debentures , bonds , warrants or convertible debentures (issuing the latter two would effectively dilute its shareholders down the road, but many shareholders at the time were not thinking that far ahead). The conglomerate would then add the target's earnings to its earnings, thereby increasing the conglomerate's overall earnings per share . In finance jargon,
7119-536: The constitution of Zeno of 483 A.D., which can be traced into Florentine municipal laws of 1322 and 1325. This provided for confiscation of property and banishment for any trade combination or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights. Justinian I subsequently introduced legislation to pay officials to manage state monopolies. Legislation in England to control monopolies and restrictive practices
7232-499: The consumers. An early example was enacted during the Roman Republic around 50 BC. To protect the grain trade , heavy fines were imposed on anyone directly, deliberately, and insidiously stopping supply ships. Under Diocletian in 301 A.D., an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing, or contriving the scarcity of everyday goods. More legislation came under
7345-474: The control over the value of all ... network control is much more unequally distributed than wealth. In particular, the top ranked actors hold a control ten times bigger than what could be expected based on their wealth. ... Recent works have shown that when a financial network is very densely connected it is prone to systemic risk. Indeed, while in good times the network is seemingly robust, in bad times firms go into distress simultaneously. This knife-edge property
7458-422: The courts found specific categories of agreement, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of market power. Earlier theorists like Adam Smith rejected any monopoly power on this basis. A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping
7571-402: The current stage of its development that the WTO will metamorphose into a global competition authority". Despite that, at the ongoing Doha round of trade talks for the World Trade Organization , discussion includes the prospect of competition law enforcement moving up to a global level. While it is incapable of enforcement itself, the newly established International Competition Network (ICN)
7684-481: The deal that consumers get. Merger control is about predicting what the market might be like, not knowing and making a judgment. Hence the central provision under EU law asks whether a concentration would , if it went ahead, "significantly impede effective competition... in particular as a result of the creation or strengthening off a dominant position..." and the corresponding provision under US antitrust states similarly, No person shall acquire, directly or indirectly,
7797-464: The enactment in 1890 US court applies these principles to business and markets. Courts applied the Act without consistent economic analysis until 1914, when it was complemented by the Clayton Act which specifically prohibited exclusive dealing agreements, particularly tying agreements and interlocking directorates, and mergers achieved by purchasing stock. From 1915 onwards the rule of reason analysis
7910-412: The end came in January 1968, when Litton shocked Wall Street by announcing a quarterly profit of only 21 cents per share, versus 63 cents for the previous year's quarter. This was "just a decline in earnings of about 19 percent", not an actual loss or a corporate scandal, and "yet the stock was crushed, plummeting from $ 90 to $ 53". It would take two more years before it was clear that the conglomerate fad
8023-400: The estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. In the European Union , the so-called "Modernisation Regulation", Regulation 1/2003, established that
8136-751: The examples are Adamjee Group , Dawood Hercules , House of Habib , Lakson Group and Nishat Group . In the Philippines , the largest conglomerate of the country is the Ayala Corporation which focuses on malls , bank , real estate development , and telecommunications . The other big conglomerates in the Philippines included JG Summit Holdings , Lopez Holdings Corporation , ABS-CBN Corporation , GMA Network, Inc. , MediaQuest Holdings , TV5 Network, Inc. , SM Investments Corporation , Metro Pacific Investments Corporation , and San Miguel Corporation . In
8249-478: The existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share firm's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power that a monopoly may confer, for instance through exclusionary practices. Market dominance is connected with decreased innovation and increased political connectedness. First, it
8362-550: The face of fluctuations in supply from overseas. So the legislation read here that whereas, it is very hard and difficult to put certain prices to any such things ... [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to
8475-467: The great damage and impoverishing of the King's subjects. Around this time organizations representing various tradesmen and handicrafts people, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835. The English common law of restraint of trade
8588-627: The grounds that it did not harm consumers. Running through the different critiques of US antitrust policy is the common theme that government interference in the operation of free markets does more harm than good. "The only cure for bad theory," writes Bork, "is better theory." Harvard Law School professor Philip Areeda , who favours more aggressive antitrust policy, in at least one Supreme Court case challenged Robert Bork's preference for non-intervention. When firms hold large market shares, consumers risk paying higher prices and getting lower quality products than compared to competitive markets. However,
8701-441: The hands of fewer than before. This usually means that one firm buys out the shares of another. The reasons for oversight of economic concentrations by the state are the same as the reasons to restrict firms who abuse a position of dominance, only that regulation of mergers and acquisitions attempts to deal with the problem before it arises, ex ante prevention of market dominance. In the United States merger regulation began under
8814-714: The headquarters of corporations to mergers, in which independent ventures were reduced to subsidiaries of conglomerates based in New York or Los Angeles. Pittsburgh, for example, lost about a dozen. The terror instilled by the mere prospect of such harsh consequences for executives and their home cities meant that fending off takeovers, real or imagined, was a constant distraction for executives at all corporations seen as choice acquisition targets during this era. The chain reaction of rapid growth through acquisitions could not last forever. When interest rates rose to offset rising inflation, conglomerate profits began to fall. The beginning of
8927-552: The jurisdiction of society... both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint,
9040-535: The late 19th century, a depression spread through Europe, known as the Panic of 1873 , ideas of competition lost favour, and it was felt that companies had to co-operate by forming cartels to withstand huge pressures on prices and profits. While the development of competition law stalled in Europe during the late 19th century, in 1889 Canada enacted what is considered the first competition statute of modern times. The Act for
9153-421: The latter half of the 19th century, it had become clear that large firms had become a fact of the market economy. John Stuart Mill 's approach was laid down in his treatise On Liberty (1859). Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within
9266-537: The margin at which buyers will buy the same amount as produced – there is no waste, the greatest number wants of the greatest number of people become satisfied and utility is perfected because resources can no longer be reallocated to make anyone better off without making someone else worse off; society has achieved allocative efficiency. Productive efficiency simply means that society is making as much as it can. Free markets are meant to reward those who work hard , and therefore those who will put society's resources towards
9379-400: The market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate specific legal measures to combat them. People of
9492-448: The monopoly. Therefore, government should not try to break up monopoly but should allow the market to work. The classical perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual liberty of tradespeople to carry on their livelihoods. Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances. Hence
9605-503: The most powerful private economic conglomerate in 1920s Europe – Stinnes Enterprises – which embraced sectors as diverse as manufacturing, mining, shipbuilding, hotels, newspapers, and other enterprises. The best-known British conglomerate was Hanson plc . It followed a rather different timescale than the U.S. examples mentioned above, as it was founded in 1964 and ceased to be a conglomerate when it split itself into four separate listed companies between 1995 and 1997. In Hong Kong, some of
9718-652: The new businesses they had recently purchased, and by the mid-1970s most conglomerates had been reduced to shells. The conglomerate fad was subsequently replaced by newer ideas like focusing on a company's core competency and unlocking shareholder value (which often translate into spin-offs ). In other cases, conglomerates are formed for genuine interests of diversification rather than manipulation of paper return on investment. Companies with this orientation would only make acquisitions or start new branches in other sectors when they believed this would increase profitability or stability by sharing risks. Flush with cash during
9831-414: The next gale of economic innovation would do the same. Contrasting with the allocatively, productively and dynamically efficient market model are monopolies, oligopolies, and cartels. When only one or a few firms exist in the market, and there is no credible threat of the entry of competing firms, prices rise above the competitive level, to either a monopolistic or oligopolistic equilibrium price. Production
9944-419: The original intention of antitrust laws and economic efficiency was the pursuit only of consumer welfare, the protection of competition rather than competitors. Furthermore, only a few acts should be prohibited, namely cartels that fix prices and divide markets, mergers that create monopolies, and dominant firms pricing predatorily, while allowing such practices as vertical agreements and price discrimination on
10057-731: The parent company. Conglomerates are often large and multinational corporations that have a global presence and a diversified portfolio of products and services. Conglomerates can be formed by merger and acquisitions , spin-offs , or joint ventures . Conglomerates are common in many countries and sectors, such as media , banking , energy , mining , manufacturing , retail , defense , and transportation . This type of organization aims to achieve economies of scale , market power, risk diversification , and financial synergy. However, they also face challenges such as complexity, bureaucracy , agency problems, and regulation . The popularity of conglomerates has varied over time and across regions. In
10170-508: The price of a commodity ... to the disadvantage of the public should be punished as misdemeanours". Austria passed a law in 1870 abolishing the penalties, though such agreements remained void. However, in Germany laws clearly validated agreements between firms to raise prices. Throughout the 18th and 19th centuries, ideas that dominant private companies or legal monopolies could excessively restrict trade were further developed in Europe. However, as in
10283-486: The production of coal and steel as it was felt that this dominance had contributed to the outbreak of the war. Article 65 of the agreement banned cartels and article 66 made provisions for concentrations, or mergers, and the abuse of a dominant position by companies. This was the first time that competition law principles were included in a plurilateral regional agreement and established the trans-European model of competition law. In 1957 competition rules were included in
10396-714: The production of electronics such as televisions. While not a keiretsu, Sony is an example of a modern Japanese conglomerate with operations in consumer electronics , video games , the music industry , television and film production and distribution , financial services , and telecommunications . In China, many of the country's conglomerates are state-owned enterprises , but there is a substantial number of private conglomerates. Notable conglomerates include BYD , CIMC , China Merchants Bank , Huawei , JXD , Meizu , Ping An Insurance , TCL , Tencent , TP-Link , ZTE , Legend Holdings , Dalian Wanda Group , China Poly Group , Beijing Enterprises , and Fosun International . Fosun
10509-587: The restriction of competition by large companies, who co-operated with rivals to fix outputs, prices and market shares, initially through pools and later through trusts . Trusts first appeared in the US railroads, where the capital requirement of railroad construction precluded competitive services in then scarcely settled territories. This trust allowed railroads to discriminate on rates imposed and services provided to consumers and businesses and to destroy potential competitors. Different trusts could be dominant in different industries. The Standard Oil Company trust in
10622-546: The sale of another can be considered abuse too, being restrictive of consumer choice and depriving competitors of outlets. This was the alleged case in Microsoft v. Commission leading to an eventual fine of million for including its Windows Media Player with the Microsoft Windows platform. A refusal to supply a facility which is essential for all businesses attempting to compete to use can constitute an abuse. One example
10735-503: The same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. By
10848-586: The size of a company became increasingly important, and a number of European countries responded by enacting laws to regulate large companies that restricted trade. Following the French Revolution in 1789 the law of 14–17 June 1791 declared agreements by members of the same trade that fixed the price of an industry or labour as void, unconstitutional, and hostile to liberty. Similarly, the Austrian Penal Code of 1852 established that "agreements ... to raise
10961-459: The statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law . Also under Edward III, the following statutory provision outlawed trade combination. ... we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to
11074-406: The transaction was " accretive to earnings." The relatively lax accounting standards of the time meant that accountants were often able to get away with creative mathematics in calculating the conglomerate's post-acquisition consolidated earnings numbers. In turn, the price of the conglomerate's stock would go up, thereby re-establishing its previous price-earnings ratio, and then it could repeat
11187-591: The transaction. Competition law gained new recognition in Europe in the inter-war years, with Germany enacting its first anti-cartel law in 1923 and Sweden and Norway adopting similar laws in 1925 and 1926 respectively. However, with the Great Depression of 1929 competition law disappeared from Europe and was revived following the Second World War when the United Kingdom and Germany, following pressure from
11300-425: The well-known conglomerates include Jardine Matheson (AD1824), Swire Group (AD1816), (British companies, one Scottish one English; companies that have a history of over 150 years and have business interests that span across four continents with a focus in Asia.) C K Hutchison Whampoa (now CK Hutchison Holdings ), Sino Group , (both Asian-owned companies specialize business such as real estate and hospitality with
11413-663: The whole process with a new target. In plain English, conglomerates were using rapid acquisitions to create the illusion of rapid growth. In 1968, the peak year of the conglomerate fad, U.S. corporations completed a record number of mergers: approximately 4,500. In that year, at least 26 of the country's 500 largest corporations were acquired, of which 12 had assets above $ 250 million. All this complex company reorganization had very real consequences for people who worked for companies that were either acquired by conglomerates or were seen as likely to be acquired by them. Acquisitions were
11526-561: The world have formed international support and enforcement networks. Modern competition law has historically evolved on a national level to promote and maintain fair competition in markets principally within the territorial boundaries of nation-states . National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level. Countries may allow for extraterritorial jurisdiction in competition cases based on so-called "effects doctrine". The protection of international competition
11639-442: Was being cross-subsidized to capture the lion's share of a booming market. One last category of pricing abuse is price discrimination . An example of this could be a company offering rebates to industrial customers who export their sugar, but not to customers who are selling their goods in the same market. According to The World Bank's "Republic of Armenia Accumulation, Competition, and Connectivity Global Competition" report which
11752-462: Was formed in 1981 from the merger of Fletcher Holdings , Challenge Corporation, and Tasman Pulp & Paper, in an attempt to create a New Zealand-based multi-national company. At the time, the newly merged company dealt in construction, building supplies, pulp and paper mills, forestry, and oil & gas. Following a series of bungled investments, the company demerged in the early 2000s to concentrate on building and construction. In Pakistan , some of
11865-688: Was frequently applied by courts to competition cases. However, the period was characterized by the lack of competition law enforcement. From 1936 to 1972 courts' application of antitrust law was dominated by the structure-conduct-performance paradigm of the Harvard School. From 1973 to 1991, the enforcement of antitrust law was based on efficiency explanations as the Chicago School became dominant, and through legal writings such as Judge Robert Bork 's book The Antitrust Paradox . Since 1992 game theory has frequently been used in antitrust cases. With
11978-434: Was held to be a restriction on trade. English courts subsequently decided a range of cases which gradually developed competition related case law, which eventually were transformed into statute law . Europe around the 16th century was changing quickly. The new world had just been opened up, overseas trade and plunder was pouring wealth through the international economy and attitudes among businessmen were shifting. In 1561
12091-445: Was in a case involving a medical company named Commercial Solvents . When it set up its own rival in the tuberculosis drugs market, Commercial Solvents were forced to continue supplying a company named Zoja with the raw materials for the drug. Zoja was the only market competitor, so without the court forcing supply, all competition would have been eliminated. Forms of abuse relating directly to pricing include price exploitation. It
12204-518: Was in force well before the Norman Conquest . The Domesday Book recorded that " foresteel " (i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England. But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act
12317-735: Was later known as National House Cleaning Contractors Inc. The company was formed on August 12, 1966, as Kinney National Services Inc., when the Kinney Parking Company and the National Cleaning Contractors Inc. were merged. The new company was headed by Steve Ross . Kinney National Services (later, National was removed from the company name in February 1971) was known for purchases and sales: On June 10, 1971, Kinney sold Riverside Memorial Chapel to Service Corporation International . Kinney also announced that it would form
12430-487: Was on its way out. The stock market eventually figured out that the conglomerates' bloated and inefficient businesses were as cyclical as any others—indeed, it was that cyclical nature that had caused such businesses to be such undervalued acquisition targets in the first place —and their descent put "the lie to the claim that diversification allowed them to ride out a downturn." A major selloff of conglomerate shares ensued. To keep going, many conglomerates were forced to shed
12543-510: Was passed in 1266 to fix bread and ale prices in correspondence with grain prices laid down by the assizes . Penalties for breach included amercements , pillory and tumbrel . A 14th-century statute labelled forestallers as "oppressors of the poor and the community at large and enemies of the whole country". Under King Edward III the Statute of Labourers of 1349 fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties,
12656-529: Was published in 2013, the Global Competitiveness Index suggests that Armenia ranks lowest among ECA (Europe and Central Asia) countries in the effectiveness of anti-monopoly policy and the intensity of competition. This low ranking somehow explains the low employment and low incomes in Armenia. A merger or acquisition involves, from a competition law perspective, the concentration of economic power in
12769-412: Was witnessed during the recent (2009) financial turmoil " Competition law, or antitrust law, has three main elements: Substance and practice of competition law varies from jurisdiction to jurisdiction. Protecting the interests of consumers ( consumer welfare ) and ensuring that entrepreneurs have an opportunity to compete in the market economy are often treated as important objectives. Competition law
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