Antitrust Practices And Market Power
The antitrust behaviors of the big eight studios were asking it extremely hard for other independent and small produce and exhibitors to run their activities in the industry, and were hence forced out in an unfair market competition. The big eight studio included United Artists, Universal, Columbia, Paramount, ROOK, Warner, MGM, and Fox. The big eight studios antitrust behaviors were characterized by creating a collusion and hence a market oligopoly was created (Richard, 2010). The oligopolies market was made possible by the big eight studios acquiring many theaters and distributors to have a string control on the industry.
Their antitrust behavior allowed the big eight company to reap a lot of profits from the oligopolies market they created, while making it extremely hard for other independent firms to survive in the industry (Richard, 2010). Through antitrust behaviors, the big eight were able to produce low quality movies which were sold 16075863 Antitrust Practices And Market Power By number behaviors was attributed to their activities that established a non-competitive market in order to gain market power, and increase their economic profits (Richard, 2010).
Cost has always been associated with any antitrust behaviors since the behaviors were a representation of trade restrain to any competitors. Antitrust behaviors tend to create a barrier to market entry and hence creating a natural monopoly or oligopoly. The firms in the oligopoly are then able to undertake price fixing whenever they want and increase their economic profits (Macgregor, 2012). Monopoly pricing is quite significant in antitrust activities, where the price curve is slopped upwards while trying to maintain or increase the demand curve.
The firms were investigated for antitrust behaviors under the Sherman Act which is aimed at preserving unfettered and free competition in any trade activity. The antitrust laws under the Sherman Act proscribes any unlawful business and mergers practices in any industry where the act leave it upon the court to make the decision on which mergers or businesses are legal or illegal all based on the current facts (Macgregor, 2012). From research and different findings, most of monopolies and oligopolies are bad for the society and for trade.
However, not all monopolies and oligopolies are bad for the society (Macgregor, 2012). Some monopolies or oligopolies are extremely crucial to the society and the existence of certain products or services. In some situation, there existing market is made up of small number of customers and the presence of more than one company in the same market will only result in losses to both firms (Macgregor, 2012). Such a market can only profit and support a single company. It will hence make no economic sense to establish a competing firm, as both firm will be remunerated to make losses.
A real life example off good monopoly in United States is the U. S Postal Service. The U. S Postal Service is company that is protected by the government to offer postal service to the U. S citizens without any completion. This is mainly due to the fact there are little profits in the market and the cost of establishing the Postal services are quite high for the form to face any competition. In a situation where a competing firm will enter the market, both firm will result in making losses.