Exam 38: Antitrust

What law prohibits mergers that are anti-competitive?

The Clayton Act prohibits anti-competitive mergers.

The Sherman Act was designed to prevent extreme concentrations of economic power.

Smalltown has two family-owned hardware stores that have been in business for years.Major Hardware decides that Smalltown would be a good place to build one of its superstores.Major opens,advertising unbelievably low prices;in fact,at below cost.Because Major owns stores nationally,it is able to keep prices extremely low until both of the family-owned stores have to go out of business because they cannot compete.After Major is the only hardware store in town,it raises its prices enough to make up for its former losses and to make some additional profit.Discuss this behavior in relation to antitrust law.

The Clayton Act was passed in part because the courts were not enforcing the Sherman Act as strictly as it had intended.