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Innovation, Creativity Tumbles with Anticompetitive Behavior.
By Jerome Cedicci & Robin Trehan
Monday, 5th November 2007
 
Competition policy within the United States requires that companies adhere to strict standards when it comes to market power and its effect on the market economy.

Anti-competitive behavior, in terms of specific business practices, significantly corresponds with the market power of a particular business.

In markets that are not perfectly competitive, companies often have a large amount of market power. This gives the company a significant advantage when it comes to the ability the company has to increase or decrease the price of their product without directly impacting market share.

A company can increase its market power by gaining control of a large part of a particular market, making it difficult for similar companies to compete.

Companies who engage in anti-competitive behavior are viewed as socially irresponsible and an attempt to discourage such behavior has been supported by legislation that limits the amount of market power a particular company may accumulate. Sometimes market power is inadvertently increased when two or more companies merge.

The act of merging is not an anti-competitive behavior on its own; rather, the way that a company conducts itself once it attains monopolistic power determines whether or not a company is guilty of poor or unbecoming conduct.

Anti-competitive practices can be of many types like: "Dumping" of products at lower prices making competition tough, "Exclusive/Refusal dealing" wherein a retailer/wholesaler must buy from a supplier or companies refuses to deal with a vendor. "Price fixing/collusion/restrictions" between companies to fix prices. "Tying up of unrelated Products" for sale thus restricting consumers' choice. "Coercive monopoly" wherein a company has all the rights and share to a product market and no other can join. This company can be one approved by the Government approved or the Government itself. This can be done via subsidies/regulations, Protectionism, Tariffs and Quotas.

Others include "Barriers to entry", "Dividing of territories" among companies, restriction in "Resale prices" by resellers, "Misuse of Patent, Copyright, or other Intellectual Property", and "Absorption of a competing technology/competitor" to stop further completion.

Many companies have come under fire in the past for their dominant position in the computer software market. Anti-competitive behaviors often benefit the companies who practice them, but these practices have a negative impact on the overall economy.

A company's market power limits a consumer's ability to avoid a particular service or product, thus forcing the consumer to rely on a product that might be substandard or inadequate. This leads to lack of innovation and creativity within the economy. Competition law, otherwise known as antitrust law, is designed to restrict the amount of market power a company may acquire as well as the company's ability to benefit from anti-competitive behaviors.

Jerome Cedicci is renowned Real Estate Developer in USA; Robin Trehan is an M&A Expert. He can be reached at rtrehan@creditcapitalfunding.com
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