BPUB621.2003.Lecture.Slides.8.Antitrust.Section2

BPUB621.2003.Lecture.Slides.8.Antitrust.Section2 - [8](1):...

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Wharton School: [8](1): Sherman Act - Section 2 Section 2: “Every person who shall monopolize , or attempt to monopolize , … any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony” Supreme Court interpretation (1) possession of monopoly power in the relevant market (2) willful acquisition OR maintenance of that power (3) as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident What is monopoly power (market power)? ability to raise prices or reduce services ability to drive existing competitors out of business ability to create barriers to entry which prevent new competitors from entering
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Wharton School: [8](2): Monopolization (Section 2) What must government or private plaintiff prove? (1) Monopoly Power in a relevant product and geographic market very high market share, certainly over 60%, often as much as 80% significant natural barriers to entry for new competitors (2) Predatory or Exclusionary Practices predatory practices harm existing competitors, possibly driving them out of business exclusionary practices are artificial barriers to entry that prevent new competitors (3) Practices have no legitimate business justification Different standard to prove attempted monopolization (1) Current market share can be much smaller, maybe as low as 30% (2) Dangerous Probability of Success in gaining a monopoly market share certainly over 60% (3) Predatory Practice designed to drive existing competitors out of business
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Wharton School: [8](3): Microsoft - Market Power What are the product markets? Operating systems for Intel-compatible personal computers: Windows Internet Browsers: Netscape Navigator and Microsoft Explorer What is the geographic market? World-wide market, but same as U.S. market What is Microsoft’s market share? Operating Systems: Windows had 90% - 95% of new sales throughout 1990’s As a result, Windows had 80% - 90% of installed base Browser Shares: Explorer Navigator 1995: 0% 100% 1996: 10% 75% 1998: 50% 50% 2000: 60% 40%
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Wharton School: [8](4): Microsoft - Potential Competition What is the existing competition in operating systems? Apple:
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BPUB621.2003.Lecture.Slides.8.Antitrust.Section2 - [8](1):...

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