ID Number
Abstract
On the 28th of February 1973, the Supreme Court released its 5-2 decision declaring the case of United States v. Falstaff Brewing Corporation must be remanded and reversed and supporting the law as constitutional. The verdict rested on the authority of the court over statutory construction. It was determined by the court’s opinion and was liberal in respect. The court conducted a review of the case through appeal and heard the case on the 17th of October 1972. The case started in the US District Court in Rhode Island and was heard straight from that court through the United States Supreme Court.
Monopolies and trusts are economic power designated to only a few companies or businesses. Economists claim that this type of control invokes both the public and the individuals concern because it results to anti-competitive practices in an attempt to acquire complete control. Anti-competitive practices then result to price controls and weakened initiative. These outcomes cause stagnation in markets and discourage economic growth.
Falstaff Brewing Corporation was allegedly violating the antitrust law when it acquired the Narragansett Brewing Co. back in 1965. The United States delivered this lawsuit under the principle that possible competition in the beer market in New England may be considerably diminished by the acquisition. As stated by the parties, the pertinent product market is the sale and manufacture of the beer and the six states in New England make up the geographic market. Narragansett, the acquired company, was the biggest beer seller in New England with nearly 20% of the market. For five years, Narragansett has been the biggest seller and has expanded the capacity of its brewery between the year 1960 and 1965. The company has also acquired the assets or trademarks of various smaller brewers in and around the market geographically. At the time of the acquisition of Narragansett, Falstaff was the fourth biggest manufacturer of beer in the United States.
Section 7 of the Clayton Act prohibits mergers in any aspect of commerce where impact may be great enough to reduce competition or may possibly trigger monopoly. This act also prevents acquisitions of a competitor by a non-competing company such as a merger by a newly entered company who warns dominion of the market or if not upset conditions of the market to the disadvantage of competition. In the case, Falstaff was not considered a competitor in the market in New England nor is it argued that its merging with Narragansett signified an entry of a dominant force in the market. It was contended that Falstaff was a possible competitor so situated that its admission by merger instead of de novo violated the section 7 of the Clayton Act. The District Court relied heavily on the statement of officers of the company and concluded that Falstaff did not have any intention of entering the market in New England other than via acquisition and that it cannot be considered a possible competitor in that market. Setting aside the notion that Falstaff is a possible de novo competitor, it goes to follow that the entry in the market by a merger would not have adverse impacts in the market competition in New England. The District court made a mistake as a matter of law. The mistake lay in the supposition that Falstaff would not have joined the market de novo; it could be taken as a potential competitor. In particular, the District Court was unsuccessful in giving separate consideration to the idea that Falstaff was a possible competitor in the sense that it was illustrated.
Because it seems that the District Court considered a narrow view of the company as a possible competitor and because it seems that the conclusion of the District Court that the merger displayed no threat to competition, it directly follows from the discovery that the company did not have any intention to join de novo. Hence, the District Court was asked to conduct proper evaluation of the Falstaff as a likely competitor. The court remand proper evaluation of the company as an “on-the-fringe” possible competitor, it is not needed to reach the question of whether market extension of 7 bars by a company would have no power on the current condition of market competition.
At the time Falstaff made an acquisition of the company, Narragansett, back in 1965, Falstaff, then, was the biggest brewer in the nation that did not vend in the market in New England. The company also stated publicly that it desired to be known as a national brewer to enable it to contend effectively with the current national brewers. The company admitted in its brief that provided an acceptable profit level, the company has the financial means and the interest to join the beer market in New England. Four years after 1965, sales of beer in New England increased by 9.5%. Nonetheless, the market became greatly concentrated.
One of the primary objectives of the 7 bars was to trigger the increasing tide of concentration in the business in the United States. The inferences of the Clayton Act, as modified by the Celler-Kefauver Act, were much wider compared to the customary restraints of the competition as well as the monopolistic power. According to Louis Brandeis, one cannot have true citizenship in America and cannot preserve political freedom; one cannot secure the standards of living in America unless certain degree of industrial freedom goes along with it.
The court decided on the case of Falstaff that the company had been having intensive interest in getting into the market in New England and that it continued the negotiations for five years with other firms operating in New England; that the alternative schemes of entry aside from acquisition of the biggest brewer in New England were accessible to Falstaff and that it was as a matter of fact one of a few and the most potential entrant into the market. Moreover, New England is greatly concentrated in the management of few numbers of brewers. Falstaff’s entry into the market eliminated the potential competitive impacts that the market could project for years. Falstaff sought to provide evidence why it was not in the economic self-interest of the company to join a new market geographically in the absence of an established distribution system. The explanation was objective as any proof provided by the Government to illustrate the reasons why Falstaff should be entering the market.
The antitrust laws restrict unlawful mergers as well as business practices that may reduce the competition. Just like the case of Apple Inc that was confronted with allegations concerning violation of the federal antitrust law by performing a role in a scheme with five publishers to increase the costs of eBook and eliminate competition in retail price, Judge Cote said that Apple offered financial assistance to five leading publishers to increase the costs of eBook. There have been various arguments concerning the abolishment of antitrust law. Among the stated arguments claim that antitrust laws are non-objective and fluid and that the law itself demeans the concept of private property. For some experts, antitrust is merely a remedy used by lawyers who do not have a grasp on how markets operate. There is also a claim that antitrust policy will only be used by unprincipled government officials to urge conformity by companies that are non-cooperative. Those who are for antitrust law, they claim that if a company is to be a monopolistic one, it is due to the fact that they are performing better compared to their competitors.
According to the article titled Antitrust Policy: the Impact of Revenue Penalties on Price, a company’s behavior can be affected by the plausible threat of intervention by antitrust authorities (Acutt and Ellidott, 2001, p. 1). This threat of intervention can be in the form of basic regulatory rules which affects the company’s pricing strategy (Acutt and Ellidott, 2001, p. 1).
Sources
Antitrust. (2014). LII / Legal Information Institute. Retrieved June 26, 2014, from http://www.law.cornell.edu/wex/antitrust
Elliott, C., & Acutt, M. (2007). Antitrust policy: the impact of revenue penalties on price. Journal Of Industry, Competition And Trade, 7(1), 1--8.
UNITED STATES v. FALSTAFF BREWING CORPORATION | Leagle.com. (2014). UNITED STATES v. FALSTAFF BREWING CORPORATION | Leagle.com. Retrieved June 26, 2014, from http://www.leagle.com/get_cited/383%20F.Supp.%201020
