Antitrust and Consumer Protection Laws
Consumer protection laws tend to regulate issues of commercial relationship between businesses and consumers. In essence, these laws require that certain minimum standards are set for product and/or service quality so that aspects on the details of the product or service are disclosed with regard to cost and implied warranty. These aspects are a misleading advertisement, misrepresentation of services and products, or not providing quality services or products. These laws are enforced by the US Federal Trade Commission. Antitrust laws, on the other hand, are concerned with prohibiting agreements in restraint of trade, monopolization, anti-competitive mergers, price discrimination on sale of commodities, and tie in schemes
Poole, (1982) states that acquisitions and mergers are meant to help businesses cut costs and increase revenue, and may require regulatory approval for the businesses to have significant market share. Other types of mergers, acquisitions, and joint ventures may raise competition law aspects, taxation consequences, transfer of assets, intellectual property, employees, and renegotiation of contractual arrangements with suppliers. Achieving successful mergers, joint ventures, and acquisitions are quite complex, as it is crucial to maintain focus on customers, achieve financial returns, and meet emerging changing strategic goals (Klein, 2002).
Some successful mergers have been seen in: Google’s Acquisition of YouTube in 2006, Disney’s acquisition of Pixar in 2006, and Ted Turner merger with Rice Broadcasting in 1970.
Disney’s acquisition of Pixar
Pixar Animation studios began in 1979 as a graphics group, part of Lucasfilm’s computer division before it was acquired by Apple Computer. The Walt Disney Company bought Pixar at a cost of $7.4 billion which made Steve Jobs the largest shareholder in Disney. Pixar and Disney had disagreements after Toy Story 2 was produced which was originally intended for a straight to video release which Pixar intended for a three-picture deal, which Disney refused, although the film was later upgraded to theatrical release during production. Pixar’s first five feature films grossed $2.5 billion. Though the arrangement was profitable for both, Pixar was of the opinion that Disney was getting more out of the arrangement. Pixar was concerned with creation and production, while Disney was responsible for marketing and distribution. Distribution and production were divided equally, though Disney owned all story and sequel rights, and collected distribution fees, which set the stage for a relationship that was contentious. After long hiatus negotiations, the two companies reached an agreement in 2006, Pixar shareholders approved the deal, and the acquisition was completed in May 2006. Conditions were put in place to ensure Pixar remained a separate entity, such as the Human Resource policies of Pixar would remain intact, and lack of employment contracts. The Pixar name was guaranteed to continue, and the studio would remain at the current location with the Pixar sign. Film branding in the post-merger would be “Disney-Pixar”
The acquisition combined Pixar’s advanced intellectual property in creative and technological resources with Disney’s great portfolio of world-class family entertainment, characters, theme parks, and other franchises. This combination results in a vast new landmark in creative output and technological innovation with the ability to fuel future growth in business. This acquisition has created a value, where grumbling about Pixar’s price tag died down, and Disney’s stocks climbed 28% after a 52 week low, raising investor confidence that will overcome the difficulties in the economy. Leveraging on Pixar’s computer-generated characters made Disney outperform most of its competitors. Pixar has matured by allowing its strategic thinking to evolve inside a sprawling corporation (Klein, 2002).
Ted Turner merger with Rice Broadcasting
Turner’s firm merges with Rice Broadcasting Company Inc. to form Turner Communications Corporation. Reverse mergers enjoy huge popularity among companies of various sizes, this where a private company goes public by merging with a public company, in most cases the public company do not have assets and liabilities. The private company doing a reverse merger with a publicly traded company retains most of the shares and trading name. When Turner Communications merged with Rice Broadcasting and gaining control of WGTC, channel 17 in Atlanta. WTCG succeeded under Turner’s ownership losing $900000 before the merger, to make $1.8 million by 1973. According to Earnest, (2002), WTCG became the first cable superstation to broadcast by satellite to handholds with cable network in the whole of United States. It was later renamed WTBS in 1979, where the station remained the most popular cable option available in households in the 1980s.
Their program schedules consisted of a mixture of movies and series that were produced but Turner’s subsidiaries reruns from their extensive entertainment libraries, broadcasts from Turner-owned Atlanta Braves, Hawks games, and other environmental features such as the Undersea Adventures and Audubon Society Specials. More innovation came in 1980 when the Cable News Network (CNN) was launched. Although Turner was not committed to serious journalism, his personal involvement in CNN appeared to give huddles to the WTBS network. CNN’s twenty-four hours news programming gained viewer loyalty and industry respect, as it surpassed all other major networks’ authority in breaking news reporting. Later CNN expanded to new markets, and by 1995 it had peaked 156 million subscribers in 140 countries worldwide.
Acquisition of YouTube in 2006
The acquisition combines the largest and growing online video entertainment communities with Googles expertise in organizing information and creating new models for advertising on the internet. The combined forces offer a comprehensive experience for consumers to upload, watch and share videos over the web. You Tube’s exciting and powerful media platform complements Google’s mission to organize the world’s information, making it universally acceptable and useful. Both companies share values and are committed to innovation to improve their business experience. YouTube will retain its identity
Mergers that were blocked due to Anti Trust laws
Crandall, &, Winston,(2003), argue that the proposed marriage of EchoStar Communications and Direct TV was blocked by antitrust regulations by federal regulators. It was presumed that if the two top competitors in the satellite TV marketplace merged, they would eliminate any vestiges of competition to cable, broadcast, and telephone services. Regulators also ruled out the merger of ProMedica Health System and St. Luke’s Hospital, that it would substantially reduce competition and allow the hospitals to charge higher prices. The proposed combination of Delta and Northwest Airlines was also blocked on the basis of anticompetitive consumer prices
If the mergers were to go through, there would be anticipated consumer price increases, and monopolistic tendencies could have been developed in the business practices of the companies. The longer-term effects of the mergers on prices would result from the increased economic activities of the merged companies, such as the development of new products. On the other hand, consumers could have benefited through the efficiency of the larger firms.
Costs and Benefits of Consumer Protection Law
The benefits to the consumer are many under the consumer protection laws such as the failures of a producer are reflected by rival producers in competitive advertisements, product comparisons, and contests. Consumers are able to test and monitor the producers using unannounced inspections, and second opinions. Producers are able to demonstrate clear quality and safety by making the content of their promises in the advertisements, sales assistance, labeling, and packaging. There is a restructured relationship between the producer and the consumer in terms of warranties, return policies, security deposits, and withheld payments. There would be price fairness to the consumer, and an adequate supply of goods and services (Baker, 2003).
Consumer demands for greater recognition imply an economic cost to the producer. The cost to business of not protecting the consumer can be very enormous, the absence of privacy rules may make consumers to abandon shopping carts on the internet because of demands of so much personal information, thus retail sales lost is much. Businesses are spending more time and money responding to subpoenas for their completion of personal data. The costs incurred by consumers to protect themselves are unwarranted an intrusion. An example where consumer protection law was violated is in Florida, a Chevrolet dealer promised free four days, three-night vacation to Acapulco to anyone who bought a car. A customer found out that this was deceptive, as the so-called free vacation was a timeshare sales promotion, and the vacation trip was laden with conditions, restrictions, and obligations. The Jury awarded the customer $1.768 million in compensatory damages. The case in New Jersey, where Kenneth ordered some furniture which came with some defects. He rejected the order and demanded a refund which the store refused. He sued and was awarded three times the cost of his deposit and the furniture store paid the attorneys fees.
Baker, J. (2003) “The Case for Antitrust Enforcement.” Journal of Economic Perspectives Vol. 17 pp. 27-50.
Crandall, W. &, Winston C. (2003). “Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence.” Journal of Economic Perspectives Vol. 17 pp. 3-26.
Klein, D, (2002). “The Demand for and Supply of Assurance.” In Tyler Cowen and Eric Crampton, eds., Market Failure or Success: The New Debate. Cheltenham, U.K.: Edward Elgar, Pp. 172–192.
Poole, R., (1982). Instead of Regulation: Alternatives to Federal Regulatory Agencies. Lexington, Mass.: D.C. Heath
Earnest C. (2002). Business the Civilizer. Boston: Little, Brown,
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