Key Terms
Free enterprise
Private, consensual system of production and distribution, conducted for profit, relatively free of government interfere
Theory
Given freedom, businesses will operate efficiently and respond to consumer needs. The weakness: it assumes businesses wi
Prohibits
Price discrimination that hinders competition or tends to create a monopoly.
Two main concerns addressed
1. Unreasonable restraints on trade between two or more parties.
FTC purpose
Protect consumers against deceptive practices and enforce antitrust laws.
Monopoly
Control or advantage by one supplier over a commercial market within a given region.
Monopoly power
Ability to fix prices unilaterally or exclude competition.
Example
Manufacturer discounts to wholesaler; wholesaler passes savings to retailer; retailer reduces prices for consumers. Cons
Evidence of intent
Purchasing smaller competitors to increase market share; engaging in predatory pricing.
Restraint on trade
Agreement between two or more businesses to eliminate competition, create a monopoly, artificially raise prices, or adve
Unreasonable restraint on trade
A restraint with significant anticompetitive effect; violates antitrust laws.
Concerted action
Planned, agreed-upon action by parties acting together toward a common scheme.
Horizontal agreements
Between direct competitors (same level of the market).
Vertical agreements
Between businesses at different points in the same distribution chain.
Price fixing
Artificial setting or maintaining of prices contrary to free market forces.