Chapter 9.3, Problem 1R

To determine

To discuss: the importance of interlocking directorate, antitrust legislation, merger, conglomerate and deregulation.

Explanation of Solution

Interlocking Directorate:

Interlocking directorate practice often puts questions on the integrity of the directors and the quality of their decisions.

As per few spectators, interlocking directorate takes into account union, bring together political − monetary intensity of corporate officials. They permit companies to expand their impact by applying power as a gathering, and to cooperate towards basic goals. It helps the corporate to gain control over consumers and workers by diminishing intra class competition and expanding collaboration.

Antitrust legislation:

The main aim of anti-trust laws is to maintain fair competition in the market. Such laws are applied to a number of anti-business activities like monopolies, price fixing, bid rigging, etc. If these laws didn’t exist, consumers would have to face unfair competition in the market like higher price for products and services, etc.

Merger:

There are several kinds of merger: horizontal, vertical or conglomerate.

When the companies that merge exist in the same business line, it refers to horizontal merger.

A vertical merger is the merger of two or more companies that are involved in the different supply chain functions for a common good or service.

A conglomerate merger is a merger amongst firms engaged in completely unrelated business activities.

Mergers are significant because that helps the acquiring firm in increasing their market share and also offers a potential growth for their business. It also reduces unnecessary competition in the market where small corporations are merged into large ones offering them more profitable opportunities.

Deregulation:

Most of the times, deregulation is considered a good thing because entry barriers are reduced a certain point thereby allowing new companies and innovations to enter the market which in turn helps in providing customers with a wide range of alternatives to choose with. It helps in increasing investment opportunities leading to a better economic growth.

Economics Concept Introduction

Introduction: Interlocking Directorate refers to the practice of the members of the Board of Directors serving as the Board of Directors of the competing corporation.

Antitrust legislation are the laws that are developed by U.S. government to protect consumers from anti-competitive business practices.

Merger refers to the combination of two or more companies formed into one single corporation.

Deregulation is the process of reducing or removing regulations and control over a particular industry or business.