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Anti-Trust Policy - Should Big Tech be Broken up

Types of Mergers

When companies do mergers, they agree to come together so that they are joined for business purposes. The types of mergers or business combinations that exist are: There is a horizontal type of merger in which companies that directly compete with each other come together and join (CorporateFinanceInstitute, 2020). If different firms are in a similar supply chain and they join a merger then, that is a vertical merger. In the market extension, we see that the companies do exist in different markets, however, they merge. If we have companies that co-exist in the same market but they are in the production of different products, then this can be said to be a product extended merger. Sometimes companies that do not do related business come together in a merger. For example, an agricultural production company coming together and merging with an insurance company (CorporateFinanceInstitute, 2020).

General Trends in Market Concentration for the past 20 years

When a market concentration comes up, we define it in the context of a top firm being able to gain a significant share in the market. The general trend in market concentration over the years has been a fall in the market share of the companies due to a rise in the new firms. Market Concentration has declined across industries in the areas of finance, retail, insurance, and real estate. In the trade and the manufacturing sector, market concentration has continued to rise. Also in the airline industry and telecommunication industry, the market is concentrated with large firms, and the small firms are having it rough gaining market share.

Ways of Measuring the Market Concentration

Market Concentration by the use of the Herfindahl-Hirschman Index (HHI). This is a scale that is applied by the addition of the square root of the percentage market measure of companies occupying different market positions in the market. For instance, if we have an American market and in this market, there exist at least five organizations with the given percentage of market share: 30%,30%, 20%,20%,20%, the Herfindahl index is discovered to be 3000 which is the addition of 900+ 900+ 400+400+400=3000. The higher the market index, the more a market appears to be an oligopoly (Colemann, 2020).

Anti-Trust law

The first vital anti-trust law in the United States was the Sherman Act which was passed in 1890. The purpose of this law was the allowance of the concept of preservation of competition within the trade and to ensure that trading activities are as free as possible (Federal Trade Commission, 2020). The first vital case against the practices of unfair business practices was filed by the United States and it was against AT & T and it was about ensuring that the merger of the company with Alcoa had followed down the laid down procedures and there were no restrictions for trade. The United States government also sued Kodak Company limited which is a multimedia company and prevented it from selling the films that had belonged to other private companies. Standard oil was also sued for a breach of the previous Sherman Act that had previously been enacted almost a hundred years earlier (, n.d.).

The consumer welfare standard suggests that big companies are okay so long as the opinions, feelings, and needs of the consumers are not harmed. With the consumer welfare standard for anti-trust, prosecutions for anti-trust laws and regulations became dryland. The United States failed to sue many big firms due to anti-trust issues (Young, 2019).


CorporateFinanceInstitute. (2020). Types of Mergers - Learn About the Different Types of

M&A. Retrieved 3 December 2020, from

Colemann, B. (2020). What is Market Concentration? Definition of Market Concentration,

Market Concentration Meaning - The Economic Times. Retrieved 3 December 2020, from

Federal Trade Commission. (2020). The Antitrust Laws. Retrieved 3 December 2020, from Infamous Anti-Trust Cases. Retrieved 3 December 2020, from


Young, R. (2019). Antitrust Basics: Rule of Reason Standard vs. Consumer Welfare Standard –

Competitive Enterprise Institute. Retrieved 3 December 2020, from

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