Instructions George Bluth really, really wants to control the market for new hom
ID: 422830 • Letter: I
Question
Instructions
George Bluth really, really wants to control the market for new homes in Orange County, California. The Bluth Company (“TBC””) currently controls about 60% of the market in Orange County, while TBC’s chief competitor, Stan Sitwell, controls about 25%, and various other companies control the remaining 15%. George approaches Sitwell to see if they can make a deal under the table to stop competing and join forces to corner the market, but Sitwell refuses. After being rebuffed by Sitwell, George decides to try and buy out Sitwell’s company. He is unable to raise enough cash to do so, however. Finally, he tries to corner the market all by himself by cutting his prices so low that his competitors could not possibly hope to compete. In fact, he cuts the prices for his new houses so low that he’s losing money on each one. Hopefully his competitors will go out of business soon and he can raise his prices back up once they do.
Please answer the following questions:
If TBC had been able to raise the money to purchase Sitwell, what type of merger would it have been? Would the government have allowed the merger to proceed? (hint: discuss Section 7 of the Clayton Act).
Do George’s actions create an illegal monopoly under Section 2 of the Sherman Act? (hint: analyze ALL of the elements necessary to have an illegal monopoly).
Instructions
George Bluth really, really wants to control the market for new homes in Orange County, California. The Bluth Company (“TBC””) currently controls about 60% of the market in Orange County, while TBC’s chief competitor, Stan Sitwell, controls about 25%, and various other companies control the remaining 15%. George approaches Sitwell to see if they can make a deal under the table to stop competing and join forces to corner the market, but Sitwell refuses. After being rebuffed by Sitwell, George decides to try and buy out Sitwell’s company. He is unable to raise enough cash to do so, however. Finally, he tries to corner the market all by himself by cutting his prices so low that his competitors could not possibly hope to compete. In fact, he cuts the prices for his new houses so low that he’s losing money on each one. Hopefully his competitors will go out of business soon and he can raise his prices back up once they do.
Explanation / Answer
Q1. If TBC had been able to Raise the Money To purchase Sitwell , Then It Would Be HORIZONTAL Merger . As TBC Would Achieve monoply status and Economies of scale.
No, The Government would not Allowed the Merger Like this since It is the unfair act of Competetion according to Clayton Act . It amended Antitrust Improvements Act which Give rights to the private party to sue for the triple damages for prohibiting the anticompetitive practice
Q2. Yes George 's Action Create illigal Monoply undr the Sherman Act. It include plain arrangements among competing businesses to fix prices, divide markets, or rig bids. As George Tried to corner the market On his own by cutting The Prices So Low Unreasonably.