Essay Antitrust: Cartel and Antitrust Laws

Submitted By sabi123s
Words: 1165
Pages: 5

Sherman Antitrust Law
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Competition is a very important aspect in the society as far as business is concerned. Competitive markets ensure adequate supply of goods at considerable prices. In such markets the forces of demand and supply are what determine the quantity of goods as well as their prices. However, this is not always the case certain forces may monopolize the market and restrict competition. This monopolization renders control of the market to a single company or entity and tampers with free trade in the market. It is for this reason that there exist antitrust laws such as the Sherman antitrust law (The Antitrust Laws, 2015). This law was developed and enacted back in 1890 with the solid aim of preserving competition and free trade in the markets. It also prevents and protects individuals and businesses from contract restrictions that inhibit them for participating in trade for particular goods and services in the market. It is a law that provides everyone economic liberty of trading in the market. Monopolization leads to economic inefficiencies that result to high priced goods that are of very low quality. Since monopoly companies control the market, they are at liberty to do whatever they want since changes in quality or prices do not affect the demand for the goods they produce and supply. The government, therefore, brought antitrust laws such as the Sherman antitrust to law to protect people and preserve competition and free trade in the market. It is because of the economic power of monopolies that companies may seek to find ways to control the market such as to have contracts that restrict trade and the Sherman law tries to prevent such restrictions by contract (Menu, 2015).
The case involving Oltz, the St Peter’s hospital and the M.D anaesthesiologist is an example of violation of antitrust laws. The doctor was unhappy that the nurse had a bigger market share than him and this made him seek a contract with the hospital that drove the nurse out of business. This took place while the contract between Oltz and the hospital was still valid. Oltz billing contact with the hospital had him supply eighty four percent of which the physician did not like because it was not good for his business mainly because Oltz charges were considerably lower. This made the physician seek an exclusive contract that led to the termination of Oltz contract with the hospital. Oltz lost his job and resulted to his action filed against the Physician and the hospital. This was clearly an unlawful business practice between the physician and the hospital because it monopolized the market in favour of the physician where he had no competition and was now at liberty to control the prices and quantity of the surgical services as he wished. The action through the exclusive contract restricted free trade in the market and forcefully removed other players such as Oltz from the market (Menu, 2015). Oltz lost his job and was the reason for his court action for damages because of the breach of contract he suffered as a result of the physician and the hospital. He was also forced to move away from the town. The exclusive contract destroyed his practice and source of livelihood. From the court action Oltz was liable for compensation for damages because of the breach of contract caused by the exclusive contract. The U.S court of appeals ruled in favour of Oltz for his entitlements to payment for damages this was based on the evidence he provided that validated the violation of antitrust laws caused by the exclusive contract.
Exclusive contracts do exist but not all of them are prohibited. It is therefore very important for entities to be fully aware of the law and the actions that violate the law. Entities should not take part in activities that restrain competition and free trade in an unreasonable manner such as the Oltz case. Negotiating such contracts should be done without breach of other contract. The antitrust…