Antitrust and Anti Competitive Practices Essay

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New Bus Dilemma

The author of this report has been asked to assess a situation where a bus company is trying to make entry into a market. They are present in said market but the barriers to entry as well as the barriers for any firm other than the top three players in the field to stay there are quite high. It is to the point that there would seem to be subterfuge being executed by at least one of the three competitors. Given all that, it would seem that the best option is to put Greenbus (the subterfuge party) in the limelight for not following the law or just acquiring the two smaller players in the market and go after Greenbus head to head. The author of this report will describe the situation and will then describe the best path forward.

Analysis

The situation here is pretty basic. Tom Newhouse is the CEO of Newbus and he is finding it very hard to compete in a market where three other companies make up eighty percent of the market share by themselves. Indeed, there is Greenbus, Brownbus and Whitebus. They command market shares of fifty percent, twenty percent and ten percent, respectively. Newbus is finding two major challenges as they do business. First, they have very high-quality buses but they are losing out on tenders to the bigger competitors all of the time. This is particularly true of government tenders. About the only reliable business that Newbus can get a hold of are private sales of buses to schools and community organizations. Newbus has also attempted to procure maintenance contracts on Greenbus buses. However, the business model is being greatly complicated by what has to be at least some amount of subterfuge and sabotage on the part of Greenbus. Newbus is getting charged a huge premium as compared to what should be the normal price and the parts take a much longer time than they should to arrive. It is easily to the extent that they could be pursued for violating the terms of the Competition and Consumer Act of 2010. Indeed, the law as written is supposed to provide for proper competition, fair trading and protection for consumers.

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Obviously, Greenbus is trying to prevent Newbus from getting a foothold in the market and should absolutely have their hand slapped and be told to stop it (Australia, 2016). However, there is not the only alternative that is present.

There is also the option of partnering with a private equity firm to make a much larger gambit. Rather than try to have Greenbus punished for its misdeeds, there is instaed of the idea of making a ploy to buy out Brownbus and Whitebus so as to make a larger company that will encompass at least thirty percent of the market, which is much closer to the fifty percent that is currently possessed by Greenbus. The growth that will be experienced by Newbus will obviously not be organic, at least not at first, but this would allow Newbus to make a firm entry into the market and the reliance Newbus previously had on Greenbus to be ethical in their business patterns will almost certainly be negated or at least limited. Rather than having to rely on maintenance contracts for Greenbus buses, they can do maintenance contracts for their own buses including all of the current Brownbus and Whitebus fleets. The creation of a much larger competitor would also position Newbus and the larger new company in a way that will make it much easier to receive and keep government tenders.

As for what Mr. Newhouse should do, the recommendation is actually both. If Greenbus is not following the law when it comes to competitive practices, they need to be reviewed and sanctioned appropriately. However, the primary focus of Newbus should be to make themselves a player in the market overnight by become a company that will have at least sixty percent of the business that Newbus has. There may be some antitrust concerns on the part of the Australian government. However, the anti-competitive practices being executed by Greenbus might mitigate those concerns and make the case that Newbus should be allowed to become a larger presence given their fair dealings and quality buses.

This all….....

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