Antitrust the Enforcement Action Being Studied Is Essay

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Antitrust

The enforcement action being studied is that of Novartis AG. The case involves the proposed acquisition by Novartis of Alcon Inc., which is a subsidiary of Nestle. The industry in question is the injectable miotics, which is a $12.4 million market. Injectable miotics are a class of prescription pharmaceuticals. These two companies are the only two in the industry, with respective market shares of 67% and 33%. Post-merger, Novartis would have a 100% share of this industry in the United States.

The specific antitrust act that is relevant to this investigation is the Clayton Act, Section 7 and Section 5 of the Federal Trade Commission Act. If the merger went through, Novartis would have a monopoly in the injectable miotics industry. Firms with monopoly power have no market incentive to constrain their prices. The risk to consumers of this deal is that Novartis would have complete pricing power in this category. Not only is it likely that Novartis would discontinue one of the products, but this monopoly would create a significant barrier to entry in the industry.

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There are no mechanisms for capping the price that Novartis could charge for this drug, so the responsibility to protect consumers from monopoly abuses falls to the Federal Trade Commission.

3. Monopolies are generally bad for society. A firm without competition can set prices and quality to whatever levels it wants. The firm's only limits to such behavior lie with the consumers' ability to either do without the good or to substitute. These constraints are often insufficient to curb monopoly abuses. For a product like a pharmaceutical, consumers who use the drug may not have any substitutes, so these consumers would be subject to either adverse financial effects of the monopoly or adverse health effects.

The issue of natural monopolies is sometimes raised in the discussion about the merits of monopolies. It has been found that….....

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"Antitrust The Enforcement Action Being Studied Is", 16 November 2012, Accessed.19 May. 2024,
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