Business Writing Assignments – Business Monopoly and Merging

Business Writing Assignments – Business Monopoly and Merging

Business Writing Assignments – Business Monopoly and Merging

Business Writing Assignments

Business monopoly and merging

Issue: Whether merging of Budweiser/Miller violates the second section of Sherman Act

Rule : the Sherman Act, 15 U.S.C. section 2 stated that “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court”

Problem # Analyze the following problem using IRAC using Sherman act restrain trade

http://www.businessinsider.com/ab-inbev- sabmiller-merger- impact-on- craft-beer- industry-2015-

9 (Links to an external site.)

http://money.cnn.com/2015/09/16/news/companies/sabmiller-anheuser- busch-

takeover/index.html (Links to an external site.)

http://www.nytimes.com/2015/09/19/business/dealbook/investors-see- potential-in- beer-

merger.html?_r=0 (Links to an external site.)

http://www.jonathanhtodd.com/2015/09/28/4-ways- the-ab- inbev-sab- miller-merger-

could-clear- regulatory-hurdles/

1- use Sherman act, section section in the analysis, the conclusion should

be 2-3 lines only, 1 page excluding what I had done of issue and rule,

single line, due today 12midnight

2- use the value of (HHI) to provide an evidence that there is a

concentration market to prove monopoly

3- do not repeat the act in the analysis part, you may explain it but not

repeat it again

4- the references in different page

5- use the links provided especially the last one

The market will be defined as the smallest product and geographic market in which a hypothetical monopolist could raise prices a small but significant and nontransitory amount (usually set at 5 percent above current prices). Market Concentration The Herfindahl– Hirschman Index ( HHI) is employed to measure market concentration. Notwithstanding the formidable title, the index is computed quite easily. The market share of each firm is squared and the results are summed. Thus, if five companies each had 20 percent of a market, the index for that market would be 2,000. The HHI is useful be-cause it measures both concentration and dispersion of market share between big and small firms. If 10 firms each have 10 percent of the market, the resulting HHI is 1,000. The larger the HHI, the more concentrated the market. In general, a postmerger HHI below 1,500 would reflect an unconcentrated market while a postmerger concentration of be-tween 1,500 and 2,500 would be considered mildly concentrated and more than 2,500 a highly concentrated market. The greater the HHI and the greater the increase in the HHI, the more likely the government will be concerned about the merger. Thus, the aforemen-tioned American Airlines and U. S. Airways merger with an HHI of 1,269 among the top four carriers in the national market ( American after the merger— 20 percent, Southwest— 18 percent, United Continental— 17 percent, and Delta— 16 percent) would be classified as “ unconcentrated.” 26 The guidelin es provide that the potential for competitive concern also depends on the analysis of additional factors, such as a change in the number of competitors along with adverse effects and ease of entry, as explained below. Broadly, the government’s guide-lines reject the older notion of market size alone as a threat to the welfare of the economy.

Issue: Whether merging of Budweiser/Miller violates the second section of Sherman Act

Rule : Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

Analysis: The merger of Budweiser with Miller could create a group with a value of around $275 billion. Whether the total value constitutes a monopolistic entity could be determined using Herfindahl-Hirschman Index, also known as the HHI Index. Market may be defined as the smallest product and geographic market in which a company can potentially raise prices at 5 percent above the current prices. The market concentration is arrived at squaring the market share of the company and summing up the results. The HHI’s utility lies in its ease of use and the more or less accurate results it provides in terms of market concentration and dispersion. Considering that combined, the companies in the merger make up 70% of the market and their HHI is at 2,556 with other companies such as Yuengling, Pabst, Sam Adams, Sierra Nevada at 1% and HHI Value of 1 as per data from Statista.com, their merger could indicate a highly concentrated market and thus be a cause of concern for the government. Moreover, the merger poses a risk of monopoly considering that post-merger, and on the basis of consensus estimates for 2016, the new company should have 12.3 times earnings before EBITDA (Foley, 2015).

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