Asked by Nurul Ainaa on Apr 30, 2024
Verified
Gorgeous is a conglomerate and its major businesses include department store chains and grocery store chains.Gorgeous recently acquired Connect Corp. ,a mobile-network operator.Connect has the third-largest share of the mobile-network market.This is Gorgeous's first venture into the mobile-network business.Which of the following theories is the most appropriate one for challenging Gorgeous's acquisition of Connect under Section 7 of the Clayton Act?
A) Elimination of actual potential competition
B) Potential reciprocity
C) Unfair advantage
D) Elimination of perceived potential competition
Clayton Act
An antitrust law in the United States that prohibits certain actions leading to anti-competitiveness, such as price discrimination and exclusive deals.
Mobile-Network Operator
A company that provides wireless communications services to mobile phone subscribers.
Conglomerate
A large corporation composed of diverse companies in various industries under a single corporate group, often achieved through mergers and acquisitions.
- Comprehend the regulatory structure that oversees mergers and acquisitions.
- Understand the significance of market share and the degree of competition in evaluating mergers.
Verified Answer
MS
Manpreet SainiMay 03, 2024
Final Answer :
C
Explanation :
Considering that Gorgeous has acquired Connect,which already enjoys a significant market position (has the third-largest share of the mobile-network market),Connect may gain an unfair advantage over its competitors through its ability to draw on the greater resources and expertise of its new owner.This unfair advantage may deter existing competitors from actively competing with it for market share and cause other potential competitors to be reluctant to enter the market.Therefore,Gorgeous's acquisition of Connect may be challenged on the "unfair advantage to acquired firm" ground under Section 7 of the Clayton Act.
Learning Objectives
- Comprehend the regulatory structure that oversees mergers and acquisitions.
- Understand the significance of market share and the degree of competition in evaluating mergers.