The purpose of this paper is to look into a case of antitrust behavior being investigated involving Johnson and Johnson and Innovators GAG, and to analyze and discuss the various antitrust practices that the organizations involved are accused of utilizing. Its purpose is also to discuss how the practices being deployed in this scenario can help any of the organizations to secure market power, which is defined by the ability of a firm to profitably raise the market price of a good or service over marginal cost (Market Power).
Finally, it will also discuss the impact that an oligopoly in this case has on society, and will determine whether such scenarios are helpful or harmful to consumers. Antitrust Practices and Market Power Antitrust law is law that promotes or maintains market competition by regulating anti-competitive conduct by companies. (Competition Law). In countries across the world, different antitrust laws have been enforced because organizations, especially those in monopolies or oligopolies, misuse their power.
I am of the belief that an oligopolies industry could either hurt or harm a society, depending on how one of he superpowers in the group uses their status as industry leader and whether they engage in antitrust behavior. There have been cases all over the world where oligopolies have different impacts on a country or region, and each would have to be analyzed individually to come to a fair conclusion.
In this particular case, Johnson & Johnson O&J) and Innovators GAG were being investigated in 2011 by the European Commission (SEC) for antitrust behavior because they were suspected of possibly colluding to keep a generic painkiller off the market. As presented in the article “Innovators, Face EX. Antitrust Investigation” (Whalen, 011), “In markets where J&J’s patents on Fontanel have expired, Innovator’s generic- drug unit Sandal sells low-cost copies of the drug”.
Upon expiration of the patent that issued to the generic provider, the company opted to allow Innovators’ generic drug unit Sandal to sell low-cost copies of the drug instead of reengaging the generic provider. The article also quoted a representative of the European Union (ELI) as stating that the competition arm of the SEC would investigate whether contractual arrangements between the companies may have had the object or effect of hindering he entry on to the market of generic versions of Fontanel in the Netherlands (Whalen, 2011).
Effects of Antitrust Behavior by Johnson & Johnson and Innovators GAG Restricting market access to a generic drug provider by way of a contractual agreement or deal results in financial implications for all entities involved in the deal. The oligopoly- holding company would incur large expenses as a result of making a payout to the generic drug maker for delaying release of their product. The generic drug maker would certainly benefit from receiving the payout, however at the expense of losing NY market share gained up to that point.
By marijuana that was effective at treating a particular condition could result in harm or hindered treatment. It is important to note that not all alternatives of the same drug will always have the same effect. If upon completion of investigation both J and Innovators are found guilty of antitrust behavior, both entities and perhaps key decision-making figures could be subject to hefty fines and even incarceration, which are typical sentences for antitrust convictions (Gibson, 2011).
The violation in question is likely being investigated under the Sherman Act, which orbits certain business activities that reduce competition in the marketplace (Sherman Antitrust Act). This conclusion has been drawn based on details provided in the web resource entitled “Guide to Antitrust Laws”, which speaks to per SE illegal offences, specifically Market and/or Customer Allocations (Guide to Antitrust Laws).
With per SE offences, certain forms of agreement among competitors could prove harmful to competition and consumers, and in this case, it is being investigated whether J and Innovators may have paid a competitor to stay out of the market (Guide o Antitrust Laws). If it is proven that the two companies actually entered into an agreement, it could easily be determined that they created a barrier to entry into the market for the generic drug manufacturer (McConnell, Economics 19th Edition).
Innovators, in collusion with J, could also be thought to be engaging in Rent- Seeking Behavior, which is defined as any activity designed to transfer income or wealth to a particular firm or resource supplier at someone else’s, or even society, expense (McConnell, Economics 19th Edition). The decision of both companies to shut UT the generic rivals effectively transfers income from the rival to Innovators, perhaps in exchange for some kind of monetary payout to J&J. Analysis of the Impact of the Pharmaceutical Oligopoly on Society It is my view that monopolies and oligopolies both have different impacts on society, though not always bad.
In the case of the pharmaceutical oligopoly for the purpose of this report, for example, both consumers and the generic drug maker are negatively impacted by the antitrust behavior conducted by both and Innovators. There is a change in the product that the market in the Netherlands has been accustomed to using. Additionally, the smaller generic drug provider has lost its ability to maintain or increase its market share because it has been blocked out by the bigger players of the pharmaceutical oligopoly.
However, this doesn’t mean that all oligopolies have this same negative impact. Reference is made to Toyota Motor Company’s decision in recent years to share its hybrid technology with Ionians and other major manufacturers. According to the article “Is An Oligopoly Good Or Bad”, Toyota, one of the largest automobile manufacturers in the world, had a huge lead over rival Ionians in hybrid-car genealogy. However, the company came to the conclusion that even with all their resources, it would fail if it attempted to commercialism this vital new technology on its own.
As such, it gave the technology to Ionians and started a collaborative hybrid program with one of its most bitter rivals (Chasuble, 2004). Other instances of Toyota sharing its technology have emerged, with Ford and Mazda both releasing hybrid consumers who have preferences where motor vehicles are concerned, can now stick to their preferences and embrace the latest energy saving technology. Conclusion Different industry structures all have a place in society in some way and can help to shape a healthy economy in a country or region.
However, antitrust practices employed for the sake of market power and maintaining position in a market are without a doubt harmful to a society, and by extension smaller businesses which want to be able to earn their own market share.