Let's proceed with our analysis of legal and regulatory environment. In this episode, we will pay special attention to the anti-trust motive in the legislation that is passed in the US. And similar piece of legislation that are passed in other countries. So the idea here is that, historically, when first large transactions took place, they were horizontal. So the company in one industry was buying its competitor in the same industry. And all that resulted in monopolization. And here, I'd like to say a few words about that. So why is that so? So I put the antitrust motive. And it very fast became clear that monopolization is bad. Well, although all companies would be willing to enjoy monopoly for some period of time. These are the words of a famous Austrian economist, Josef Schumpeter, that he wrote in 1919. But still, the damage produced by monopolization was recognized really quickly. And here, I would like to put some, quote, theoretical background. There are two major theories or approaches with respect to monopolization, or better say, concentration of industry. One is called the structural theory. And that was, A major idea all the way up to 1960s. Basically, it says that companies, that concentration and monopolization is the special move that is aimed at achieving efficiency. So companies engage in collusion, in monopolization, whatever. So they are trying to become bigger so that their size will allow them to enjoy advantage over some smaller players. So the efficiency, in this case, is the result of concentration. And therefore, you can say that m and a. So caution, you have to watch it. So this is kind of bad. There is another theory that is prevailing now that is called dynamic competition theory. That basically, tells the opposite. That says that concentration is not the pretext for efficiency. Rather, it's the result of efficiency. Concentration. The result of efficiency. So it basically says that companies grow and then they see that now they are becoming more efficient. And because they are more efficient, they buy other companies that are less efficient. And that is beneficial for the economy. And all that leads to the idea that you have to analyze them, these transactions, keeping that in mind. Now, the fact that this is sort of the prevailing story right now is that dynamic competition model is more consistent with the idea of fast technology change. With the idea that, oftentimes, if you do the job better than others that the fact that you can enjoy almost a monopoly or clearly a huge market share, is not automatically harmful for everyone. You can see that now there are huge IT giants that sometimes enjoy, almost, a monopoly in their segments. But that still is only because they're doing better. So they do not really, so they push their competitors out of the market, not because they're strong, but because their products are better. So that goes with all these products on Internet, that happens with products like various social media, with messengers and others. So sometimes you see that if the barriers may be low, it is easy to start another product. But if people are not using that, not buying that, then that all adds up to the fact that one or a few big companies, they actually dominate the market. Now, this actual motive, historical the past more than 100 years, that resulted in a fact that certain laws have been passed in the United States. And now we would say a few words about them. So this is like major, US antitrust laws. Well, the oldest and the most famous one is the Sherman Act. That was passed as early as 1890. That basically was and Sherman Act was specifically aimed at prevention of gun threats, conspiracies and actions, as we put it, in restraints of commerce. So that's restraints of competition. And that was in a special article that was aimed against actual or attempted monopolization. And it's been over 120 years that this act is enforced in the United States. And huge cases, they were investigated, and they went to courts on the basis of Sherman Act. Another one that is also quite old, this is Clayton Act that was first passed in 1914, over 100 years ago. So I would put that here. It's against monopolization, like this. Here, the Clayton Act barred, Purchase of stock. If, again, that would result in the potential monopolization. Well, the Clayton Act it still left a loophole open. You could buy the assets of this company. And then it was amended in 1950. So this asset purchases that I would also put them like this. And then there is another piece here that was the Hart-Scott-Rodino it was called an Antitrust Improvements Act, this is 1976. The main idea here was that before you could sue the company for something that has already happened. Now, the Hart-Scott-Rodino Act also put some emphasis on, I would put before the transaction. So you had to have some notifications, you have to disclose information before so that people could judge that. Not waiting until it's a day after affair. So while these are the most fundamental laws. There are obviously lots other and these are federal laws. There are lots of state laws that regulate the anti-trust motives. And anti-trust, they analyze motives in everyday transactions in the US. But that is only part because anti-trust is only one motive. And what follows, in the next episode, we will talk about some other US federal laws that also make up this background for M and A activity.
