Business Ethics and Legal Issues
Antitrust laws are the legislations by state governments aimed regulating the way in which trade and commerce is carried out. This is possible through the prevention of illegitimate price-fixing and monopolies and facilitating fair completion. The net effect that is felt by the consumer is the production of high quality goods and services at prices that are affordable to all. Additionally, the public welfare and interest are well protected because it ensures that the firms who are engaged in the sale of goods and services meet their demand. This is achieved by the provision of an ample environment for ...view middle of the document...
This is depicted from the two companies which conspired in order make profits by creating an unfair environment. This raised the concerns of the Federal Trade Commission. The case in question involves one France-based company known as Aventis Company and Andrx Pharmacies. Aventis Company (now Sanofi-Aventis) is a pharmaceutical company based in France and deals with developing of new medical products relating to vaccines, central nervous system among other five areas. The company was formed in 1999 when it merged with a German-based Hoechst company. Most of the products that the company makes deal with the reduction of pain and other over-the-counter products. The history of the company shows that it was managed by one general manager from 1973 to 2007. Most shareholders of the company are the public and besides its involvement in research the company also funds public research especially in the clinical sector (Ferrell et al., 2009, p. 35).
Andrx Pharmaceuticals on the other is a Miami-based company which was taken over in 2001 and is now known as Watson pharmaceuticals. Founded in 1984, the firm boasts of being the fifth largest pharmaceutical in the United States. The company deals with brand and generic pharmaceuticals of up to a hundred and fifty drugs. Its operations are global with major supplies in oral contraceptives and narcotic painkillers. The Watson Pharmaceuticals acquired this company in 2006 which resulted in broadening of its product diversity and other growth opportunities.
Why would the drug maker want to stymie generic competition? Explain.
In a case involving the two companies, Aventis brought a suit against Andrx for patents infringement. Aventis acquired Hoechst in 2000 and paid it $100 million for it not to market a generic version of the Cardizem CD for 11 months. The drug maker in my opinion made all efforts to hinder generic competition with the intention of making more profits by buying out the other firm. This is because in a monopolistic market consumers have limited choices of buying the drug in question. In this scenario where only one supplier exists because the other one has been eliminated, the price is not controlled by the forces of demand and supply (Mankiw, 2008, p. 76). With the intention of making super-normal profits, the drug maker may decide to fix prices for the drug to a level that is favorable to them. In addition to making of profits, the company also hindered generic competition in order to ensure that all their products are purchased adequately. Having a reliable market is very important to any firm that does not want to experience wastage of its products.
What types of legal barriers to market entry exist?
The legal barriers that exist in the market for the entry of new supplier are generated by the competitive nature of the market and monopoly of a firm within the industry. Existence of a single firm in the industry may make it hard for other firms to enter through a number of ways. An...