Application of the Sherman Antitrust Act

American Intercontinental University

Before giving any opinions on the US government suit against Goliath and Junior, I would like to explain the idea behind the US Sherman Antitrust Act and the creation of a subsidiary.

The US Sherman Antitrust Act is an anti-monopoly act passed to protect US producers and ensure fair economic competitiveness in transactions (MUSE, 2010).

A subsidiary is a company created by a parent company from which it is legally separated. Subsidiaries are independent and locally organized firms (Burke, nd.).

From the definition above, Goliath was right by saying that it is not part of the cartel because Goliath and its subsidiary Junior are separate legal entities. As a result, the subsidiary company status protects its parent firm from unlimited liability (MUSE, 2010). In other words, Goliath cannot be held responsible for Junior’s actions. However, the argument about the negligible effect of the cartel on the US market for sapphires is not receivable. We all know that the creation of a cartel helps its members to influence the price of the items for which they have decided to join together. Consequently, the US market for sapphires may be affected by this agreement. As for Junior, I believe that the US government cannot engage any actions against this entity because it is not a US company due to its creation under a foreign state law.

Both Goliah and Junior will be incorrect if the US Government is able to prove that Goliath intended to have such effect on market for sapphires and that it is legally responsible for the action taken by its foreign subsidiaries.

The companies have several options to prove the irreceivability of the US action. To do so, they will have to prove that they are legally independent, show the limit of the Sherman Anti-trust act when it comes to foreign companies and prove that the cartel formed by Junior does not harm the US market for sapphires.

References

MUSE.(2010).The Multinational...