Business Ethics In International Business Commerce Essay

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The nature of all business is to compete in order to succeed in gaining customers or market share. The ethical norms and business attitudes should sway the businesses competition which should lead to a healthy fair competition business practices. The fair business competitions create a market that satisfies small and big businesses and serves the customers at all levels. Small business can survive within markets if the big companies gave them the chance to compete or at least serve their customers. Those small businesses have the right to survive in the market as other businesses under the fair competitions; however, the huge firms with their intentional or in-intentional practices may destroy the small businesses and also may lead them to close permanently. Those small businesses may survive in the market and gain success and become leading businesses as well if they got the opportunity within the market. The opportunity will be granted only if the competition is fair and the legislation existence will assure this fairness.

The fair competition in businesses is not the only factor that affect the survival of the small businesses; laws and business regulations preserve and protect small and big businesses from antitrust or unethical practices that may pitfall them. Competition policy, antitrust law, corporation and contract law are terms used worldwide to refer to the concept that regulate the businesses' practices among each other and set the rules of competing with each other.

Business ethics plays the important role in prohibiting businesses from antitrust or unethical practices even if they were legal to create an environment that serve businesses as well as customers or consumers by creating competitive business environment that urges businesses to innovate and compete fairly to produce goods and services and gain market share that should serve customers and consumers at all levels with different choices and tastes.

This paper will examine the history of anticipating such regulations worldwide. Also it addresses some issues related to antitrust and the best practices to avoid it. At the end of this paper, the author is addressing the results and findings with analysis of the antitrust practices under the law coverage that are considered to be unethical. Mainly, the recommendations should be useful for businessmen to start legal and healthy business that can protect itself from the antitrust practices of the other businesses.

Literature Review

Antitrust and Business Ethics

Antitrust literately is the reverse of trust, however in businesses they refer to this term as the governmental regulations to maintain a fair business competition by breaking the monopolies and promoting the free ethical competition (Linux Information Project, 2006). Actually this definition is suitable more for the term of "Antitrust Laws" rather than for Antitrust. Britannica Encyclopedia defined antitrust as the business practices that are considered unfair or monopolistic which matches the literature definition. Antitrust is linked with business ethics and moral of businessmen as well because their ethical practices will be the only deterrent besides the laws to prevent business antitrust.

Business ethics is applying the general ethical practices in businesses. According to Lawrence & Weber (2008), unethical conduct is practiced within businesses for many reasons such as selfishness and personal gain, conflict of interests, cross cultural contradiction and pressure on profit. Actually Lawrence & Weber are right in specifying those reasons that are applicable for business antitrust also. Big firms and industries or even businessmen sometimes become greedy and selfish in gaining profits and expanding their businesses and this may lead some of them to forget the share of small businesses or firms intentionally or unintentionally. The practices of such firms lead to the unfair market competition and antitrust issues which lead to the closure of small businesses. Conflict of interests may occur between firms due to the business and market conditions and each firm may try to misconduct the contract rules unethically and by following the law coverage to avoid legal suits and succeed in the market without any consideration to the ethical practices.

Cross cultural contradiction actually may lead to create antitrust issues in international businesses. Laws and regulations of businesses are different among countries. The law gabs between those countries allows businesses to practice unethical or even illegal transactions among the countries they are functioning in due to the law differences. The pressure on profit occurs when business are squeezed by strong competition which encourages business to practice unethically to protect themselves and gain profit.

Businesses should maintain ethical practices because the value of ethical practices is one way of maintaining a trust and harmonious relations among businesses and between businesses and customers also. Reay (2010) identified many unethical practices conducted by businesses such as ruining other firms' reputation, bribery and accounting creativity to reduce some payments.

Lawrence & Weber stated five reasons for business to practice in an ethical manner. As stated in table 1.

Table 1: Reasons for business to practice ethically

Meet the stakeholders demands and interests

Enhance the business performance

Comply with the legal requirements

Minimize the harm

Promote personal morality

Ethical practices by business lead to satisfy the social responsibility towards the society and stakeholders which includes other business as well. Ethical practices of businesses promote the sense of trust and positive alliances among businesses. Practicing ethical manner in business leads them to comply with the laws regulations and also minimize the harm or loss the company may face by breaking the laws. From the individual perspective, ethical conduct of business makes their employees respect the laws and ethical practices and hence enhance the ethical behavior in the society.

Ethical Reasoning in Business Activities

Three methods of ethical reasoning are identified by Lawrence & Weber (2008). Businessmen can use those three methods to understand the ethical issues arise. Those three methods are actually yes/no questions that help defining the action as ethical or unethical. Figure 1 illustrates the three methods. Utility, Rights and Justice are the three dimensions of this analytical approach. In utility, the benefits resulted from the business action should exceed its costs for all parties involved. The rights of humans as well as business should be respected by the business practice to be ethical. And the last dimension should consider the fair distribution of benefits among the involved parties. By fulfilling this approach, businesses can assure the validity and avoidance of antitrust in their practices.

Figure 1: Ethical reasoning approach - (Lawrence & Weber, 2008)

The answer to the three questions determines the validity of the business practice. If all answers are yes, then the practice is fully ethical, and if the three answers are no, then the business should revise their practice because it is totally unethical and opens the door of antitrust.

History of Antitrust Laws

The businesses and its regulations isn't something new, it had started early in sixteenth century in England where some merchants faced the high seas danger and required protection for their cargo losses from weather or pirates. The English Monarchy granted those corporate limited financial liability for any losses. Also many of the corporations were monopolizing territories and industries that were considered to be critical to England interests. At that time, the English law permitted the monopolies to serve its interests. Later on during the sixteenth century, the English Parliament passed the Statute of Frauds. Standards for settling the disagreements legally were mentioned in the law. US, after its independence had adopted many actions from the English act to form the basis of the US contracts laws (Brannen & Hanes, 2001).

After the US civil war, big businesses expanded greatly because the economy had changed from agriculture to industries. The competitions increased between industries because their supply of products exceeded the demand and the businesses needed to protect their profits, however, the laws controlled business mergers and prohibited companies to own stocks in other businesses. As a result of the law restrictions, businesses tend to join their competitors to set the products market prices and control the productions among them (Brannen & Hanes, 2001). This phenomenon occurred in the nineteenth century where large businesses joined and signed a trust agreement. The trustees representative from those companies were given the power to set product prices which lead to eliminate the competition and increase their profits. Large monopolies flourished as a result of those type of agreements which used unfair practices to lead the competition using the below-cost pricing then raise their product prices to the highest amount after monopolizing the market (Wise Geek, nd).

The trust joins between businesses harmed the consumers and the small businesses. So there was a demand from publics for a governmental action to stop those business trusts to save the free market competition. Then US had started regulating the laws and maintaining the business acts (Brannen & Hanes, 2001).

The antitrust regulations and case law were developed in the late nineteenth century in England and US as a response to breakdown monopolies and maintain the free trade (James May, nd).In the twentieth century, still the business market was not regulated well. England was the dominant and central business controller in the world economy and US business markets were monopolized by wealthy businessmen were few large companies were controlling the more than half of US manufactures (Brannen & Hanes, 2001).

Sherman Act

The Sherman Antitrust Act which was conceded in 1890 considered the first American antitrust law. Its rules prohibit all the trust joins and agreements of large companies monopolized the market in US (Wise Geek, nd). Sherman act considered to be the foundation of antitrust laws in US (Lawrence & Weber, 2008). The Sherman act (based on the constitutional power of Congress, ( authorizes penalties, fines and jail terms for any violation of the law that may include restraining the trade through conspiracies', business joints or contracts and monopolizing the commerce using predatory pricing or allocating business territories Lawrence & Weber, 2008). Further details of Sherman Act are in appendix I.

Clayton Act

Clayton Act is an amendment for the Sherman Act which was planned by Henry De Lamar Clayton in 1914 (The Columbia Encyclopedia, 2008). Clayton act added the prohibition of pricing discrimination with customers to enforce them to buy additional products to get their needed ones. Also Clayton act illegalize the purchase of companies stock by another company for the purpose of monopoly (Wise Geek, n.d).

Clayton act also clarified the issue of corporate mergers which is illegal in the case of creating a monopoly. Also the act prohibited the interlocking directorates in large similar businesses were a single representative can't be a member of board of directors for two or more similar business corporations (Lawrence & Weber, 2008).

The Federal Trade Commission Act

The Federal Trade Commission (FTC) established at this time of the Clayton Act. It aimed to monitor the business practices and assure the implementation of the antitrust legislations (Wise Geek, nd). In September 26th, 1914, President Woodrow Wilson signed the Federal Trade Commission Act (

FTC Act is authorized to disallow unfair methods of competition and practices that affect the commerce. Also the FTC is authorized to investigate corporations' business practices and engaged management into commerce to find out and prohibit the unethical business behaviors. Also the FTC made reports and recommendations to the Congress office in US to track the implementation of the legislations ( FTC Act didn't define the details of the unfair competitions or business practices. After few years then act was revised to amend new rules to protect the consumers from the business abuse like deceptive and misleading advertisements (Lawrence & Weber, 2008).


To conduct this research paper, many resources were used along with the discussion in the classroom. Academic articles, books, research papers, encyclopedias and internet websites is used together information about antitrust in international businesses. The information gathered is analyzed to provide a valuable source of information for businessmen who plan to do business outside the borders of the country.

Justification & Purpose of the Study

Apart from doing a university course project, the purpose of this research paper is to examine the antitrust laws and business ethics in international businesses. The US antitrust laws are highlighted to identify the ideal business market to invest in that is protected by laws and the populations respect those laws. Some cases in the antitrust and business ethics are analyzed to show businessmen the value of knowing the business laws while doing international business and emphasize on the importance of ethical practices in doing businesses.

The Corporate Power Dilemma

Corporate power is defined as the capability of corporations to influence government, economy and society based on their organizational resources (Lawrence & Weber, 2008). Power can be measured by size, number of employees, number of affiliates or subsidiaries, corporate capital and resources, revenues and even reputation and consumer support. Big organizations or the huge ones, mostly have a revenues and profits that exceed the capital of some countries. This corporate income allows the company to act as a whole nation who is responsible about its staff which may exceed the population of some countries as well. Actually those corporate may simulate countries because they have their own capital, revenues and the large number of employees who acts like the citizens of the company. Let's imagine if one of those huge companies exists in a small country.

Wal-Mart is a good example. According to Fortune Global, 2005-2006, they have 1,800,000 employees with revenues of 315,654 US$ millions and profit of 11.231 US$ millions. Wal-Mart annual sales revenue is approximately equal to the GDP of Australia. According to this statistical information, Wal-Mart is equal to Australia!! That's mean Wal-Mart can be considered as a whole continent. Those numbers with companies over countries shows that the company may have more power than the country itself. Figure 2 shows the top 10 largest firms in 2005-2006 while figure 3 shows the comparison between large firms' revenues and countries GDP.

This corporate power which may exceed or even nearly reach the country power can influence or control the country economics. If one firm is controlling the country economics, it will be for sure able to influence and control the political and governmental issues and that lead to influence the social life of the society people as well.

Figure 2: Top 10 largest firms in 2005-2006 - (Lawrence & Weber, 2008)

Figure 3: Comparison between large firms' revenues and countries GDP in 2005-2006 - (Lawrence & Weber, 2008)

Unethical Practices and Illegal Practices

Business ethics is the norms and values that assure the practice of businesses in a legal manner that doesn't harm the consumers, society, economics and competitors. With the revolution of the legislation laws that controlled the businesses behavior, many enterprises tempts to do unethical actions and keep hiding those actions from public and laws to gain profits or even monopolizing the market and controlling the prices.


Wal-Mart is considered the first leading employer company in UAS. According to Forbes magazine, Wal-Mart is one of the best 100 companies to work for. However, the pay scale for Wal-Mart places its employee under the poverty line. The average salary for its full time employees ranges from $6 to $7.50 an hour for 28-40 hours per week.

Wal-Mart had a huge campaign with a slogan of "Made in USA" indicating that their products are manufactured and produced locally in USA to support the nation economy. While the truth is that more than 85% of Wal-Mart products are imported from China and other third level countries (Stores Wars, n.d). The campaign attracted the customers especially with the reasonable prices. Wal-Mart business behavior forced many USA manufactures to close because they can't market their products in USA because Wal-Mart is almost monopolizing the market. Actually the advertising campaign by Wal-Mart is considered as a deceiving ad that is under law should be stopped and Wal-Mart should be committed guilty for that practice because they were abusing the consumer based on the Federal Trade Commission Act amendment that aimed to protect consumers from deceived business advertisements.

Enron Collapse

Enron Corporation was listed as the most innovative company based on Fortune magazine for the sixth consecutive year. In January, 2001, Enron Chairman and CEO announced that their new mission is to be the world's greatest company (Lawrence & Weber, 2008).

Most economical analysts were considering Enron as an outstanding successful company. Enron increased its revenues from under 10$ billion in 1999 to 101 $ billion in the first quarter of 2000. The collapse of Enron wasn't from their energetic industries, rather from the internet and communication business investments in foreign subsidiaries. Enron assigned its business losses assets to unwanted partnerships to inflate its reported bottom line. Along with this unethical practice, Enron hide its dept to cover its indebtedness (Sterling, 2002).

Enron CEO had resigned in 2001 and after two months from the resignation, Enron announced its first quarterly loss. Enron with the help of Arthur Anderson had shredded its financial audit documents to hide its secrets from laws to avoid penalties (Sterling, 2002). Actually Enron showed a fake image of its revenues and that was abusing the stakeholders to invest more with the company. Also it had destroyed all the financial audits to clear any evidence on their financial crises and to hide their actual loss and vapor the stakeholders with fake revenues. Enron's CEO then sold all his stocks to avoid the loss and resigned leaving the corporate to face its collapse. Enron bankruptcy was due to abusing its stakeholder by showing fake financial statements and due to other individual greediness and unethical acts by the executives.

Microsoft Antitrust Case

Microsoft faced much antitrust lawsuit in USA, Europe and South Korea for its operating system bundled with Internet Explorer and Media Player.

In USA, Microsoft was sued by the Justice Department for bundling Internet Explorer with its Operating system (Lawrence & Weber, 2008). Bundling Internet Explorer with the Windows Operating System of Microsoft increases the success of the Internet Explorer over other internet browsers. This led to unfair competition for other internet browsing software because it was difficult to uninstall the Internet Explorer or replace it with any other browsers. Microsoft made an unintentional antitrust action when it made its IE difficult to be removed or replaced and therefore, it was sued by the US Justice Department and both parties agreed to allow other software companies to be able to install their internet browsers on Microsoft Operating System.

In Europe, the case was similar to US case. However the debate was for the open source programmers and companies to be able to install their programs on Microsoft Operating system. The European legislations accused Microsoft that it is threatening the success of some software companies because they can't install their programs on the computers where most of them use Microsoft Operating System. The legislation forced Microsoft to open the interface of its operating system to be able to interact with any type of programs. In my opinion, the legislation was right because although Microsoft is the leading and pioneered IT company, other companies as well as programmers should have the right to innovate and enter the IT industry market. Microsoft will always have the intellectual property for what it had innovated and developed and it has the market domination for its operating system that all programs should adapt to it to run and work. Therefore, opening the interface for non-Microsoft programs is a right for the customers and a portion of the programs' success will be addressed and credited to Microsoft because it is the base for running such programs.

In South Korea, the case was similar to the European one. The South Korean Federal Trade Commission (FTC) sued Microsoft for bundling Medial Player and instant messenger with its operating system. FTC argued that Microsoft abused the market where one Korean instant messaging company was closed because Microsoft is dominating the market with its instant messenger (Lawrence & Weber, 2008). In my opinion, the Korean action was unfair to Microsoft because Microsoft had opened the interface of its operating system to work with any other programs and the customer have the choices and options to use Microsoft programs or any other brand programs.

Objectives of Antitrust Laws

Enforcing any antitrust law actually serves a core objective to protect fair business competition. Restricting or cutting down unfair competition helps protecting the fair competition practice. Defending the business' and consumers' interests is considered as a direct result of the fair competitions while preserving the socialist market economy is an indirect result of the fair competition (Global Forum on Competition, 2003).

Lawrence & Weber, 2008, identified four main objectives for the antitrust laws in general. The first objective is preserving the competition by forbidding monopolies and removing the price discrimination and collision. Protecting the competition is done also through blocking mergers of large companies that may dominate the market and control the prices. An example for that is when the US antitrust regulators banned the merger of Nestle and Dreyer's because the resulting merger will be able control 60% of the super premium ice cream in the market.

The second objective is protecting the consumers' rights and welfare by banning all types of advertisements that are misleading or deceptive. The antitrust law assumed that the consumer is protected through the fair business competition; however the regulators noticed some business actions to mislead the consumers and abuse them. The third objective is protecting small businesses and firms from big businesses competitions and the economic pressures. To do so, the antitrust law forbade predatory pricing which is selling with a price below the produces prices to egress the competitors from the market and competitions. The last objective is protecting the life and customs of small towns from the threat of replacing their own small industries or farming practices by large modern industries that may ruin the life and image of the town itself (Lawrence & Weber, 2008).

Antitrust issues


The monopoly itself as a concept is not illegal in the market economy (Lawrence & Weber, 2008). The legal monopoly concept is related to innovation and intellectual properties. If a company is providing the market with a unique service of products, it will monopolize the market for what it is providing. This monopoly is not intended by itself where the company is not preventing other firms to provide similar services or products. The illegal monopoly comes when a company practices unethical actions to dominate the market. Licensing is not part of monopolies where a business gives the rights for other company to represent and offer its products in its market. Licensing is actually a contract that grants a company access to the licensing company patents, trade secrets or the used technology (Donald et al, 2010). So when a company gets the license from others, they can offer its service in the dominant market unless that company licenses the same offer to other company in the same market.


Antitrust policies interferes innovative industries nowadays. In past times, economics and antitrust analysts ignored innovations issues while analyzing the market trends. Innovation industries and intellectual properties entered the competitions area in the economical market. Microsoft antitrust case bring the attention to some analysts that the law is poorly supporting such innovative industries and may overwhelm the pioneer inventors and support new market entrants in this field (Segal & Whinston, 2005). The antitrust law was fitting stable technological market, in current time; the antitrust action is changing due to the rapid technological competition in the economical market (Lawrence & Weber, 2008).

In the case of Microsoft antitrust issues, Microsoft is a leading IT company where its power is considered as a fuel for the research and development in IT software and technological fields. Most new IT market entrants, benefits from Microsoft R&D. the antitrust regulations against Microsoft may interfere its research and development practices and may reduce its innovations. However, the law regulators and economic analysts consider Microsoft actions as a preventers and barriers for new firms entering the market (Segal & Whinston, 2005). Two point views from the industry side and regulation side conflict each other. The industrial firms would like to protect its rights as intellectual property and facilitate the process of research and development for more innovation in the industry while regulators need to maintain a fair competition in the market for the new entrants as well.

High Technology Business

The current economical business has changed from heavy industries, transportation and manufacturing to an era of services and information technology. Most antitrust laws were crafted in the 19th & 20th centuries; and they can't suit all the current situation were intellectual property must be addressed. The principle of antitrust law is to maintain fair competition away from monopolies. Some natural monopolies are formed by customers themselves. For example, most customers tend to work on Microsoft Windows Operating Systems because it suits most of the applications while Microsoft is not attempting to monopolize the market (Lawrence & Weber, 2008). In fact high technological businesses need to be addressed by the antitrust laws to protect themselves from unfair regulations.

The effect of Antitrust on Business Concentration

Pdf file of Effects_of

Mergers and acquisitions