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Weston Cook
Weston Cook

Antitrust Legislation

Many consumers have never heard of antitrust laws, but enforcement of these laws saves consumers millions and even billions of dollars a year. The Federal Government enforces three major Federal antitrust laws, and most states also have their own. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for products and services.

antitrust legislation

The Antitrust Division also often uses other laws to fight illegal activities that arise from conduct accompanying antitrust violations or that otherwise impact the competitive process, as well as offenses that involve the integrity of an antitrust or related investigation, including laws that prohibit false statements to Federal agencies, perjury, obstruction of justice, conspiracies to defraud the United States and mail and wire fraud. Each of these crimes carries its own fine and imprisonment term, which may be added to the fines and imprisonment terms for antitrust law violations.

Congress passed the first antitrust law, the Sherman Act, in 1890 as a "comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade." In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. With some revisions, these are the three core federal antitrust laws still in effect today.

The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age. Yet for over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.

The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize." Long ago, the Supreme Court decided that the Sherman Act does not prohibit every restraint of trade, only those that are unreasonable. For instance, in some sense, an agreement between two individuals to form a partnership restrains trade, but may not do so unreasonably, and thus may be lawful under the antitrust laws. On the other hand, certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in other words, no defense or justification is allowed.

In addition to these federal statutes, most states have antitrust laws that are enforced by state attorneys general or private plaintiffs. Many of these statutes are based on the federal antitrust laws.

The Commission has adopted various non-regulatory documents, which may take various forms (notices, guidelines, etc). Such documents are intended to explain in more detail the policy of the Commission on a number of issues, either relating to the interpretation of substantive antitrust rules or to procedural issues, such as access to file.

The Directive removes practical obstacles to compensation for all victims of infringements of EU antitrust law and fine-tunes the interplay between private damages actions and public enforcement of the EU antitrust rules.

The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) are responsible for making sure that antitrust laws are abided by. The FTC mainly focuses on segments of the economy where consumer spending is high, while the DOJ holds sole antitrust jurisdiction in sectors such as telecommunications, banks, railroads, and airlines and has the power to impose criminal sanctions.

In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.[2]

Federal antitrust laws provide for both civil and criminal enforcement. Civil antitrust enforcement occurs through lawsuits filed by the Federal Trade Commission, the United States Department of Justice Antitrust Division, and private parties who have been harmed by an antitrust violation. Criminal antitrust enforcement is done only by the Justice Department's Antitrust Division. Additionally, U.S. state governments may also enforce their own antitrust laws, which mostly mirror federal antitrust laws, regarding commerce occurring solely within their own state's borders.

The scope of antitrust laws, and the degree to which they should interfere in an enterprise's freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. Some economists argue that antitrust laws actually impede competition,[3] and may discourage businesses from pursuing activities that would be beneficial to society.[4] One view suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controlling economic power in the public interest.[5] A survey of 568 member economists of the American Economic Association (AEA) in 2011 found a near-universal consensus, in that 87 percent of respondents broadly agreed with the statement "Antitrust laws should be enforced vigorously."[6]

American antitrust law was formally created in 1890 with the U.S. Congress's passage of the Sherman Antitrust Act.[a] Using broad language "unequaled in its generality", the Sherman Act outlawed "monopoliz[ation]" and "every contract, combination ... or conspiracy in restraint of trade".[9]

In 1911, the U.S. Supreme Court reframed U.S. antitrust law as a "rule of reason" in its landmark decision Standard Oil Co. of New Jersey v. United States.[11] At trial, the Justice Department had successfully argued that American petroleum conglomerate Standard Oil had violated the Sherman Act by using economic threats against competitors and secret rebate deals with railroads to build a monopoly in the oil refining industry. On appeal, the Supreme Court affirmed the trial court's verdict and ruled that Standard Oil's high market share was proof of its monopoly power, ordering it to break itself up into 34 separate companies. But the Court also held that the Sherman Act's language outlawing "every" trade restraint actually only banned "unreasonable" restraints on trade.[11] The Court ruled that the Sherman Act's provisions were to be interpreted as a "rule of reason" under which the legality of most business practices would be evaluated on a case-by-case basis according to their competitive impacts, with only the most egregious conduct being illegal per se.[11]

At the time, many observers believed that the Supreme Court's decision in Standard Oil represented an ongoing effort by conservative federal judges to "soften" the still-new antitrust laws and narrow their scope.[12] Congress reacted in 1914 by passing two new laws: the Clayton Antitrust Act, which outlawed using mergers and acquisitions to achieve monopolies and created an antitrust law exemption for collective bargaining; and the Federal Trade Commission Act, which created the U.S. Federal Trade Commission (FTC) as an independent agency that has shared jurisdiction with the Justice Department over federal civil antitrust enforcement and has the power to prohibit "unfair methods of competition".[12]

Despite the passage of the Clayton Act and the FTC Act, U.S. antitrust enforcement was not aggressive between the mid-1910s and the 1930s.[12] Based on their experience with the War Industries Board during World War I, many American economists, government officials, and business leaders adopted the associationalist view that close collaboration among business leaders and government officials could efficiently guide the economy.[12] Some Americans abandoned faith in free market competition entirely after the Wall Street Crash of 1929.[13] Advocates of these views championed the passage of the National Industrial Recovery Act of 1933 and the centralized economic planning experiments during the early stages of the New Deal.[14]

The Supreme Court's decisions in antitrust cases during this period reflected these views, and the Court had a "largely tolerant" attitude toward collusion and cooperation between competitors.[14] One prominent example was the 1918 decision Chicago Board of Trade v. United States, in which the Court ruled that a Chicago Board of Trade rule banning commodity brokers from buying or selling grain forwards after the close of business at 2:00 pm each day at any price other than that day's closing price did not violate the Sherman Act.[14] The Court said that although the rule was a restraint on trade, a comprehensive examination of the rule's purposes and effects showed that it "merely regulates, and perhaps thereby promotes competition."[15]

The "structuralist" interpretation of U.S. antitrust law began losing favor in the early 1970s in the face of harsh criticism by economists and legal scholars from the University of Chicago.[22] Scholars from the Chicago school of economics had long advocated for reducing price regulation and limiting barriers to entry. Newer Chicago economists like Aaron Director had begun arguing that there were economic efficiency explanations for some practices that had been condemned under the structuralist interpretation of the Sherman and Clayton Acts.[23] Much of their economic analysis involved game theory, which showed that some conduct that had been thought uniformly anticompetitive, such as preemptive capacity expansion, could be either pro- or anticompetitive depending on the circumstances.[24] 041b061a72


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