The somewhat unexpected term “antitrust” is used in the United States to refer to a set of laws related to the prohibition of harmful monopolies and/or unfair business practices. Sometimes also known as competition lawsAntitrust laws seek to promote competition in business and stop any behavior that may harm the economy or consumers for the benefit of one or more business entities.
Antitrust law had its beginnings in efforts to combat the formation of huge corporate conglomerates in the late 19th century. These entities, known as “fideicomisos,” were similar to today’s cartels. In 1890, Congress passed the Sherman Antitrust Act, a landmark law that forms the core of modern antitrust law.
Promotion of competition, prohibition of unfair practices
Antitrust laws affect various areas of business operation. For many people, they are known as laws that prohibit the formation of a business monopoly, that is, an entity or allied group of entities that have disproportionate control of the distribution and production of a certain good or service. While this is partially correct, we should point out that there is a distinction between monopolies. Antitrust laws do not prohibit all monopolies, but only those that are formed through illegal and/or unethical practices. Among the most common unfair business practices prohibited by US antitrust laws are:
Price fixing – agreements between competitors to artificially determine the price of a good or service,
Territory fixation – agreements between competitors to stay out of each other’s respective geographic market areas, and
bid rigging – artificially designate a group of bidders to win a bid.
For example, while a water company may technically have a monopoly over a certain area (because of its existing pipeline infrastructure), the monopoly is not necessarily bad for the economy and will probably be allowed; however, a company like the infamous Standard Oil, which threatened its competitors and made backroom deals with railroad companies to crack down on the oil industry, splintered into several dozen separate companies as a result of antitrust litigation.
Antitrust Law Enforcement
Two major agencies handle the enforcement of US antitrust laws at the national level: the Department of Justice (DoJ) and the Federal Trade Commission (FTC). At the state level, the state attorney general can also bring a civil lawsuit to enforce antitrust laws. Finally, private citizens can file a lawsuit against a company they believe has violated federal or state antitrust laws. The courts, in effect, provide an incentive to private citizens by tripling the damages awarded to consumers who win an antitrust lawsuit, thereby encouraging enforcement of the antitrust laws by private citizens.
A controversial approach
Behind the antitrust law is the logic that greater competition between companies promotes lower prices and higher quality goods/services; in short, that competition favors the consumer, while monopolies favor the companies. This is somewhat debatable; Many economists argue that restrictive laws like the Sherman Act do more harm than good and can discourage companies from taking potentially beneficial actions that appear to be against the law.
Learn more
For more information on business law in the United States and related topics, explore the resources provided by the Austin business attorneys at Slater & Kennon at http://www.slaterandkennon.com.