Antitrust law is the broad category of federal and state laws that are meant to keep business operating honest and fairly. Antitrust laws regulate the way companies do business. The goal is to level the playing the field in the free market and prevent businesses from having too much power. For the purposes of antitrust law, a trust is a large group of businesses that work together or combine in order to form a monopoly or control the market. Major antitrust legislation in the United States includes the Interstate Commerce Act of 1887, the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914.
What do antitrust laws do?
Antitrust laws ban companies from taking certain actions in order to develop monopolies. They ban what some people see as deceptive trade practices that companies might want to use in order to try and outperform the competition. To put it another way, antitrust laws prevent companies from using dirty poker in order to stay ahead of the competition.
What do antitrust laws prohibit?
Antitrust laws don’t prohibit a company from controlling a large share of the market if they do it by innocent means. What antitrust laws prohibit are acts intended to form a monopoly by using unfair tactics. The courts use what’s called the “rule of reason” test in order to determine if an act is unlawful. They consider the effect of the business decision on the market.
Laws and court cases provides more direction
As government officials and private entities bring lawsuits against alleged antitrust violators, courts give more direction about what kinds of behaviors amount to antitrust violations. The courts say that certain actions like price fixing, group boycotts or group agreements to control business activity in certain markets automatically amount to antitrust activity. However, no two cases are exactly alike. In each case, the court has to look at exactly what happened and make a determination.
The Sherman Act is the seminal law that prohibits antitrust behavior. Courts can pursue civil or criminal penalties that can include up to 10 years in prison and a $1 million fine for each violation. Businesses can face a fine of up to $100 million. They can also face a fine that equals twice the profits they’ve made from the unlawful activity. The Clayton Act is an antitrust law that followed soon after the Sherman Act and specifically identified certain prohibited behaviors. For example, the Clayton Act prohibits an intermingled directorship where one person makes business decisions for two or more competing companies.
Examples of antitrust laws
An example of behavior that antitrust laws prohibit is lowering the price in a certain geographic area in order to push out the competition. For example, a large company sells widgets for $1.00 each throughout the country. Another company goes into business and sells widgets just in California or $.90 each. In response, the first company lowers their prices just in California to $.80. They’re selling the widgets at a loss just in that state just to push out the new competitor. The second company goes out of business. The first company likely violated antitrust laws by using their large status to lower prices in just one area in order to attack the competition.
Another example of an antitrust violation is collusion. For example, three companies manufacture and sell widgets. They charge $1.00, $1.05, and $1.10 for their widgets. If these three companies plan and agree to all charge $1.15 for widgets, they’re likely in violation of antitrust laws.
How does a company know if they’re violating an antitrust law?
It’s not always immediately clear if a company is in violation of an antitrust law. It’s a question that’s specific to the facts of each case. The courts and regulating agencies have to look at the facts of the case in order to make a determination. Companies are wise to seek legal advice as they plan large-scale business changes including mergers and acquisitions in order to make sure they steer clear of potential violations of antitrust laws.
Who enforces antitrust laws in the United States?
Representatives of federal and state agencies bring lawsuits in order to enforce antitrust laws. Specifically, the Federal Trade Commission, the U.S. Department of Justice and state government authorities bring lawsuits on behalf of the government. They bring lawsuits against the companies that they believe may have violated antitrust laws. There are both civil and criminal remedies available to the courts. The court can also issue an injunction in order to prevent the company from continuing specific behaviors.
Private citizens and other companies can also take action to enforce an antitrust law. They can file a lawsuit in the appropriate court. When a person or company can show that they’re the victim of antitrust behavior, they can collect damages.
The Federal Trade Commission has ways outside of the judicial system to enforce antitrust agreements. They’re able to enter into consent agreements where businesses agree to certain actions in exchange for resolving accusations of antitrust violations. In addition, the Federal Trade Commission also has the power to require pre approval of proposed mergers and acquisitions.
How did antitrust laws develop in the United States?
Public support for antitrust laws grew in the late 19th century. As business began to boom in the United States, some people worried that businesses could have too much power. They saw the development of large railroad companies and other industries of the era. Some people likened the power of big business to the power of a king. If a king could have too much power over their subjects, they reasoned, it could be equally problematic for any single company to have too much power in society. They reasoned that antitrust laws are the answer to this concern.
Although the first piece of antitrust legislation was the Interstate Commerce Act of 1887, the landmark antitrust legislation in the United States is the Sherman Act of 1890. The Clayton Act soon followed in 1914. Also in 1914, legislation created the Federal Trade Commission. The Federal Trade Commission is a federal agency tasked with enforcing federal antitrust laws.
As soon as they were in place, government officials quickly used antitrust laws to bring actions against companies they suspected acted in violation of the law. President Theodore Roosevelt brought suits against 45 companies using the Sherman Act. William Howard Taft used antitrust laws to sue more than 75 companies. Even Ronald Reagan took advantage of antitrust laws to break up telecommunications powerhouse AT&T into several smaller companies.
The Standard Oil Company Case
Perhaps the most famous antitrust case is the case against John D. Rockefellar’s Standard Oil Company. (Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).) The courts agreed with U.S. officials that Standard Oil Company used secretive rebate offers in order to build a monopoly. They also agreed that the company threatened other competitors in order to push them out of the market. The antitrust litigation against Standard Oil Company broke the company into smaller businesses that are known today as ExxonMobil, Amoco and Chevron.
In the Standard Oil Company case, the U.S. Supreme Court said that not all business activities are offensive or a violation of federal law. Instead, the court said that it’s only activities that unduly restrict trade that violate the Sherman Act. The Court said that companies have the liberty to conduct their affairs. The Court said that businesses should use the “rule of reason” to determine if their proposed activities are lawful.
The American Tobacco Case
Another seminal antitrust case is United States v. American Tobacco Co., 221 U.S. 106 (1911). In that case, the court said that the Sherman Act doesn’t ban having a monopoly. Instead, it only prohibits bad acts used to get a monopoly.
Antitrust laws are controversial
Antitrust laws are a matter of some debate. Supporters say that antitrust laws are necessary in order to keep competition fair in a free-market economy. They say that businesses can’t be trusted to look out for the interests of society as well as their own interests. Preventing monopolies and collusion lowers prices for everyone, they say.
Opponents say that it isn’t that simple. They say that allowing businesses to fully compete would result in the lowest prices for consumers. They say that as long as there’s a profit to be made, there’s always someone that is going to come along and enter the market.
What’s not debatable is the impact that antitrust laws have had on American business. Antitrust laws have split up some of the largest companies in American history. The laws continue to be a matter of debate as governments and private citizens continue to aggressively enforce them.
American antitrust laws continue to be as debated as they are influential. Antitrust laws affect all Americans whether they’re aware of it or not. Antitrust laws ensure that companies conduct business fairly. They’re meant to ensure free trade and competition. Both government agencies and private entities can enforce antitrust laws. Courts continue to define and refine antitrust laws that date as far back as the late 19th century.
Why practice antitrust law?
Antitrust law is a field of law that suits people who enjoy analysis, investigations and logic. Because an antitrust violation is a fact-specific determination that depends on the circumstances of each case, an attorney that enjoys investigating facts and applying reason enjoys this field of practice. Antitrust attorneys may work for the government, or they may work on behalf of a private entity.
An attorney that works in the private sector may be in-house counsel for a corporation, or they might work for a law firm. That means if you’re looking for the challenge of private practice or a career in government, there are options available. There may also be career opportunities to move between the public and private sector.
Lawyers in the antitrust field work with a large but structured and identifiable body of case law. They can also contribute to lasting case law developments. Finally, antitrust attorneys may also work as advocates and lobbyists on behalf of corporations as they seek to change or supplement existing antitrust laws. Many antitrust attorneys find the field mentally challenging and personally rewarding.