Antitrust law is also known as competition law. It refers to a set of laws, rules, and regulations that protect the essence of a competitive marketplace and prevent monopolization. It prevents anti-competitive practices, promotes fair trade practices, and protects small businesses from being dominated by mighty corporate giants.
Antitrust laws exist on federal and international levels. These regulate the functioning of companies. Their primary function is the prevention of monopolies, the protection of small businesses, and the overall goal of consumer protection. These laws also promote a smooth working business model for big corporations, which tend to get complicated and corrupted over time.
What Is The Purpose Of Antitrust Laws?
Since the main objective of antitrust laws is the protection of competition, prohibition of distortions, and consumer welfare, they prevent abusive practices that harm the system.
- Antitrust laws see to it that monopolies do not exist. A monopoly is when a single entity starts controlling a big and influential chunk of the market. This gives them power over the market, and they start limiting their competition by using unfair trade practices.
- Antitrust laws are anti-competitive measures against practices that harm competition.
- There are often agreements among competitors who try to fix prices in the market as a manipulative tool.
- They allocate markets so that consumers pay higher prices. Competitors also have agreements to divide the customer base among themselves. This eliminates competition.
- Secret agreements often exist between organizations. These give them an unfair advantage over other companies in the market.
- Deliberate low prices by the big companies can attract the customer base from other companies.
- Sometimes companies try to sell things together so that consumers have to buy one product to get another one.
- Exclusive contractual terms also prevent customers from dealing with competitors.
- Mergers and acquisitions often face the wrath of Antitrust laws. They prevent the market from getting concentrated in order to avoid monopolistic tendencies.
These are some of the conditions that antitrust laws usually target.
What Are Antitrust Laws In The USA?
Antitrust laws in the United States primarily aim to prevent monopolistic practices.
These laws come from two of the federal bodies of the nation:
a. Federal Trade Commission (FTC)
b. Antitrust Division of the Department of Justice (DOJ).
These fight against monopolization, market allocation practices, mergers meant to manipulate the market, and other anti-competition techniques.
What Are Some Federal Antitrust Laws?
Let us now look at some federal pieces of machinery that enforce antitrust practices in the nation.
Sherman Antitrust Act (1890)
The Sherman Antitrust Act (1890) is the most prominent part of the United States national and federal antitrust legislation. It limits the scope of any agreements that try to restrain free trade by creating monopolies. It has two main sections, each looking into different aspects of anti-competition practices.
- Section 1 strictly prohibits conspiracies and actions from businesses that aim to limit free-trade practices—specifically, price-fixing, rigging of bids, and practices of market allocation.
- Section 2 establishes strict conditions against monopolization. It attempts to stop the monopolization of the market by anti-competitive behavior.
Clayton Antitrust Act (1914)
The Clayton Antitrust Act came into effect 1914. It was an expansion of the Sherman Act. It targeted particular anti-competitive practices that became rampant at the time.
- Section 3 of the Act prohibits tying and bundling practices where consumers can buy a product only if they buy another.
- Section 7 of the Act prohibits and regulates mergers and acquisitions that aim to stop competition in the market.
- Section 8 of the Act prohibits the director of one company from serving as the director of competing companies (this could lead to collaboration).
Federal Trade Commission Act (1914)
This Act created the Federal Trade Commission. The commission empowers antitrust laws and regulates unfair practices in competition, deception of consumers, and other dishonest practices.
Robinson-Patman Act (1936)
This Act deals with price discrimination. It prohibited sellers from selling goods and services at different prices to different buyers, significantly if this practice affected competition.
Hart-Scott-Rodino Antitrust Improvements Act (1976)
This Act made it mandatory for companies to notify the Federal Trade Commission and the Department of Justice before undergoing a merger or acquisition. This was the case significantly if the coalition could heavily impact competition.
Wrapping It Up!
The Antitrust Division of the Department of Justice and the Federal Trade Commission primarily enforces these federal antitrust laws. Both of these agencies investigate antitrust violations in the nation and lodge complaints and lawsuits to seek remedies that put competition back in the market system.
Antitrust laws are also changed and heavily influenced by court rulings. These interpretations by judges and precedents shape the scope of these regulations.
The United Nations Conference on Trade and Development (UNCTAD) has promoted competition throughout its member nations. It aims to enhance economic development and consumer welfare. The UNCTAD has guidelines on competition policy to develop and implement good competition laws throughout member states.