Antitrust law (or competition law) is a law that prevents businesses from using their power in a market to act in ways that might harm consumers to limit their choices, raise prices, and create barriers to entry.
The United States Department of Justice enforces antitrust laws. The law exists to promote policies of fair competition in the domestic marketplace. The laws regulate mergers and business practices.
What Is Antitrust Law?
Antitrust laws are a set of rules in the United States created to prohibit monopolies and cartels. The essence of antitrust law is to provide significant competitive benefits for consumers.
The main goal of antitrust law is to establish free and open competition between companies. Many benefits go with this, such as lower prices, increased innovation, greater efficiency, and more choices for consumers.
The three main types of antitrust law are price-fixing, monopolies, and cartels.
Price fixing is when companies agree to charge the same price for the same product or service. Monopolies are companies that have a market share above 90%. And cartels are groups of companies that agree to set a fixed price for their products or services.
What Are the Main Points in the Antitrust Laws?
Antitrust law protects consumers from monopolies and oligopolies.
The main points in the antitrust laws are:
– Merger control: The state can intervene in certain mergers or complete mergers to preserve competition.
– Cartel control: The state can intervene where a company is engaged in price-fixing activities or has attempted to limit production and distribution.
– Exclusion control: State can prohibit anticompetitive practices that exclude competitors from particular markets.
What Are the 3 Main Antitrust Laws?
The three core antitrust laws are the Sherman Act, the Clayton Act, and the Federal Trade Commission Act.
The Congress of the United States passed the Sherman Antitrust Act in 1890. The law prohibits agreements to restrain trade and monopolies, while the Clayton Act prohibits certain pricing restraints and anticompetitive mergers. The Federal Trade Commission Act protects consumers from unfair or deceptive practices in commerce.
What Are Some Examples of Violations of Antitrust Laws?
Violations of these antitrust laws can be subtle and often result in consumers being overcharged or undercharged for goods and services. Here are some examples of violations.
These include price fixing, bid rigging, territorial restrictions, market sharing plans, and predatory pricing.
Here are some examples of violations of antitrust laws:
- Exclusive dealing agreements;
- Market allocation;
- Product exclusion agreements;
- Merger or acquisition agreement negotiations and implementation;
- Bid-rigging and collusion in auctions and bidding processes;
- Predatory pricing (predatory pricing is a pricing strategy where a company sells below cost to gain market share, creating excess demand, which forces competitors to follow suit or enter already saturated markets, resulting in loss of profit for all firms involved);
- Illegal mergers or acquisitions (when two companies buy each other without them selling the company) are a huge problem.
What Is the Purpose of Antitrust Laws?
Antitrust law is in place to protect consumers from the monopolies and unfair business practices that companies have the power to undertake. It is supposed to protect consumers from unethical business practices committed by large corporations.
The United States Department of Justice provides ways for smaller businesses to enter into markets that larger companies hold monopolies on, but only if they can prove that their product is better than their competitors’ products.