Everything You Need To Know About Antitrust Laws
Whenever you buy anything or even when you’re getting your car fixed, you’d see many products or businesses that are ideal for you.
There might be some brands that customers like more, but ultimately, there are others in the wings that may provide an alternate option of what you might want.
But there will still be corporations that would like to get a leg up on their competitors, and they are often ones who have been trading for a long period.
To make sure no one gets the upper hand in their chosen niche, nor establish a monopoly on any business, is one reason antitrust laws are in place.
What Is An Antitrust Law?
It is a law that regulates or controls any competitors by limiting the strength or any corporation’s ability to regulate the price, by controlling the supply and/or demand of a particular item of any firm.
It can also be known as one of a broad group of federal laws that are in place to make sure that even small businesses engage in healthy competition economically.
Some people say the antitrust law is important for an open marketplace, as consumers are sure to get lower product prices and higher-quality items and services.
There are individuals, though, that believe it is best for corporations to engage with others without thinking of the guidelines so that customers can get better prices.
But as antitrust laws are in place, current companies engage in healthy competition with other businesses of the same niche, taking care of their behavior and following what the regulations are.
IMPORTANT: The “trust” in “antitrust” points to a certain number of businesses that form a monopoly so that they can fix prices that were set for particular products.
It is also good to remember that the antitrust law is in place, not because it was meant to punish big or small businesses because of their success commercially. They were made to promote economics in every niche while avoiding abuses that may arise.
Some strategies that an antitrust law often do or avoid:
- making sure any mergers and acquisitions do not focus control on any one company
- stop companies or businesses from forming a monopoly
- separating firms that joined forces to become monopolies
- prevent different companies from pooling their resources or forming a cartel to narrow down the potential rivals through price-fixing
As it’s difficult to choose what actions will limit other corporations in a specific niche, antitrust laws have their own separate legal specialization.
With the Antitrust Bureau’s help, the Attorney General of the State of New York enforces both State and Federal antitrust laws.
The Main Statutes
Interstate Commerce Act in 1887
Beneficial in establishing antitrust regulations, it was less influential compared to the Sherman Act, Clayton Act, and Federal Trade Commission Act.
Congress passed the Interstate Commerce Act in 1887, and it was made to deregulate the railroads, that the railroads must charge a fair fee for any travelers, and that they must post those fees publicly, along with other requirements.
Sherman Act of 1890
Approved on July 2, 1890, the Sherman Act was the first Federal act that outlawed monopolistic trade practices. It was also the first measure passed by Congress to prohibit trusts.
The Sherman Antitrust Act was also a comprehensive charter of economic liberty whose goal was to preserve unfettered competition as the rule of trade.
If a firm incurs any violations against the Sherman Antitrust Act, it will face the consequences, such as $100 million in fines for companies and $1 million for individuals, with prison time up to 10 years.
Clayton Act of 1914
This was passed in 1914, and it is the second of the major federal antitrust laws that continue to control U.S. business practices at present.
Its purpose was to strengthen earlier antitrust legislation. The Clayton Act prohibits an illegal merger, predatory and discriminatory pricing, and other forms of unethical business behavior.
Federal Trade Commission Act of 1914
Created simultaneously as the Clayton Act, the purpose of the Federal Trade Commission (FTC) was to avoid unfair competition from taking place in commerce.
Through the years, U.S. Congress passed additional laws to give the FTC more authority to manage anti-competitive practices.
The act also gives the FTC the needed power to make sure that people follow the Sherman and Clayton Antitrust provisions and act as a consumer protection agency that has powers to stop practices not allowed in antitrust laws.
What Is the U.S. Department of Justice (DOJ) Antitrust Division?
The FTC and the DOJ see to it that the federal antitrust laws are followed to the letter. There are some instances that their authorities overlap, but the two agencies actually complement each other.
They have developed their expertise in specific industries and markets.
There are times that before one of them opens an investigation in a federal court, they consult with one another to make sure they are not repeating what the other has done.
A Sample of an Antitrust Law Violation
In the early months of 2014, Google sent the European Commission a proposal for an antitrust settlement.
They suggested they would display results from at least three competitors every time the search engine showed specialized searches linked to products, restaurants, or travel.
Competitors would then give the search giant a payment each time a person clicked on a particular type of result shown next to Google’s results. Google would then pay a third-party contractor to manage the process.
The proposal also stated that content providers like Yelp can opt-out of Google’s specialized search services without paying any penalties.
Google also suggested taking out the conditions, which will make it difficult for advertisers to move their campaigns to competitor’s sites, but sites using Google’s search tool could show ads from other services. The suggestion was not accepted in the end.
October 20 of last year, the Department of Justice, with eleven states’ Attorney Generals, filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to prevent Google from unfairly maintaining monopolies through anti-competitive and exclusionary practices in the search and search advertising markets while also resolving competitive harms.
According to Attorney General William Barr, many Americans depend on the internet and the various online platforms that they can access with the help of the internet.
That the antitrust case filed against Google, a gatekeeper of the internet, for violating an antitrust law is a big case for both the Justice Department and for the American people.
What Is an Antitrust Lawsuit?
It is a type of class action lawsuit applicable for any complaint of anti-competitive practices that leads to unequal competition, price-fixing, or other fraud forms.
To consumers, what is an antitrust lawsuit? It is to stop unethical business practices that unfairly deprive consumers of the benefits of firms competing, which may cause higher prices for products and services of low quality.
Antitrust lawsuits are in place to make sure that there is an open and healthy competitive market.
If any business is trying to stop trade, antitrust lawsuits are in place to control such practices, and it also compensates anyone who is harmed by any incidents.
Antitrust lawsuits can be filed individually, but a complaint often turns into class action cases as there are many affected people.
Who Can Bring an Antitrust Lawsuit To a Court of Law?
Two entities can file an antitrust lawsuit:
Companies or competitors of a company may bring an antitrust lawsuit claiming that a particular company engaged in anti-competitive strategies.
Let’s say a company may participate in practices that will create monopolies in a specific industry; individuals or a group of consumers can bring an antitrust case as they were the ones who were forced to pay too much for a product or service because of anti-competitive practices of a seller.
Types of Antitrust Lawsuits
They form when one or more companies have control over a bigger piece in an economic sector. It can also refer to the dominance of an industry or sector by one firm while muscling out the competition.
Regulators also need to ensure that monopolies do not result from a naturally competitive environment and gain market share simply through business acumen and innovation.
It occurs when competitors agree on a specific price range, or they will raise the price of the goods or services that they offer.
The price must be determined naturally by market forces rather than a company setting it intentionally.
It is where competitors agree in advance with the others who will give the winning bid. There are also different types of bid-rigging:
When a competitor stops or withdraws their bid so that a designated winner’s bid wins, that is called Bid Suppression.
Complementary Bidding or Cover or Courtesy Bidding occurs when competitors agree to submit abnormally high bids for the buyer or special provisions are included in the bid that nullifies other bids.
When competitors take turns to be the lowest bidder on different contract specifications, like contract sizes and volumes, then it is called Bid Rotations.
This happens when a buyer gets their supplies from only one supplier.
Tying or bundling arrangement
It happens when a company conditions the sale of a product or a service on the purchase of a second item.
Agreement to divide markets
Companies agree to only sell to a particular group of customers or in specific parts of a country.
This happens when charging different prices does not happen automatically or per se violation of antitrust laws unless it affects competition.
Let’s say a seller gives rebates or promotions only to particular customers or offers lower prices in some locations; it affects competition.
Editor’s Note on Antitrust Laws & Antitrust Lawsuits:
This class action and lawsuit guide is created to inform you about the American Antitrust Laws.
If you have questions regarding this piece or feel like you are eligible to file a lawsuit that you need help with, please tell us about it and send us a message! We would be glad to help!