Introduction to Antitrust laws
Antitrust Laws , legislation intended to regulate or prohibit business activities considered harmful to the public interest in two broad areas—the creation of monopolies and the restriction of competition through unfair business practices. The term "antitrust" was originally created to describe laws and government actions that attempted to regulate or punish the monopolistic tendencies of large corporations. The term has a much broader meaning today.
Government intervention in the economy to preserve competition has been national policy in the United States since the late 19th century. Enforcement of antitrust laws, however, has varied over the years, depending upon U.S. Supreme Court decisions, the policies of particular Presidential administrations, and public opinion. There are both federal and state antitrust laws. State laws, however, are seldom invoked today.
Federal Laws
The three laws described in the following paragraphs are the basic antitrust laws of the United States. These laws, especially the Clayton Act, have been amended many times. Sections of laws dealing with foreign trade have also dealt with problems of monopoly and unfair practices.
The Sherman Antitrust Act(1890) declares contracts and business alliances, or combinations, that restrain interstate trade and commerce to be illegal. The attempt to monopolize or conspire to monopolize any part of interstate or international trade is made punishable as a misdemeanor. (Exporters were exempted from antitrust laws in 1918 in order to help them compete on more equal terms with foreign companies. In 1974 some violations of antitrust laws, such as price fixing [an agreement among competing producers to avoid competitive pricing by charging identical prices], were changed from misdemeanors to felonies.)
This general anti-monopoly law is enforced by the Antitrust Division of the U.S. Department of Justice. One of this agency's tasks is to give opinions on the acceptability under the Sherman Act of mergers between firms, prior to their taking place.
The Clayton Antitrust Act(1914) declares certain acts unlawful "where the effect is substantially to lessen competition, or where they tend to foster a monopoly." Such acts include price discrimination (the charging of different prices to different buyers for the same products purchased in the same quantities); leases or sales in which the lessee or buyer must agree not to use the products of a competitor of the lessor or seller; and, in certain cases, the acquisition of stock of another company.
Most of this act's provisions are enforced by the Federal Trade Commission. Those applicable to communications are enforced by the Federal Communications Commission, and those applicable to banking, by the Federal Reserve Board.
The Federal Trade Commission Act(1914) established the Federal Trade Commission to enforce the unfair practices sections of the Clayton Act.
Foreign and International Laws
The United States was the first nation to undertake antitrust legislation and enforcement. Only since World War II have other nations done the same, and they are few in number—only about 15.
Although there is no established international law on antitrust matters, the growth of regional economic unions and trade associations since the end of World War II has led to some cooperation between nations in regulating monopoly and restraints on trade. Within the European Union for example, the power of the Commission (the executive group) to approve or disallow certain trade and production agreements between member nations has the effect of regulating or preventing monopoly and unfair business practices.
Antitrust Laws In the United States
The first laws countering what were considered to be unfair business practices were passed by several Midwestern states during the 1870's to regulate railways. It was many years before federal legislation accomplished the goal of railway regulation.
During the business expansion that followed the Civil War, many manufacturing firms employed practices objectionable to the public, principally the creation of business trusts that monopolized the production and distribution of commodities such as oil and sugar. By 1890 the public outcry against monopolistic activities was such that Congress passed the Sherman Antitrust Act. During the next few years, however, interpretations of this law by the Supreme Court severely limited its effectiveness in dealing with large business combinations and with practices that were not specifically mentioned in the act. The Clayton Antitrust Act and the Federal Trade Commission Act were both passed in 1914. These laws specified unfair business practices and the procedures for preventing them or prosecuting violators, thus supplementing the broad and unspecific language of the Sherman Antitrust Act.
During World War I, the antitrust laws were suspended to allow companies to cooperate in order to aid the war effort. Following the war, a booming economy made public opinion favorable to big business, and there was little enforcement of antitrust legislation. Then, during the Great Depression, passage of the Robinson-Patman Act (1936), which forbade certain pricing practices that applied particularly to chain stores, ushered in a new period of antitrust activity. After another suspension of antitrust laws, during World War II, the government resumed prosecuting antitrust cases. The great economic growth of the late 1950's and the 1960's led to the government paying more attention to preventive antitrust procedures, particularly to reviewing proposed mergers.
During the 1980's, the antitrust laws were not rigorously enforced. Corporate mergers and acquisitions greatly increased. In the 1990's there was a resurgence in federal antitrust prosecutions.