What is Antitrust
Antitrust laws are the laws that apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution and marketing. They prohibit a variety of practices that restrain trade. Examples of illegal practices are price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.
BREAKING DOWN Antitrust
Antitrust laws are necessary in an open marketplace. Competition among sellers gives consumers lower prices, higher-quality products and services, more choice, and greater innovation.
History of Antitrust Laws
Congress passed the Sherman Act in 1890, outlawing contracts and conspiracies restraining trade and/or monopolizing industries. For example, competing individuals or businesses may not fix prices, divide markets or rig bids. In 1914, Congress passed the Federal Trade Commission Act, banning unfair competition methods and deceptive acts or practices. The Clayton Act was passed the same year, addressing specific practices the Sherman Act does not prohibit. For example, the Clayton Act prohibits having the same person make business decisions for competing corporations. The three antitrust laws describe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on facts of each case.
Enforcing Antitrust Laws
The FTC focuses on segments of the economy where consumer spending is high, such as healthcare, pharmaceuticals, professional services, food, energy, computer technology and Internet services. Premerger notification filings, consumer or business correspondence, Congressional inquiries or articles on consumer or economic subjects could trigger an FTC investigation. If the FTC believes a law is or may be violated, the agency attempts stopping the disputed practices or resolving the anti-competitive aspects of the proposed merger. If the attempt fails, the FTC issues an administrative complaint and/or injunctive relief in federal court.
The FTC may refer evidence of criminal antitrust violations to the Department of Justice (DOJ) for criminal sanctions. The DOJ has jurisdiction in telecommunications, banks, railroads and airlines. The FTC and DOJ also work with regulatory agencies in ensuring certain mergers fit the public interest.
Example of Antitrust Law Violation
In early 2015, Google reached an antitrust settlement with the European Commission. The main provisions of the agreement ensure Google displays results from at least three competitors each time it shows results for specialized searches related to products, restaurants and travel. Competitors pay Google each time someone clicks on specific types of results shown next to Google’s results. The search engine pays for an independent monitor overseeing the process.
Content providers such as Yelp may decide to not have their content included in Google’s specialized search services. The providers are not penalized in Google’s normal search rankings as a result of their decision. The search giant removed conditions making it difficult for advertisers to move their campaigns to competing sites; sites using Google’s search tool may now show ads from other services. The agreement lasts for five years and affects any search and promoted-product services Google introduces in Europe.