Loading the player...

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.

RELATED TERMS
  1. Clayton Antitrust Act

    The Clayton Antitrust Act is a U.S. amendment designed to promote ...
  2. Hart-Scott-Rodino Antitrust Improvements ...

    The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires ...
  3. The Celler-Kefauver Act

    The Celler-Kefauver Act was an anti-merger act passed by the ...
  4. Canadian Competition Act

    The Competition Act is the Canadian federal law that governs ...
  5. Federal Trade Commission - FTC

    The FTC is an independent agency that aims to protect consumers ...
  6. Robinson-Patman Act

    The Robinson-Patman Act is a federal law passed in 1936 to outlaw ...
Related Articles
  1. Small Business

    What are antitrust laws?

    Learn about antitrust laws or "competition laws." These statutes protect consumers from predatory business practices by ensuring fair competition exists.
  2. Personal Finance

    Google Faces EU Antitrust Charges (GOOGL)

    Google, which could be fined up to $7.4 billion, has been accused of anti-competitive practices.
  3. Small Business

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Insights

    A Short History of the US Federal Trade Commission

    Since the early 1900s, the Federal Trade Commission has preventing anticompetitive, deceptive, and unfair business practices.
  5. Investing

    Google Fined By India's Antitrust Body for 'Search Bias'

    India’s watchdog said Google steered certain search queries to its own specialist comparison pages in order to receive commission payments.
  6. Investing

    Is Google a Good Investment?

    What are some things investors should know before deciding whether to go for Google? An analysis of the company's fundamentals and outlook.
  7. Insights

    The European Effect on Google's Bottom Line

    The EU is turning up the heat on Google. What effect will it have on the company's bottom line?
  8. Small Business

    How Google's Search Engine Makes Money

    A deep analysis of how Google's search engine and related services have made it one of the biggest companies on the planet.
  9. Investing

    The Story Behind Google's Success

    An ongoing commitment to innovation and rapid iteration drives Google's ongoing success.
  10. Investing

    A Trump Breakup of Amazon Is 'Pure Fantasy'

    Big tech companies have come under fire lately, but the worries they'll be broken up are overdone.
RELATED FAQS
  1. What are the most famous monopolies?

    Learn about famous monopolies from Carnegie Steel to Comcast that challenge free-market competition and encourage government ... Read Answer >>
  2. How do Internet companies profit if they give away their services for free?

    Learn how companies in the Internet sector make a profit when service, content and user applications are offered at no cost ... Read Answer >>
  3. What are the benefits of investing in a money market fund?

    Understand the calculation of the Herfindahl-Hirschman Index and how it is used by the Federal Trade Commission to evaluate ... Read Answer >>
  4. What major laws regulating financial institutions were created in response to the ...

    Read about the major federal responses to the financial crisis of 2008, such as the Dodd-Frank Wall Street Reform Act and ... Read Answer >>
  5. What are Common Examples of Monopolistic Markets?

    Providers of water, natural gas, telecommunications, and electricity have all been historically monopolistic markets. Read Answer >>
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center