Antitrust Laws
Antitrust laws are designed to protect economic freedom and opportunity by encouraging competition. The laws forbid practices that restrain trade, such as predatory actions calculated to accomplish and preserve monopolistic dominance, bid rigging and price-fixing conspiracies, and business mergers likely to decrease the competitive vitality of markets. The laws apply to almost all industry sectors at each level of business, such as distribution, manufacturing, marketing, and transportation.
Three major antitrust laws exist at the federal level. The Sherman Antitrust Act, enacted by Congress in 1890, is the dominant basis of antitrust law in the United States. The Sherman Act prohibits and criminalizes monopolization of interstate commerce that is achieved by holding back competition through anticompetitive conduct. The Act also forbids and carries criminal penalties for combinations, conspiracies and contracts that unreasonably restrain interstate and foreign trade, such as bid-rigging, pricing-fixing, and customer allocation agreements. As a federal statute, the Sherman Act is limited by constitutional and federal government checks. That said, the Commerce Clause of the Constitution enables a broad application and interpretation of the Sherman Act, applying it to all businesses and transactions concerning interstate commerce. In the case of local activities, the Sherman Act pertains to businesses affecting interstate commerce. In addition, most states have similar laws forbidding anti-competitive practices at the local level.
The Clayton Antitrust Act of 1914 is a civil statute that forbids acquisitions and mergers likely to substantially decrease competition. Pursuant to this Act, businesses above a specific size must notify the Federal Trade Commission and Antitrust Division for the Department of Justice when considering an acquisition or merger. The act also prohibits, under defined circumstances, price discrimination, sales conditioned on a purchaser or lessee not dealing with a competitor, and tying, which requires a purchaser to buy another different product from the seller.
The Federal Trade Commission Act, another civil statute, created the Federal Trade Commission to police unfair methods of competition in interstate commerce articulated in the Federal Trade Commission Act, including false advertisements.
The Antitrust Division of the US Department of Justice enforces federal antitrust laws through both criminal prosecution and civil proceedings. The Department of Justice also employs other laws to combat illegal, unfair business practices, such as perjury, obstruction of justice, conspiracy and mail fraud.
