One of the great things about living in a free and capitalist society is the ability to offer an open marketplace for consumers. Competition in an open marketplace drives down prices while paving the way for high-quality products and more choices. To keep things fair in a capitalist society, antitrust laws have been put in place to protect consumers, prevent certain types of mergers, and enforce ethical business practices. The following is a basic guide to antitrust legislation and litigation:
Antitrust Law Basics
The first antitrust law was passed in 1890. Known as the Sherman Act, the law was aimed at providing free and unfettered competition within the marketplace. Additional antitrust laws known as the Federal Trade Commission Act and the Clayton Act were passed by Congress in 1914.
In short, antitrust laws identify any unlawful mergers and unscrupulous business practices in a broad sense while leaving it up to the courts to determine the legality of each case. These laws have been applied to various and changing markets over the last several decades but have always aimed at protecting the competitive spirit.
The Must-Know Essentials
The Sherman Act
According to the Federal Trade Commission, the Sherman Act outlaws “every contract, combination, or conspiracy in restraint of trade.” This includes monopolization or conspiracy to commit monopolization. It’s important to note that this act only prevents acts that are deemed unreasonable.
The Federal Trade Commission Act
Passed in 1914, this act bans any type of unfair method of competition or deceptive practices. It has been previously decided in court that any violation of the Sherman Act was also a violation of the Federal Trade Commission Act.
The Clayton Act
This act deals strictly with mergers and with cases of individuals being decision-makers for two directly competitive companies. The act specifically prohibits any acquisition or merger that would lessen competition within the marketplace. The act also requires companies to notify the FTC of large scale mergers that are planned in the future.
Price Fixing is Illegal
This occurs when several businesses may come together to set the price of a service or product intentionally without letting the free market making the determination itself.
This type of litigation can take many forms. The FTC and Department of Justice both have investigative powers when it comes to pursuing antitrust cases. The outcome of such litigation can include either hefty fines or jail time if the offense was substantial.
Even though antitrust can involve one defendant and one plaintiff, in most cases, a class or group of individuals file a complaint together. Those that are grouped as plaintiffs usually live in various jurisdictions across the country.
Major Antitrust Litigation Cases
Many of the world’s largest corporations have been a party to antitrust proceedings.
For example, in 2013, Apple was found guilty by the Justice Department of e-book price fixing, and in the end, had to pay $450 million in fines.
Another famous antitrust litigation case occurred between Microsoft and the United States Government in 2001. Microsoft was accused of holding a monopoly position within the personal computer marketplace. This was determined by investigating the technical restrictions put on manufacturers by Microsoft, and the difficulty users had with uninstalling Internet Explorer in exchange for Netscape Navigator.
The case was settled when the Department of Justice accepted a plan by Microsoft to share its interfaces with other companies and allow independent parties unfettered access to any records or source code for five years.
In recent cases, intellectual property has become a focus of antitrust cases, especially when it comes to technology companies that operate on an international level.