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In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote
competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, ind ...
and prevent unjustified
monopolies A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
. The three main U.S. antitrust statutes are the Sherman Act of 1890, the
Clayton Act of 1914 The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipi ...
, and the
Federal Trade Commission Act of 1914 The Federal Trade Commission Act of 1914 was a United States federal law which established the Federal Trade Commission. The Act was signed into law by US President Woodrow Wilson in 1914 and outlaws unfair methods of competition and unfair acts ...
. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits
price fixing Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
and the operation of
cartel A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals. Mos ...
s, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the
mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...
of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization. Federal antitrust laws provide for both civil and criminal enforcement. Civil antitrust enforcement occurs through lawsuits filed by the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
, the
United States Department of Justice Antitrust Division The United States Department of Justice Antitrust Division is a division of the U.S. Department of Justice that enforces U.S. antitrust law. It has exclusive jurisdiction over U.S. federal criminal antitrust prosecutions. It also has jurisdic ...
, and private parties who have been harmed by an antitrust violation. Criminal antitrust enforcement is done only by the Justice Department's Antitrust Division. Additionally, U.S. state governments may also enforce their own antitrust laws, which mostly mirror federal antitrust laws, regarding commerce occurring solely within their own state's borders. The scope of antitrust laws, and the degree to which they should interfere in an enterprise's freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. Some economists argue that antitrust laws actually impede competition,''The Business Community's Suicidal Impulse'' by Milton Friedman
A criticism of antitrust laws and cases by the Nobel economist
and may discourage businesses from pursuing activities that would be beneficial to society. One view suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controlling
economic power Economic power refers to the ability of countries, businesses or individuals to improve living standards. It increases their ability to make decisions on their own that benefit them. Scholars of international relations also refer to the economic p ...
in the public interest. A survey of 568 member economists of the
American Economic Association The American Economic Association (AEA) is a learned society in the field of economics. It publishes several peer-reviewed journals acknowledged in business and academia. There are some 23,000 members. History and Constitution The AEA was esta ...
(AEA) in 2011 found a near-universal consensus, in that 87 percent of respondents broadly agreed with the statement "Antitrust laws should be enforced vigorously."


Nomenclature

In the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
and
Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by to ...
, and to a lesser extent in the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
, the modern law governing
monopolies A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
and
economic competition In economics, competition is a scenario where different economic firmsThis article follows the general economic convention of referring to all actors as firms; examples in include individuals and brands or divisions within the same (legal) fir ...
is known by its original name, "antitrust law". The term "antitrust" came from late 19th-century American industrialists' practice of using trusts—legal arrangements where someone is given ownership of property to hold solely for another's benefit—to consolidate separate companies into large conglomerates. These " corporate trusts" died out in the early 20th century as U.S. states passed laws making it easier to create new
corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
s. Most other countries now call antitrust law "competition law" or "anti-monopoly law".


History


Creation and early years (1890–1910s)

American antitrust law was formally created in 1890 with the U.S. Congress's passage of the
Sherman Antitrust Act The Sherman Antitrust Act of 1890 (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author. ...
. Using broad language "unequaled in its generality", the Sherman Act outlawed "monopoliz tion and "every contract, combination ... or conspiracy in restraint of trade". American courts quickly began struggling with the Sherman Act's broad and vague language, recognizing that interpreting it literally might make even simple business associations like
partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments ...
s illegal. Federal judges began trying to develop legal principles for distinguishing between "naked" trade restraints between rivals that suppressed competition and other restraints that were only "ancillary" to other cooperation agreements that promoted competition. The Sherman Act gave the U.S. Department of Justice the authority to enforce it, but the
U.S. presidents The president of the United States is the head of state and head of government of the United States, indirectly elected to a four-year term via the Electoral College. The officeholder leads the executive branch of the federal government and ...
and U.S. Attorneys General in power during the 1890s and early 1900s showed relatively little interest in doing so. With little interest in enforcing the Sherman Act and courts interpreting it relatively narrowly, a wave of large industrial mergers swept the United States in the late 1890s and early 1900s. The rise of the
Progressive Era The Progressive Era (late 1890s – late 1910s) was a period of widespread social activism and political reform across the United States focused on defeating corruption, monopoly, waste and inefficiency. The main themes ended during Am ...
prompted public officials to increase enforcement of antitrust laws. The Justice Department sued 45 companies under the Sherman Act during the presidency of
Theodore Roosevelt Theodore Roosevelt Jr. ( ; October 27, 1858 – January 6, 1919), often referred to as Teddy or by his initials, T. R., was an American politician, statesman, soldier, conservationist, naturalist, historian, and writer who served as the 26t ...
(1901–09) and 90 companies during the presidency of
William Howard Taft William Howard Taft (September 15, 1857March 8, 1930) was the 27th president of the United States (1909–1913) and the tenth chief justice of the United States (1921–1930), the only person to have held both offices. Taft was elected pr ...
(1909–13).


Rise of "Rule of Reason" (1910s–1930s)

In 1911, the U.S. Supreme Court reframed U.S. antitrust law as a "rule of reason" in its landmark decision ''
Standard Oil Co. of New Jersey v. United States ''Standard Oil Co. of New Jersey v. United States''(1910), was a case in which the Supreme Court of the United States found Standard Oil Co. of New Jersey guilty of monopolizing the petroleum industry through a series of abusive and anticompe ...
''. At trial, the Justice Department had successfully argued that American petroleum conglomerate
Standard Oil Standard Oil Company, Inc., was an American oil production, transportation, refining, and marketing company that operated from 1870 to 1911. At its height, Standard Oil was the largest petroleum company in the world, and its success made its co- ...
had violated the Sherman Act by using economic threats against competitors and secret rebate deals with railroads to build a monopoly in the
oil refining An oil refinery or petroleum refinery is an industrial process plant where petroleum (crude oil) is transformed and refined into useful products such as gasoline (petrol), diesel fuel, asphalt base, fuel oils, heating oil, kerosene, liquefi ...
industry. On appeal, the Supreme Court affirmed the trial court's verdict and ruled that Standard Oil's high
market share Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...
was proof of its monopoly power, ordering it to break itself up into 34 separate companies. But the Court also held that the Sherman Act's language outlawing "every" trade restraint actually only banned "unreasonable" restraints on trade. The Court ruled that the Sherman Act's provisions were to be interpreted as a "rule of reason" under which the legality of most business practices would be evaluated on a case-by-case basis according to their competitive impacts, with only the most egregious conduct being illegal ''per se''. At the time, many observers believed that the Supreme Court's decision in ''Standard Oil'' represented an ongoing effort by conservative federal judges to "soften" the still-new antitrust laws and narrow their scope. Congress reacted in 1914 by passing two new laws: the
Clayton Antitrust Act The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipie ...
, which outlawed using
mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...
to achieve monopolies and created an antitrust law exemption for
collective bargaining Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The ...
; and the
Federal Trade Commission Act The Federal Trade Commission Act of 1914 was a United States federal law which established the Federal Trade Commission. The Act was signed into law by US President Woodrow Wilson in 1914 and outlaws unfair methods of competition and unfair acts ...
, which created the U.S.
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
(FTC) as an independent agency that has shared jurisdiction with the Justice Department over federal civil antitrust enforcement and has the power to prohibit "unfair methods of competition". Despite the passage of the Clayton Act and the FTC Act, U.S. antitrust enforcement was not aggressive between the mid-1910s and the 1930s. Based on their experience with the
War Industries Board The War Industries Board (WIB) was a United States government agency established on July 28, 1917, during World War I, to coordinate the purchase of war supplies between the War Department (Department of the Army) and the Navy Department. Becaus ...
during
World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fig ...
, many American economists, government officials, and business leaders adopted the associationalist view that close collaboration among business leaders and government officials could efficiently guide the economy. Some Americans abandoned faith in
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
competition entirely after the
Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange coll ...
. Advocates of these views championed the passage of the
National Industrial Recovery Act of 1933 The National Industrial Recovery Act of 1933 (NIRA) was a US labor law and consumer law passed by the 73rd US Congress to authorize the president to regulate industry for fair wages and prices that would stimulate economic recovery. It also ...
and the centralized
economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...
experiments during the early stages of the
New Deal The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Con ...
. The Supreme Court's decisions in antitrust cases during this period reflected these views, and the Court had a "largely tolerant" attitude toward collusion and cooperation between competitors. One prominent example was the 1918 decision '' Chicago Board of Trade v. United States'', in which the Court ruled that a
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...
rule banning
commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
brokers from buying or selling grain forwards after the close of business at 2:00pm each day at any price other than that day's closing price did not violate the Sherman Act. The Court said that although the rule was a restraint on trade, a comprehensive examination of the rule's purposes and effects showed that it "merely regulates, and perhaps thereby promotes competition."


Structuralist approach (1930s–1970s)

During the mid-1930s, confidence in the
statist In political science, statism is the doctrine that the political authority of the state is legitimate to some degree. This may include economic and social policy, especially in regard to taxation and the means of production. While in use since ...
centralized economic planning models that had been popular in the early years of the New Deal era began to wane. At the urging of economists such as
Frank Knight Frank Hyneman Knight (November 7, 1885 – April 15, 1972) was an American economist who spent most of his career at the University of Chicago, where he became one of the founders of the Chicago School. Nobel laureates Milton Friedman, George ...
and Henry C. Simons, President Franklin D. Roosevelt's economic advisors began persuading him that free market competition was the key to recovery from the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
. Simons, in particular, argued for robust antitrust enforcement to “de-concentrate” American industries and promote competition. In response, Roosevelt appointed "trustbusting" lawyers like
Thurman Arnold Thurman Wesley Arnold (June 2, 1891 – November 7, 1969) was an American lawyer best known for his trust-busting campaign as Assistant Attorney General in charge of the Antitrust Division in President Franklin D. Roosevelt's Department of Justic ...
to serve in the Justice Department's
Antitrust Division The United States Department of Justice Antitrust Division is a division of the U.S. Department of Justice that enforces U.S. antitrust law. It has exclusive jurisdiction over U.S. federal criminal antitrust prosecutions. It also has jurisdict ...
, which had been established in 1919. This intellectual shift influenced American courts to abandon their acceptance of sector-wide cooperation among companies. Instead, American antitrust jurisprudence began following strict "structuralist" rules that focused on markets’ structures and their levels of
concentration In chemistry, concentration is the abundance of a constituent divided by the total volume of a mixture. Several types of mathematical description can be distinguished: '' mass concentration'', '' molar concentration'', ''number concentration'', ...
. Judges usually gave little credence to defendant companies' attempts to justify their conduct using economic efficiencies, even when they were supported by economic data and analysis. In its 1940 decision ''
United States v. Socony-Vacuum Oil Co. ''United States v. Socony-Vacuum Oil Co.'', 310 U.S. 150 (1940), is a 1940 United States Supreme Court decision widely cited for the proposition that price-fixing is illegal ''per se''. The ''Socony'' case was, at least until recently, the most wid ...
'', the Supreme Court refused to apply the rule of reason to an agreement between oil refiners to buy up surplus gasoline from independent refining companies. It ruled that
price-fixing Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
agreements between competing companies were illegal ''per se'' under section 1 of the Sherman Act and would be treated as crimes even if the companies claimed to be merely recreating past government planning schemes. The Court began applying ''per se'' illegality to other business practices such as tying,
group boycott In competition law, a group boycott is a type of secondary boycott in which two or more competitors in a relevant market refuse to conduct business with a firm unless the firm agrees to cease doing business with an actual or potential competitor of ...
s, market allocation agreements, exclusive territory agreements for sales, and vertical restraints limiting retailers to geographic areas. Courts also became more willing to find that dominant companies' business practices constituted illegal monopolization under section 2 of the Sherman Act. American courts were even stricter when hearing merger challenges under the Clayton Act during this era, due in part to Congress's passage of the Celler-Kefauver Act of 1950, which banned consolidation of companies' stock or assets even in situations that did not produce market dominance. For example, in its 1962 decision ''Brown Shoe Co. v. United States'', the Supreme Court ruled that a proposed merger was illegal even though the resulting company would have controlled only five percent of the relevant market. In a now-famous line from his dissent in the 1966 decision ''United States v. Von's Grocery Co.'', Supreme Court justice
Potter Stewart Potter Stewart (January 23, 1915 – December 7, 1985) was an American lawyer and judge who served as an Associate Justice of the United States Supreme Court from 1958 to 1981. During his tenure, he made major contributions to, among other areas ...
remarked: "The sole consistency that I can find n U.S. merger lawis that in litigation under he Clayton Act the Government always wins."


Rise of the Chicago School (1970s–present)

The "structuralist" interpretation of U.S. antitrust law began losing favor in the early 1970s in the face of harsh criticism by economists and legal scholars from the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
. Scholars from the
Chicago school of economics The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles. Milton Friedman and George Stig ...
had long advocated for reducing
price regulation Regulatory economics is the economics of regulation. It is the application of law by government or regulatory agencies for various purposes, including remedying market failure, protecting the environment and economic management. Regulation Re ...
and limiting
barriers to entry In theories of competition in economics, a barrier to entry, or an economic barrier to entry, is a fixed cost that must be incurred by a new entrant, regardless of production or sales activities, into a market that incumbents do not have or ha ...
. Newer Chicago economists like
Aaron Director Aaron Director (; September 21, 1901 – September 11, 2004) was a Russian-born American economist and academic who played a central role in the development of the field Law and Economics and the Chicago school of economics. Director was a profe ...
had begun arguing that there were economic efficiency explanations for some practices that had been condemned under the structuralist interpretation of the Sherman and Clayton Acts. Much of their economic analysis involved
game theory Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...
, which showed that some conduct that had been thought uniformly anticompetitive, such as preemptive capacity expansion, could be either pro- or anticompetitive depending on the circumstances. The writings of
Yale Law School Yale Law School (Yale Law or YLS) is the law school of Yale University, a private research university in New Haven, Connecticut. It was established in 1824 and has been ranked as the best law school in the United States by '' U.S. News & World ...
professor
Robert Bork Robert Heron Bork (March 1, 1927 – December 19, 2012) was an American jurist who served as the solicitor general of the United States from 1973 to 1977. A professor at Yale Law School by occupation, he later served as a judge on the U.S. Cour ...
and
University of Chicago Law School The University of Chicago Law School is the law school of the University of Chicago, a private research university in Chicago, Illinois. It is consistently ranked among the best and most prestigious law schools in the world, and has many dis ...
professors
Richard Posner Richard Allen Posner (; born January 11, 1939) is an American jurist and legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chic ...
and Frank Easterbrook, who all later became prominent federal appellate judges, translated Chicago economists' analytical advances into legal principles that judges could readily apply. Pointing out that economic analysis showed that some previously condemned practices were actually procompetitive and had economic benefits that outweighed their dangers, they argued that many antitrust bright-line ''per se'' rules of illegality were unwarranted and should be replaced by the rule of reason. Judges increasingly accepted their ideas from the mid-1970s on, motivated in part by the United States' declining economic dominance amidst the
1973–1975 recession The 1973–1975 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the overall post–World War II economic expansion. It differed from many previous recessions by ...
and rising competition from East Asian and European countries. The "pivotal event" in this shift was the Supreme Court's 1977 decision '' Continental Television, Inc. v. GTE Sylvania, Inc''. In a decision that prominently cited Chicago school of economics scholarship, the ''GTE Sylvania'' Court ruled that non-price vertical restrictions in contracts were no longer ''per se'' illegal and should be analyzed under the rule of reason. Overall, the Supreme Court's antitrust rulings during this era on collusion cases under section 1 of the Sherman Act reflected tension between the older "absolutist" approach and the newer Chicago endorsing the rule of reason and economic analysis. The Justice Department and FTC lost most of the monopolization cases they brought under section 2 of the Sherman Act during this era. One of the government's few anti-monopoly victories was '' United States v. AT&T'', which led to the breakup of Bell Telephone and its monopoly on U.S. telephone service in 1982. The general "trimming back" of antitrust law in the face of economic analysis also resulted in more permissive standards for mergers. In the Supreme Court's 1974 decision ''United States v. General Dynamics Corp.'', the federal government lost a merger challenge at the Supreme Court for the first time in over 25 years. In 1999 a coalition of 19 states and the federal Justice Department sued
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washi ...
. A highly publicized trial in the
U.S. District Court for the District of Columbia The United States District Court for the District of Columbia (in case citations, D.D.C.) is a federal district court in the District of Columbia. It also occasionally handles (jointly with the United States District Court for the District o ...
found that Microsoft had strong-armed many companies in an attempt to prevent competition from the
Netscape Netscape Communications Corporation (originally Mosaic Communications Corporation) was an American independent computer services company with headquarters in Mountain View, California and then Dulles, Virginia. Its Netscape web browser was on ...
browser. In 2000, the trial court ordered Microsoft to split in two, preventing it from future misbehavior. Microsoft appealed to the
U.S. Court of Appeals for the D.C. Circuit The United States Court of Appeals for the District of Columbia Circuit (in case citations, D.C. Cir.) is one of the thirteen United States Courts of Appeals. It has the smallest geographical jurisdiction of any of the U.S. federal appellate cou ...
, which affirmed in part and reversed in part. In addition, it removed the judge from the case for discussing the case with the media while it was still pending. With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged.


Cartels and collusion

Preventing collusion and cartels that act in
restraint of trade Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of ''Mitchel v Reynolds'' (1711) Lord Sm ...
is an essential task of antitrust law. It reflects the view that each business has a duty to act independently on the market, and so earn its profits solely by providing better priced and quality products than its competitors. The Sherman Act §1 prohibits " ery contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." This targets two or more distinct enterprises acting together in a way that harms third parties. It does not capture the decisions of a single enterprise, or a single economic entity, even though the form of an entity may be two or more separate legal persons or companies. In '' Copperweld Corp. v. Independence Tube Corp.'' it was held an agreement between a parent company and a wholly owned subsidiary could not be subject to antitrust law, because the decision took place within a single economic entity. This reflects the view that if the enterprise (as an economic entity) has not acquired a
monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
position, or has significant
market power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
, then no harm is done. The same rationale has been extended to
joint ventures A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to access ...
, where corporate shareholders make a decision through a new company they form. In '' Texaco Inc. v. Dagher'' the Supreme Court held unanimously that a price set by a joint venture between
Texaco Texaco, Inc. ("The Texas Company") is an American oil brand owned and operated by Chevron Corporation. Its flagship product is its fuel "Texaco with Techron". It also owned the Havoline motor oil brand. Texaco was an independent company unt ...
and
Shell Oil Shell plc is a British multinational oil and gas company headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New ...
did not count as making an unlawful agreement. Thus the law draws a "basic distinction between concerted and independent action". Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unambiguously negative effect and "is judged more sternly". Generally the law identifies four main categories of agreement. First, some agreements such as price fixing or sharing markets are automatically unlawful, or illegal ''
per se Per se may refer to: * ''per se'', a Latin phrase meaning "by itself" or "in itself". * Illegal ''per se'', the legal usage in criminal and antitrust law * Negligence ''per se'', legal use in tort law *Per Se (restaurant), a New York City restauran ...
''. Second, because the law does not seek to prohibit every kind of agreement that hinders
freedom of contract Freedom of contract is the process in which individuals and groups form contracts without government restrictions. This is opposed to government regulations such as minimum-wage laws, competition laws, economic sanctions, restrictions on pri ...
, it developed a "
rule of reason The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal ''per se', ''other actions, such as po ...
" where a practice might restrict trade in a way that is seen as positive or beneficial for consumers or society. Third, significant problems of proof and identification of wrongdoing arise where businesses make no overt contact, or simply share information, but appear to act in concert.
Tacit collusion Tacit collusion is a collusion between competitors, which do not explicitly exchange information and achieving an agreement about coordination of conduct. There are two types of tacit collusion - concerted action and conscious parallelism. In a ...
, particularly in concentrated markets with a small number of competitors or
oligopolists An oligopoly (from Greek ὀλίγος, ''oligos'' "few" and πωλεῖν, ''polein'' "to sell") is a market structure in which a market or industry is dominated by a small number of large sellers or producers. Oligopolies often result from ...
, have led to significant controversy over whether or not antitrust authorities should intervene. Fourth, vertical agreements between a business and a supplier or purchaser "up" or "
downstream Downstream may refer to: * Downstream (bioprocess) * Downstream (manufacturing) * Downstream (networking) * Downstream (software development) * Downstream (petroleum industry) * Upstream and downstream (DNA), determining relative positions on DNA ...
" raise concerns about the exercise of
market power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
, however they are generally subject to a more relaxed standard under the "rule of reason".


''Per se'' illegal practices

Some practices are deemed by the courts to be so obviously detrimental that they are categorized as being automatically unlawful, or illegal ''
per se Per se may refer to: * ''per se'', a Latin phrase meaning "by itself" or "in itself". * Illegal ''per se'', the legal usage in criminal and antitrust law * Negligence ''per se'', legal use in tort law *Per Se (restaurant), a New York City restauran ...
''. The simplest and central case of this is
price fixing Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
. This involves an agreement by businesses to set the price or
consideration Consideration is a concept of English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in '' Currie v Misa'' declar ...
of a good or service which they buy or sell from others at a specific level. If the agreement is durable, the general term for these businesses is a
cartel A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals. Mos ...
. It is irrelevant whether or not the businesses succeed in increasing their profits, or whether together they reach the level of having
market power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
as might a
monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
. Such collusion is illegal ''per se''. *''
United States v. Trenton Potteries Co. United may refer to: Places * United, Pennsylvania, an unincorporated community * United, West Virginia, an unincorporated community Arts and entertainment Films * ''United'' (2003 film), a Norwegian film * ''United'' (2011 film), a BBC Two f ...
'', per se illegality of
price fixing Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
*'' Appalachian Coals, Inc. v. United States'', *''
United States v. Socony-Vacuum Oil Co. ''United States v. Socony-Vacuum Oil Co.'', 310 U.S. 150 (1940), is a 1940 United States Supreme Court decision widely cited for the proposition that price-fixing is illegal ''per se''. The ''Socony'' case was, at least until recently, the most wid ...
'',
Bid rigging Bid rigging is a fraudulent scheme in procurement auctions resulting in non-competitive bids and can be performed by corrupt officials, by firms in an orchestrated act of collusion, or between officials and firms. This form of collusion is illegal ...
is a form of price fixing and market allocation that involves an agreement in which one party of a group of bidders will be designated to win the bid. Geographic market allocation is an agreement between competitors not to compete within each other's geographic territories. *'' Addyston Pipe and Steel Co. v. United States'' pipe manufacturers had agreed among themselves to designate one lowest bidder for government contracts. This was held to be an unlawful
restraint of trade Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of ''Mitchel v Reynolds'' (1711) Lord Sm ...
contrary to the Sherman Act. However, following the reasoning of Justice Taft in the Court of Appeals, the Supreme Court held that implicit in the Sherman Act §1 there was a
rule of reason The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal ''per se', ''other actions, such as po ...
, so that not every agreement which restrained the
freedom of contract Freedom of contract is the process in which individuals and groups form contracts without government restrictions. This is opposed to government regulations such as minimum-wage laws, competition laws, economic sanctions, restrictions on pri ...
of the parties would count as an anti-competitive violation. *'' Hartford Fire Insurance Co. v. California'', 113 S.Ct. 2891 (1993) 5 to 4, a group of reinsurance companies acting in London were successfully sued by California for conspiring to make U.S. insurance companies abandon policies beneficial to consumers, but costly to reinsure. The Sherman Act was held to have extraterritorial application, to agreements outside U.S. territory. ;Group boycotts of competitors, customers or distributors *'' Fashion Originators' Guild of America v. FTC'', 312 U.S. 457 (1941) the FOGA, a combination of clothes designers, agreed not to sell their clothes to shops which stocked replicas of their designs, and employed their own inspectors. Held to violate the Sherman Act §1 *'' Klor's, Inc. v. Broadway-Hale Stores, Inc.'', 359 U.S. 207 (1959) a group boycott is per se unlawful, even if it may be connected with a private dispute, and will have little effect upon the markets *'' American Medical Association v. United States'', 317 U.S. 519 (1943) *'' Molinas v. National Basketball Association'', 190 F. Supp. 241 (S.D.N.Y. 1961) *''
Associated Press v. United States ''Associated Press v. United States'', 326 U.S. 1 (1945), was a Supreme Court of the United States, United States Supreme Court case on U.S. antitrust law. Facts The Associated Press (AP) had prohibited member newspapers from selling or providing ...
'', 326 U.S. 1 (1945) 6 to 3, a prohibition on members selling "spontaneous news" violated the Sherman Act, as well as making membership difficult, and
freedom of speech Freedom of speech is a principle that supports the freedom of an individual or a community to articulate their opinions and ideas without fear of retaliation, censorship, or legal sanction. The right to freedom of expression has been recogni ...
among newspapers was no defense, nor was the absence of a total monopoly *''
Northwest Wholesale Stationers v. Pacific Stationery The points of the compass are a set of horizontal, radially arrayed compass directions (or azimuths) used in navigation and cartography. A compass rose is primarily composed of four cardinal directions—north, east, south, and west—each ...
'', 472 U.S. 284 (1985) it was not ''per se'' unlawful for the Northwest Wholesale Stationers, a purchasing co-operative where Pacific Stationery had been a member, to expel Pacific Stationery without any procedure or hearing or reason. Whether there were competitive effects would have to be adjudged under the rule of reason. *'' NYNEX Corp. v. Discon, Inc.'', 525 U.S. 128 (1998) the per se group boycott prohibition does not apply to a buyer's decision to purchase goods from one seller or another


Rule of reason

If an antitrust claim does not fall within a ''per se'' illegal category, the plaintiff must show the conduct causes harm in "restraint of trade" under the Sherman Act §1 according to "the facts peculiar to the business to which the restraint is applied". This essentially means that unless a plaintiff can point to a clear precedent, to which the situation is analogous, proof of an anti-competitive effect is more difficult. The reason for this is that the courts have endeavoured to draw a line between practices that restrain trade in a "good" compared to a "bad" way. In the first case, '' United States v. Trans-Missouri Freight Association'', the Supreme Court found that railroad companies had acted unlawfully by setting up an organisation to fix transport prices. The railroads had protested that their intention was to keep prices low, not high. The court found that this was not true, but stated that not every "restraint of trade" in a literal sense could be unlawful. Just as under the common law, the restraint of trade had to be "unreasonable". In '' Chicago Board of Trade v. United States'' the Supreme Court found a "good" restraint of trade. The
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...
had a rule that
commodities trader A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing ...
s were not allowed to privately agree to sell or buy after the market's closing time (and then finalise the deals when it opened the next day). The reason for the Board of Trade having this rule was to ensure that all traders had an equal chance to trade at a transparent market price. It plainly restricted trading, but the Chicago Board of Trade argued this was beneficial. Justice Brandeis, giving judgment for a unanimous Supreme Court, held the rule to be pro-competitive, and comply with the rule of reason. It did not violate the Sherman Act §1. As he put it, *'' Broadcast Music v. Columbia Broadcasting System'', blanket licenses did not necessarily count as price fixing under a relaxed rule of reason test. *'' Arizona v. Maricopa County Medical Society'', 457 U.S. 332 (1982) 4 to 3 held that a maximum price agreement for doctors was per se unlawful under the Sherman Act section 1. *''
Wilk v. American Medical Association ''Wilk v. American Medical Association'', 895 F.2d 352 ( 7th Cir. 1990), was a federal antitrust suit brought against the American Medical Association (AMA) and 10 co-defendants by chiropractor Chester A. Wilk, DC, and four co-plaintiffs. It resu ...
'', 895 F.2d 352 (7th Cir. 1990) the American Medical Association's boycott of
chiropractor Chiropractic is a form of alternative medicine concerned with the diagnosis, treatment and prevention of mechanical disorders of the musculoskeletal system, especially of the spine. It has esoteric origins and is based on several pseudosci ...
s violated the Sherman Act §1 because there was insufficient proof that it was unscientific *'' United States v. Topco Assocs., Inc.'', 405 U.S. 596 (1972) *'' Palmer v. BRG of Georgia, Inc.'', 498 U.S. 46 (1990) *'' National Soc'y of Prof. Engineers v. United States'', 435 U.S. 679 (1978); ¶¶219-220 - *'' NCAA v. Board of Regents of the University of Oklahoma'', 468 U.S. 85 (1984) 7 to 2, held that the National College Athletics Association's restriction of television of games, to encourage live attendance, was restricting supply, and therefore unlawful. *'' California Dental Assn. v. FTC'', 526 U.S. 756 (1999) *'' FTC v. Indiana Fed'n of Dentists'', 476 U.S. 447 (1986)


Tacit collusion and oligopoly

*''
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp. ''Matsushita Electric Industrial Co. v. Zenith Radio Corp.'', 475 U.S. 574 (1986), was an antitrust case decided by the Supreme Court of the United States. It raised the standard for surviving summary judgment to unambiguous evidence that tends to ...
'', 475 U.S. 574 (1986) held that the evidence needed to show unlawful collusion contrary to the Sherman Act must be enough to exclude the possibility of individual behavior. *''
Bell Atlantic Corp. v. Twombly ''Bell Atlantic Corp. v. Twombly'', 550 U.S. 544 (2007), was a decision of the Supreme Court of the United States involving antitrust law and civil procedure. Authored by Justice David Souter, it established that parallel conduct, absent evidence ...
'', 550 U.S. 544 (2007) 5 to 2, while Bell Atlantic and other major telephone companies were alleged to have acted in concert to share markets, and not compete in each other's territory to the detriment of small businesses, it was held that in absence of evidence of an agreement, parallel conduct is not enough to ground a case under the Sherman Act §1 *'' Interstate Circuit, Inc. v. United States'', 306 U.S. 208 (1939) *''
Theatre Enterprises v. Paramount Distributing Theatre or theater is a collaborative form of performing art that uses live performers, usually actors or actresses, to present the experience of a real or imagined event before a live audience in a specific place, often a stage. The perfor ...
'', 346 U.S. 537 (1954), no evidence of illegal agreement, however film distributors gave first film releases to downtown Baltimore theatres, and suburban theatres were forced to wait longer. Held, there needed to be evidence of conspiracy to injure *'' United States v. American Tobacco Company'', 221 U.S. 106 (1911) found to have monopolized the trade. *'' American Tobacco Co. v. United States'', 328 U.S. 781 (1946) after American Tobacco Co was broken up, the four entities were found to have achieved a collectively dominant position, which still amounted to monopolization of the market contrary to the Sherman Act §2 *'' American Column & Lumber Co. v. United States'', 257 US 377 (1921) information sharing *'' Maple Flooring Manufacturers' Assn. v. United States'', 268 U.S. 563 (1925) *'' United States v. Container Corp.'', 393 U.S. 333 (1969) *
Airline Tariff Publishing Company The Airline Tariff Publishing Company (commonly known as ATPCO) is a privately held corporation that engages in the collection and distribution of fare and fare-related data for the airline and travel industry. ATPCO currently works with more tha ...
, settlement with the
US Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United Stat ...


Vertical restraints

;Resale price maintenance *'' Dr. Miles Medical Co. v. John D. Park and Sons'', 220 U.S. 373 (1911) affirmed a lower court's holding that a massive minimum resale price maintenance scheme was unreasonable and thus offended Section 1 of the Sherman Antitrust Act. *'' Kiefer-Stewart Co. v. Seagram & Sons, Inc.'', 340 U.S. 211 (1951) it was unlawful for private liquor dealers to require that their products only be resold up to a maximum price. It unduly restrained the freedom of businesses and was per se illegal. *''
Albrecht v. Herald Co. Albrecht ("noble", "bright") is a given name or surname of German origin and may refer to: First name *Albrecht Agthe, (1790–1873), German music teacher * Albrecht Altdorfer, (c. 1480–1538) German Renaissance painter * Albrecht Becker, (1906� ...
'', 390 U.S. 145 (1968) setting a fixed price, minimum or maximum, held to violate section 1 of the Sherman Act *'' State Oil Co. v. Khan'', 522 U.S. 3 (1997) vertical maximum price fixing had to be adjudged according to a rule of reason *''
Leegin Creative Leather Products, Inc. v. PSKS, Inc. ''Leegin Creative Leather Products, Inc. v. PSKS, Inc.'', 551 U.S. 877 (2007), is a US antitrust case in which the United States Supreme Court overruled '' Dr. Miles Medical Co. v. John D. Park & Sons Co.'' ''Dr Miles'' had ruled that vertical p ...
'' 551 U.S. 877 (2007) 5 to 4 decision that vertical price restraints were not ''per se'' illegal. A leather manufacturer therefore did not violate the Sherman Act by stopping delivery of goods to a retailer after the retailer refused to raise its prices to the leather manufacturer's standards. ;Outlet, territory or customer limitations *'' Packard Motor Car Co. v. Webster Motor Car Co.'', 243 F.2d 418, 420 (D.C. Cir.), cert, denied, 355 U.S. 822 (1957) *'' Continental Television v. GTE Sylvania'', 433 U.S. 36 (1977) 6 to 2, held that it was not an antitrust violation, and it fell within the rule of reason, for a seller to limit the number of franchises and require the franchisees only sell goods within its area *'' United States v. Colgate & Co.'', there is no unlawful action by a manufacturer or seller, who publicly announces a price policy, and then refuses to deal with businesses who do not subsequently comply with the policy. This is in contrast to agreements to maintain a certain price. *'' United States v. Parke, Davis & Co.'', under Sherman Act §4 *'' Monsanto Co. v. Spray-Rite Service Corp.'', , stating that, "under Colgate, the manufacturer can announce its re-sale prices in advance and refuse to deal with those who fail to comply, and a distributor is free to acquiesce to the manufacturer's demand in order to avoid termination". Monsanto, an agricultural chemical, terminated its distributorship agreement with Spray-Rite on the ground that it failed to hire trained salesmen and promote sales to dealers adequately. Held, not per se illegal, because the restriction related to non-price matters, and so was to be judged under the rule of reason. *'' Business Electronics Corp. v. Sharp Electronics Corp.'', electronic calculators; "a vertical restraint is not illegal per se unless it includes some agreement on price or price levels. ... ere is a presumption in favor of a rule-of-reason standard; nddeparture from that standard must be justified by demonstrable economic effect, such as the facilitation of cartelizing ... "


Mergers

Although the Sherman Act 1890 initially dealt, in general, with cartels (where businesses combined their activities to the detriment of others) and monopolies (where one business was so large it could use its power to the detriment of others alone) it was recognized that this left a gap. Instead of forming a cartel, businesses could simply merge into one entity. The period between 1895 and 1904 saw a "great merger movement" as business competitors combined into ever more giant
corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
s. However upon a literal reading of Sherman Act, no remedy could be granted until a monopoly had already formed. The Clayton Act 1914 attempted to fill this gap by giving jurisdiction to prevent mergers in the first place if they would "substantially lessen competition". Dual antitrust enforcement by the
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
and
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
has long elicited concerns about disparate treatment of mergers. In response, in September 2014, the House Judiciary Committee approved the Standard Merger and Acquisition Reviews Through Equal Rules Act ("SMARTER Act"). *'' FTC v. Dean Foods Co'', 384 U.S. 597 (1966) 5 to 4, the FTC was entitled to get an injunction to prevent the completion of a merger, between milk selling competitors in the Chicago area, before its competitive effects are determined by a court *'' Robertson v. National Basketball Association'', 556 F.2d 682 (2d Cir. 1977) injunction issued against merger of the NBA with the ABA *'' Citizen Publishing Co. v. United States'', failing company defense *'' Cargill, Inc. v. Monfort of Colorado, Inc'', private enforcement * Clayton Act 1914 §8, interlocking directorates


Horizontal mergers

*''
Northern Securities Co. v. United States ''Northern Securities Co. v. United States'', 193 U.S. 197 (1904), was a case heard by the U.S. Supreme Court in 1903. The Court ruled 5-4 against the stockholders of the Great Northern and Northern Pacific railroad companies, which had essential ...
'', horizontal merger under the Sherman Act *'' United States v. Philadelphia National Bank'', the second and third largest of 42 banks in the Philadelphia area would lead to a 30% market control in a concentrated market, and so violated the Clayton Act §7. Banks were not exempt even though there was additional legislation under the Bank Merger Act of 1960. *'' United States v. Von's Grocery Co.'', 384 U.S. 270 (1966) a merger of two grocery firms in the
Los Angeles Los Angeles ( ; es, Los Ángeles, link=no , ), often referred to by its initials L.A., is the largest city in the state of California and the second most populous city in the United States after New York City, as well as one of the world ...
area did violate the Clayton Act §7, particularly considering the amendment by the
Celler–Kefauver Act The Celler–Kefauver Act is a United States federal law passed in 1950 that reformed and strengthened the Clayton Antitrust Act of 1914, which had amended the Sherman Antitrust Act of 1890. The Celler–Kefauver Act was passed to close a loophol ...
1950 *''United States v. General Dynamics Corp.'', 415 U.S. 486 (1974) General Dynamics Corp had taken control over, by share purchase, United Electric Coal Companies, a strip-mining coal producer. * Horizontal Merger Guidelines (2010) *'' FTC v. Staples, Inc.'', 970 F. Supp. 1066 (1997) *'' Hospital Corp. of America v. FTC'', 807 F. 2d 1381 (1986) *'' Federal Trade Commission v. H.J. Heinz Co.'', 246 F.3d 708 (2001) *'' United States v. Oracle Corp'', 331 F. Supp. 2d 1098 (2004)


Vertical mergers

*''
United States v. Columbia Steel Co. United may refer to: Places * United, Pennsylvania, an unincorporated community * United, West Virginia, an unincorporated community Arts and entertainment Films * ''United'' (2003 film), a Norwegian film * ''United'' (2011 film), a BBC Two f ...
'', *'' United States v. E.I. Du Pont De Nemours & Co.'', *'' Brown Shoe Co., Inc. v. United States'', there is not one single test for whether a merger substantially lessens competition, but a variety of economic and other factors may be considered. Two shoe retailers and manufacturers merging was held to substantially lessen competition, given the market in towns over 10,000 people for men's, women's and children's shoes.


Conglomerate mergers

*''
United States v. Sidney W. Winslow United may refer to: Places * United, Pennsylvania, an unincorporated community * United, West Virginia, an unincorporated community Arts and entertainment Films * ''United'' (2003 film), a Norwegian film * ''United'' (2011 film), a BBC Two f ...
'', *'' United States v. Continental Can Co.'', concerning the definition of the market segments in which the Continental Can Co was performing a merger. *'' FTC v. Procter & Gamble Co.'',


Monopoly and power

The law's treatment of monopolies is potentially the strongest in the field of antitrust law. Judicial remedies can force large organizations to be broken up, subject them to positive obligations, impose massive penalties, and/or sentence implicated employees to jail. Under §2 of the Sherman Act 1890 every "person who shall monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States" commits an offence. The courts have interpreted this to mean that monopoly is not unlawful ''per se'', but only if acquired through prohibited conduct. Historically, where the ability of
judicial remedies A legal remedy, also referred to as judicial relief or a judicial remedy, is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a penalty, or makes another court order to impose its w ...
to combat
market power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
have ended, the legislature of states or the Federal government have still intervened by taking
public ownership State ownership, also called government ownership and public ownership, is the ownership of an industry, asset, or enterprise by the state or a public body representing a community, as opposed to an individual or private party. Public ownershi ...
of an enterprise, or subjecting the industry to sector specific regulation (frequently done, for example, in the cases
water Water (chemical formula ) is an inorganic, transparent, tasteless, odorless, and nearly colorless chemical substance, which is the main constituent of Earth's hydrosphere and the fluids of all known living organisms (in which it acts as ...
,
education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...
,
energy In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of ...
or
health care Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health pr ...
). The law on
public services A public service is any service intended to address specific needs pertaining to the aggregate members of a community. Public services are available to people within a government jurisdiction as provided directly through public sector agencies ...
and
administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal ** Administrative Assistant, traditionally known as a Secretary, or also known as an administrative officer, admini ...
goes significantly beyond the realm of antitrust law's treatment of monopolies. When enterprises are not under public ownership, and where regulation does not foreclose the application of antitrust law, two requirements must be shown for the offense of monopolization. First, the alleged monopolist must possess sufficient
power Power most often refers to: * Power (physics), meaning "rate of doing work" ** Engine power, the power put out by an engine ** Electric power * Power (social and political), the ability to influence people or events ** Abusive power Power may a ...
in an accurately defined market for its products or services. Second, the monopolist must have used its power in a prohibited way. The categories of prohibited conduct are not closed, and are contested in theory. Historically they have been held to include
exclusive dealing In Economics and Law, exclusive dealing arises when a supplier entails the buyer by placing limitations on the rights of the buyer to choose what, who and where they deal. This is against the law in most countries which include the USA, Austra ...
,
price discrimination Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different markets. Price discrimination is distinguished from product differe ...
, refusing to supply an essential facility,
product tying Tying (informally, product tying) is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a ''tying sale'' makes the sale of one good (the ''tying good'') to the ...
and
predatory pricing Predatory pricing is a pricing strategy, using the method of undercutting on a larger scale, where a dominant firm in an industry will deliberately reduce the prices of a product or service to loss-making levels in the short-term. The aim is th ...
.


Monopolization

*''
Northern Securities Co. v. United States ''Northern Securities Co. v. United States'', 193 U.S. 197 (1904), was a case heard by the U.S. Supreme Court in 1903. The Court ruled 5-4 against the stockholders of the Great Northern and Northern Pacific railroad companies, which had essential ...
'', 193 U.S. 197 (1904) 5 to 4, a railway monopoly, formed through a merger of 3 corporations was ordered to be dissolved. The owner,
James Jerome Hill James Jerome Hill (September 16, 1838 – May 29, 1916) was a Canadian-American railroad director. He was the chief executive officer of a family of lines headed by the Great Northern Railway, which served a substantial area of the Upper Midwes ...
was forced to manage his ownership stake in each independently. *'' Swift & Co. v. United States'', 196 U.S. 375 (1905) the antitrust laws entitled the federal government to regulate monopolies that had a direct impact on commerce *''
Standard Oil Co. of New Jersey v. United States ''Standard Oil Co. of New Jersey v. United States''(1910), was a case in which the Supreme Court of the United States found Standard Oil Co. of New Jersey guilty of monopolizing the petroleum industry through a series of abusive and anticompe ...
'', 221 U.S. 1 (1911) Standard Oil was dismantled into geographical entities given its size, and that it was too much of a monopoly *'' United States v. American Tobacco Company'', 221 U.S. 106 (1911) found to have monopolized the trade. *'' United States v. Alcoa'', 148 F.2d 416 (2d Cir. 1945) a monopoly can be deemed to exist depending on the size of the market. It was generally irrelevant how the monopoly was achieved since the fact of being dominant on the market was negative for competition. (Criticised by Alan Greenspan.) *'' United States v. E. I. du Pont de Nemours & Co.'', 351 U.S. 377 (1956), illustrates the cellophane paradox of defining the relevant market. If a monopolist has set a price very high, there may now be many substitutable goods at similar prices, which could lead to a conclusion that the market share is small, and there is no monopoly. However, if a competitive price were charged, there would be a lower price, and so very few substitutes, whereupon the market share would be very high, and a monopoly established. *'' United States v. Syufy Enterprises'', 903 F.2d 659 (9th Cir. 1990) necessity of barriers to entry *'' Lorain Journal Co. v. United States'', 342 U.S. 143 (1951) attempted monopolization *'' United States v. American Airlines, Inc.'', 743 F.2d 1114 (1985) *'' Spectrum Sports, Inc. v. McQuillan'', 506 U.S. 447 (1993) in order for monopolies to be found to have acted unlawfully, action must have actually been taken. The threat of abusive behavior is insufficient. *'' Fraser v. Major League Soccer'', 284 F.3d 47 (1st Cir. 2002) there could be no unlawful monopolization of the soccer market by MLS where no market previously existed *'' United States v. Griffith'' 334 U.S. 100 (1948) four cinema corporations secured exclusive rights from distributors, foreclosing competitors. Specific intent to monopolize is not required, violating the Sherman Act §§1 and 2. *'' United Shoe Machinery Corp v. U.S.'', 347 U.S. 521 (1954) exclusionary behavior *'' United States v. Grinnell Corp.'', 384 U.S. 563 (1966) Grinnell made plumbing supplies and fire sprinklers, and with affiliates had 87% of the central station protective service market. From this predominant share there was no doubt of monopoly power.


Exclusive dealing

*'' Standard Oil Co. v. United States (Standard Stations)'', 337 U.S. 293 (1949): oil supply contracts affected a gross business of $58 million, comprising 6.7% of the total in a seven-state area, in the context of many similar arrangements, held to be contrary to Clayton Act §3. *''
Tampa Electric Co. v. Nashville Coal Co. ''Tampa Electric Co. v. Nashville Coal Co.'', 365 U.S. 320 (1961), the ''Tampa Electric case'', was a 1961 decision of the Supreme Court that, together with '' United States v. Philadelphia National Bank'', clarified the legal test for determining ...
'', 365 U.S. 320 (1961): Tampa Electric Co contracted to buy coal for 20 years to provide power in Florida, and Nashville Coal Co later attempted to end the contract on the basis that it was an exclusive supply agreement contrary to the Clayton Act § 3 or the Sherman Act §§ 1 or 2. Held, no violation because foreclosed share of market was insignificant this did not affect competition sufficiently. *'' US v. Delta Dental of Rhode Island'', 943 F. Supp. 172 (1996)


Price discrimination

* Robinson–Patman Act * Clayton Act 1914 §2 (15 USC §13) *'' FTC v. Morton Salt Co.'' *'' Volvo Trucks North America, Inc. v. Reeder-Simco Gmc, Inc.'' *'' J. Truett Payne Co. v. Chrysler Motors Corp.'' *'' FTC v. Henry Broch & Co.'' *'' FTC v. Borden Co.'', commodities of like grade and quality *'' United States v. Borden Co.'', the cost justification defense *'' United States v. United States Gypsum Co.'', meeting the competition defense *'' Falls City Industries v. Vanco Beverage, Inc.'' *'' Great Atlantic & Pacific Tea Co. v. FTC''


Essential facilities

*''
Aspen Skiing Co. v. Aspen Highlands Skiing Corp. ''Aspen Skiing Co. v. Aspen Highlands Skiing Corp.'', 472 U.S. 585 (1985), was a United States Supreme Court case that decided whether a dominant firm's unilateral refusal to deal with a competitor could establish a monopolization claim under Sect ...
'', 472 U.S. 585 (1985) the refusal of supply access to ski slopes violated the Sherman Act section 2. *'' Eastman Kodak Company v. Image Technical Services, Inc.'', 504 U.S. 451 (1992) Kodak has refused to supply replacement parts to small businesses servicing Kodak equipment, which was alleged to violate the Sherman Act §§1 and 2. The Supreme Court held 6 to 3 that the small businesses were entitled to bring the case, and Kodak was not entitled to summary judgment. *'' Verizon Communications v. Law Offices of Curtis V. Trinko, LLP'', 540 U.S. 398 (2004) no extension of the essential facilities doctrine beyond that set in ''Aspen'' *'' Otter Tail Power Co. v. United States'', 410 U.S. 366 (1973) *'' Berkey Photo, Inc v. Eastman Kodak Company'', 603 F.2d 263 (2d Cir. 1979) *'' United States v. AT&T'' (1982) led to the
breakup of AT&T The breakup of the Bell System was mandated on January 8, 1982, by an agreed consent decree providing that AT&T Corporation would, as had been initially proposed by AT&T, relinquish control of the Bell Operating Companies, which had provided loc ...


Tying products

* Sherman Act 1890 §1, covers making purchase of goods conditional on purchase of other goods, if there is sufficient market power *'' International Business Machines Corp. v. United States'', requiring a leased machine to be operated only with supplies from IBM was contrary to Clayton Act §3. *'' International Salt Co. v. United States'', it would be a ''per se'' infringement of the Sherman Act §2 for a seller, who has a legal monopoly through a patent, to tie buyers to purchase products over which the seller does not have a patent *''
United States v. Paramount Pictures, Inc. ''United States v. Paramount Pictures, Inc.'', 334 U.S. 131 (1948) (also known as the Hollywood Antitrust Case of 1948, the Paramount Case, or the Paramount Decision), was a landmark United States Supreme Court antitrust case that decided the f ...
'', 334 US 131 (1948) Hollywood studios practice of requiring
block booking Block booking is a system of selling multiple films to a theater as a unit. Block booking was the prevailing practice among Hollywood's major studios from the turn of the 1930s until it was outlawed by the U.S. Supreme Court's decision in '' Un ...
was unlawful among other things *'' Times-Picayune Publishing Co. v. United States'', 345 U.S. 594 (1953) 5 to 4, where there was no market dominance in a product market, tying the sale of a morning and an evening newspaper together was not unlawful *''
United States v. Loew's Inc. ''United States v. Loew's Inc.'', 371 U.S. 38 (1962), was an Competition law, antitrust case in which the Supreme Court of the United States held that block booking of movies—the offer of only a combined assortment of movies to an exhibitor—vi ...
'', 371 U.S. 38 (1962) product bundling and price discrimination. The existence of a tie was sufficient to create a presumption of market power. *'' Jefferson Parish Hospital District No. 2 v. Hyde'', reversing ''Loew's'', it was necessary to prove sufficient market power for a tying requirement to be anti-competitive *'' United States v. Microsoft Corporation'
253 F.3d 34
(2001) an

(1999) Microsoft ordered to be split into two for its monopolistic practices, including tying, but then the ruling was reversed by the Court of Appeals.


Predatory pricing

In theory predatory pricing happens when large companies with huge cash reserves and large lines of
credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...
stifle competition by selling their products and services at a loss for a time, to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in further
technological Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
research, since there are no competitors left to gain an advantage over. High
barriers to entry In theories of competition in economics, a barrier to entry, or an economic barrier to entry, is a fixed cost that must be incurred by a new entrant, regardless of production or sales activities, into a market that incumbents do not have or ha ...
such as large upfront investment, notably named
sunk costs In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. Sunk costs are contrasted with '' prospective costs'', which are future costs that may be ...
, requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return to
predatory pricing Predatory pricing is a pricing strategy, using the method of undercutting on a larger scale, where a dominant firm in an industry will deliberately reduce the prices of a product or service to loss-making levels in the short-term. The aim is th ...
long enough to force the competitor out of business. Critics argue that the empirical evidence shows that "predatory pricing" does not work in practice and is better defeated by a truly
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
than by antitrust laws (see Criticism of the theory of predatory pricing). *'' Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.'', 509 U.S. 209 (1993) to prove predatory pricing the plaintiff must show that changes in market conditions are adverse to its interests, and that (1) prices are below an appropriate measure of its rival's costs, and (2) the competitor had a reasonable prospect or a "dangerous probability" of recouping its investment in the alleged scheme. *'' Weyerhaeuser Company v. Ross-Simmons Hardwood Lumber Company'', 549 U.S. 312 (2007) a plaintiff must prove that, to make a claim of predatory buying, the alleged violator is likely to recoup the cost of the alleged predatory activity. This involved the saw mill market. *'' Barry Wright Corp. v. ITT Grinnell Corp.'' 724 F2d 227 (1983) *'' Spirit Airlines, Inc. v. Northwest Airlines, Inc.'', 431 F. 3d 917 (2005) *'' United States v. E. I. du Pont de Nemours & Co.'', 351 U.S. 377 (1956)


Intellectual property

*'' Continental Paper Bag Co. v. Eastern Paper Bag Co.'', 210 U.S. 405 (1908) 8 to 1, concerning a self opening paper bag, it was not an unlawful use of a monopoly position to refuse to license a patent's use to others, since the essence of a patent was the freedom not to do so. *'' United States v. Univis Lens Co.'', 316 U.S. 241 (1942) once a business sold its patented lenses, it was not allowed to lawfully control the use of the lens, by fixing a price for resale. This was the
exhaustion doctrine The exhaustion of intellectual property rights constitutes one of the limits of intellectual property (IP) rights. Once a given product has been sold under the authorization of the IP owner, the reselling, rental, lending and other third party comme ...
. *'' International Salt Co. v. United States'', 332 U.S. 392 (1947) it would be a ''per se'' infringement of the Sherman Act §2 for a seller, who has a legal monopoly through a patent, to tie buyers to purchase products over which the seller does not have a patent *'' Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp.'', 382 U.S. 172 (1965) illegal monopolization through the maintenance and enforcement of a patent obtained via fraud on the Patent Office case, sometimes called "Walker Process fraud". *'' United States v. Glaxo Group Ltd.'', 410 U.S. 52 (1973) the government may challenge a patent where it is involved in a monopoly violation *''
Illinois Tool Works Inc. v. Independent Ink, Inc. ''Illinois Tool Works Inc. v. Independent Ink, Inc.'', 547 U.S. 28 (2006), was a case decided by the Supreme Court of the United States involving the application of U.S. antitrust law to " tying" arrangements of patented products. The Court ruled ...
'', 547 U.S. 28 (2006) there is no presumption of market power, in a case on an unlawful tying arrangement, from the mere fact that the defendant has a patented product * Apple Inc. litigation and
United States v. Apple Inc. ''United States v. Apple Inc.'', 952 F. Supp. 2d 638 (S.D.N.Y. 2013), was a US antitrust case in which the Court held that Apple Inc. conspired to raise the price of e-books in violation of the Sherman Act. The suit, filed in April 2012, allege ...


Scope of antitrust law

Antitrust laws do not apply to, or are modified in, several specific categories of
enterprise Enterprise (or the archaic spelling Enterprize) may refer to: Business and economics Brands and enterprises * Enterprise GP Holdings, an energy holding company * Enterprise plc, a UK civil engineering and maintenance company * Enterprise ...
(including sports, media, utilities,
health care Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health pr ...
,
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
,
banks A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becaus ...
, and
financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial ma ...
) and for several kinds of actor (such as employees or consumers taking
collective action Collective action refers to action taken together by a group of people whose goal is to enhance their condition and achieve a common objective. It is a term that has formulations and theories in many areas of the social sciences including psyc ...
).


Collective actions

First, since the Clayton Act 1914 §6, there is no application of antitrust laws to agreements between employees to form or act in
labor union A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits (s ...
s. This was seen as the "Bill of Rights" for labor, as the Act laid down that the "labor of a human being is not a
commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
or article of commerce". The purpose was to ensure that employees with
unequal bargaining power Inequality of bargaining power in law, economics and social sciences refers to a situation where one party to a bargain, contract or agreement, has more and better alternatives than the other party. This results in one party having greater power ...
were not prevented from combining in the same way that their employers could combine in
corporations A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
, subject to the restrictions on mergers that the Clayton Act set out. However, sufficiently autonomous workers, such as professional sports players have been held to fall within antitrust provisions.


Pro sports exemptions and the NFL cartel

Second, professional sports leagues enjoy a number of exemptions. Mergers and joint agreements of professional football, hockey, baseball, and basketball leagues are exempt.
Major League Baseball Major League Baseball (MLB) is a professional baseball organization and the oldest major professional sports league in the world. MLB is composed of 30 total teams, divided equally between the National League (NL) and the American League (A ...
was held to be broadly exempt from antitrust law in the Supreme Court case '' Federal Baseball Club v. National League''. The court unanimously held that the baseball league's organization meant that there was no commerce between the states taking place, even though teams traveled across state lines to put on the games. That travel was merely incidental to a business which took place in each state. It was subsequently held in 1952 in '' Toolson v. New York Yankees'', and then again in 1972 ''
Flood v. Kuhn ''Flood v. Kuhn'', 407 U.S. 258 (1972), was a decision by the Supreme Court of the United States that preserved the reserve clause in Major League Baseball (MLB) players' contracts. By a 5–3 margin, the Court reaffirmed the antitrust exemptio ...
'', that the baseball league's exemption was an "aberration". However Congress had accepted it, and favored it, so retroactively overruling the exemption was no longer a matter for the courts, but the legislature. In '' United States v. International Boxing Club of New York'', it was held that, unlike baseball, boxing was not exempt, and in ''Radovich v. National Football League (NFL)'', professional football is generally subject to antitrust laws. As a result of the AFL-NFL merger, the
National Football League The National Football League (NFL) is a professional American football league that consists of 32 teams, divided equally between the American Football Conference (AFC) and the National Football Conference (NFC). The NFL is one of the majo ...
was also given exemptions in exchange for certain conditions, such as not directly competing with college or high school football. However, the 2010 Supreme Court ruling in American Needle Inc. v. NFL characterised the NFL as a "cartel" of 32 independent businesses subject to antitrust law, not a single entity.


Media

Third, antitrust laws are modified where they are perceived to encroach upon the
media Media may refer to: Communication * Media (communication), tools used to deliver information or data ** Advertising media, various media, content, buying and placement for advertising ** Broadcast media, communications delivered over mass e ...
and free speech, or are not strong enough. Newspapers under joint operating agreements are allowed limited antitrust immunity under the Newspaper Preservation Act of 1970. More generally, and partly because of concerns about media cross-ownership in the United States, regulation of media is subject to specific statutes, chiefly the
Communications Act of 1934 The Communications Act of 1934 is a United States federal law signed by President Franklin D. Roosevelt on June 19, 1934 and codified as Chapter 5 of Title 47 of the United States Code, et seq. The Act replaced the Federal Radio Commission wit ...
and the
Telecommunications Act of 1996 The Telecommunications Act of 1996 is a United States federal law enacted by the 104th United States Congress on January 3, 1996, and signed into law on February 8, 1996, by President Bill Clinton. It primarily amended Chapter 5 of Title 47 of ...
, under the guidance of the
Federal Communications Commission The Federal Communications Commission (FCC) is an independent agency of the United States federal government that regulates communications by radio, television, wire, satellite, and cable across the United States. The FCC maintains jurisdicti ...
. The historical policy has been to use the state's licensing powers over the airwaves to promote plurality. Antitrust laws do not prevent companies from using the legal system or political process to attempt to reduce competition. Most of these activities are considered legal under the Noerr-Pennington doctrine. Also, regulations by states may be immune under the Parker immunity doctrine. *''Professional Real Estate Investors, Inc., v. Columbia Pictures'', 508 U.S. 49 (1993) *''Allied Tube v. Indian Head, Inc.'', 486 U.S. 492 (1988) *''FTC v. Superior Ct. TLA'', 493 U.S. 411 (1990)


Other

Fourth, the government may grant monopolies in certain industries such as
utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and ...
and infrastructure where multiple players are seen as unfeasible or impractical.Areeda, pp. 80-92. Fifth,
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
is allowed limited antitrust exemptions as provided by the McCarran-Ferguson Act of 1945. Sixth, M&A transactions in the defense sector are often subject to greater antitrust scrutiny from the
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
and the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
. *'' United States v. South-Eastern Underwriters Association'', 322 U.S. 533 (1944) the insurance industry was not exempt from antitrust regulation. *''
Credit Suisse v. Billing ''Credit Suisse Securities (USA) LLC v. Billing'', 551 U.S. 264 (2007), was a decision by the Supreme Court of the United States, which held that the securities markets were exempt from the scope of antitrust laws. Facts Judgment The Supreme Co ...
'', 551 U.S. 264 (2007) 7 to 1, the industries regulated by the Securities Act 1933 and the Securities and Exchange Act 1934 are exempt from antitrust lawsuits. *'' Parker v. Brown'', 317 U.S. 341 (1943) actions by state governments were held to be exempt from antitrust law, given that there was no original legislative intent to cover anything other than business combinations. *'' Goldfarb v. Virginia State Bar'', 421 U.S. 773 (1975) the Virginia State Bar, which was delegated power to set price schedules for lawyers fees, was an unlawful price fixing. It was no longer exempt from the Sherman Act, and constituted a per se infringement. *'' California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc.'', 445 U.S. 97 (1980) the state of California acted contrary to the Sherman Act 1890 §1 by setting fair trade wine price schedules. *'' Rice v. Norman Williams Co.'', 458 U.S. 654 (1982) the Sherman Act did not prohibit a California law which prohibited the importation of goods that were not authorised to be imported by the manufacturer. *'' Tritent International Corp. v. Commonwealth of Kentucky'', 467 F.3d 547 (2006) Kentucky had not acted unlawfully by giving effect to a Tobacco Master Settlement Agreement, because there was no illegal behavior in it. *'' United States v. Trans-Missouri Freight Association'', 166 U.S. 290 (1897) the antitrust laws applied to the railroad industry, even though there was a comprehensive scheme of legislation applying to the railroads already. No specific exemption had been given. *'' Silver v. New York Stock Exchange'', 373 U.S. 341 (1963) the NYSE was not exempt from antitrust regulation, even though many of its activities were regulated by the Securities and Exchange Act 1934. *'' American Society of Mechanical Engineers v. Hydrolevel Corporation'', 456 U.S. 556 (1982) 6 to 3, that the
American Society of Mechanical Engineers The American Society of Mechanical Engineers (ASME) is an American professional association that, in its own words, "promotes the art, science, and practice of multidisciplinary engineering and allied sciences around the globe" via " continuing ...
, a non profit standard developer had violated the Sherman Act by giving information to one competitor, used against another. *'' National Collegiate Athletic Association v. Alston,'' 594 U.S. ___ (2021) 9 to 0, the National Collegiate Athletic Association’s caps on player compensation, most notably its restrictions on education benefits for players, restrain competition among colleges and thereby violate the nation’s antitrust laws.


Remedies and enforcement

The remedies for violations of U.S. antitrust laws are as broad as any
equitable remedy Equitable remedies are judicial remedies developed by courts of equity from about the time of Henry VIII to provide more flexible responses to changing social conditions than was possible in precedent-based common law. Equitable remedies were gra ...
that a court has the power to make, as well as being able to impose penalties. When private parties have suffered an actionable loss, they may claim compensation. Under the Sherman Act 1890 §7, these may be trebled, a measure to encourage private litigation to enforce the laws and act as a deterrent. The courts may award penalties under §§1 and 2, which are measured according to the size of the company or the business. In their inherent jurisdiction to prevent violations in future, the courts have additionally exercised the power to break up businesses into competing parts under different owners, although this remedy has rarely been exercised (examples include ''
Standard Oil Standard Oil Company, Inc., was an American oil production, transportation, refining, and marketing company that operated from 1870 to 1911. At its height, Standard Oil was the largest petroleum company in the world, and its success made its co- ...
'', ''
Northern Securities Company The Northern Securities Company was a short-lived American railroad trust formed in 1901 by E. H. Harriman, James J. Hill, J.P. Morgan and their associates. The company controlled the Northern Pacific Railway; Great Northern Railway; Chicago, ...
'', ''
American Tobacco Company The American Tobacco Company was a tobacco company founded in 1890 by J. B. Duke through a merger between a number of U.S. tobacco manufacturers including Allen and Ginter and Goodwin & Company. The company was one of the original 12 members ...
'', ''
AT&T Corporation AT&T Corporation, originally the American Telephone and Telegraph Company, is the subsidiary of AT&T Inc. that provides voice, video, data, and Internet telecommunications and professional services to businesses, consumers, and government agen ...
'' and, although reversed on appeal, ''
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washi ...
''). Three levels of enforcement come from the Federal government, primarily through the Department of Justice and the Federal Trade Commission, the governments of states, and private parties. Public enforcement of antitrust laws is seen as important, given the cost, complexity and daunting task for private parties to bring litigation, particularly against large corporations.


Federal government

The federal government, via both the
Antitrust Division The United States Department of Justice Antitrust Division is a division of the U.S. Department of Justice that enforces U.S. antitrust law. It has exclusive jurisdiction over U.S. federal criminal antitrust prosecutions. It also has jurisdict ...
of the
United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United Stat ...
and the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
, can bring civil lawsuits enforcing the laws. The United States Department of Justice alone may bring criminal antitrust suits under federal antitrust laws. Perhaps the most famous antitrust enforcement actions brought by the federal government were the break-up of AT&T's local telephone service monopoly in the early 1980s and its actions against Microsoft in the late 1990s. Additionally, the federal government also reviews potential mergers to attempt to prevent
market concentration In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. In any industry, a handful of firms that hold a signific ...
. As outlined by the Hart-Scott-Rodino Antitrust Improvements Act, larger companies attempting to merge must first notify the Federal Trade Commission and the Department of Justice's Antitrust Division prior to consummating a merger. These agencies then review the proposed merger first by defining what the market is and then determining the
market concentration In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. In any industry, a handful of firms that hold a signific ...
using the Herfindahl-Hirschman Index (HHI) and each company's
market share Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...
. The government looks to avoid allowing a company to develop
market power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
, which if left unchecked could lead to monopoly power. The
United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United Stat ...
and
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
target nonreportable mergers for enforcement as well. Notably, between 2009 and 2013, 20% of all merger investigations conducted by the
United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United Stat ...
involved nonreportable transactions. *'' FTC v. Sperry & Hutchinson Trading Stamp Co.'', 405 U.S. 233 (1972). Case held that the FTC is entitled to bring enforcement action against businesses that act unfairly, as where supermarket trading stamps company injured consumers by prohibiting them from exchanging trading stamps. The FTC could prevent the restrictive practice as ''unfair'', even though there was no specific antitrust violation.


International cooperation

Despite considerable effort by the
Clinton administration Bill Clinton's tenure as the 42nd president of the United States began with his first inauguration on January 20, 1993, and ended on January 20, 2001. Clinton, a Democrat from Arkansas, took office following a decisive election victory over ...
, the Federal government attempted to extend antitrust cooperation with other countries for mutual detection, prosecution and enforcement. A bill was unanimously passed by the
US Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washin ...
; however by 2000 only one
treaty A treaty is a formal, legally binding written agreement between actors in international law. It is usually made by and between sovereign states, but can include international organizations, individuals, business entities, and other legal per ...
has been signed with
Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country by ...
. On the
Australian Competition & Consumer Commission The Australian Competition and Consumer Commission (ACCC) is the chief competition regulator of the Government of Australia, located within the Department of the Treasury. It was established in 1995 with the amalgamation of the Australian Trad ...
announced it was seeking explanations from a US company,
Apple An apple is an edible fruit produced by an apple tree (''Malus domestica''). Apple trees are cultivated worldwide and are the most widely grown species in the genus '' Malus''. The tree originated in Central Asia, where its wild ancest ...
In relation to potentially anticompetitive behaviour against an Australian bank in possible relation to
Apple Pay Apple Pay is a mobile payment service by Apple Inc. that allows users to make payments in person, in iOS apps, and on the web. It is supported on these Apple devices: iPhone, Apple Watch, iPad, and Mac. It digitizes and can replace a cred ...
. It is not known whether the treaty could influence the enquiry or outcome. In many cases large US companies tend to deal with overseas antitrust within the overseas jurisdiction, autonomous of US laws, such as in
Microsoft Corp v Commission ''Microsoft Corp. v. Commission'' (2007T-201/04 is a case brought by the European Commission of the European Union (EU) against Microsoft for abuse of its dominant position in the market (according to competition law). It started as a complaint ...
and more recently,
Google Google LLC () is an American Multinational corporation, multinational technology company focusing on Search Engine, search engine technology, online advertising, cloud computing, software, computer software, quantum computing, e-commerce, ar ...
v
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
where the companies were heavily fined. Questions have been raised with regards to the consistency of antitrust between jurisdictions where the same antitrust corporate behaviour, and similar antitrust legal environment, is prosecuted in one jurisdiction but not another.


State governments

State attorneys general The state attorney general in each of the 50 U.S. states, of the federal district, or of any of the territories is the chief legal advisor to the state government and the state's chief law enforcement officer. In some states, the attorney genera ...
may file suits to enforce both state and federal antitrust laws. *
Parens patriae ''Parens patriae'' is Latin for "parent of the nation" (lit., "parent of one's country"). In law, it refers to the public policy power of the state to intervene against an abusive or negligent parent, legal guardian, or informal caretaker, and to ...
*'' Hawaii v. Standard Oil Co. of Cal.'', 405 U.S. 251 (1972) state governments do not have a cause of action to sue for consequential loss for damage to their general economies after an antitrust violation is found.


Private suits

Private civil suits may be brought, in both state and federal court, against violators of state and federal antitrust law. Federal antitrust laws, as well as most state laws, provide for triple damages against antitrust violators in order to encourage private lawsuit enforcement of antitrust law. Thus, if a company is sued for monopolizing a market and the jury concludes the conduct resulted in consumers' being overcharged $200,000, that amount will automatically be tripled, so the injured consumers will receive $600,000. The United States Supreme Court summarized why Congress authorized private antitrust lawsuits in the case '' Hawaii v. Standard Oil Co. of Cal.'', 405 U.S. 251, 262 (1972): *'' Pfizer, Inc. v. Government of India'', 434 U.S. 308 (1978) foreign governments have standing to sue in private actions in the U.S. courts. *''
Bigelow v. RKO Radio Pictures, Inc. ''Bigelow v. RKO Radio Pictures, Inc.'', 327 U.S. 251 (1946), was a decision by the United States Supreme Court allowing an action to recover compensatory damages under the antitrust statutes. The jury had returned a verdict for $120,000 in petiti ...
'', 327 U.S. 251 (1946) treble damages awarded under the Clayton Act §4 needed not to be mathematically precise, but based on a reasonable estimate of loss, and not speculative. This meant a jury could set a higher estimate of how much movie theaters lost, when the film distributors conspired with other theaters to let them show films first. *'' Illinois Brick Co. v. Illinois'', 431 U.S. 720 (1977) indirect purchasers of goods where prices have been raised have no standing to sue. Only the direct contractors of cartel members may, to avoid double or multiple recovery. *'' Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.'', 473 U.S. 614 (1985) on arbitration


Theory

The Supreme Court calls the Sherman Antitrust Act a "charter of freedom", designed to protect free enterprise in America. One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace.''United States v. Columbia Steel Co.''
334 U.S. 495, 535-36 (1948).
Contrary to this are efficiency arguments that antitrust legislation should be changed to primarily benefit consumers, and have no other purpose.
Free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
economist
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
states that he initially agreed with the underlying principles of antitrust laws (breaking up
monopolies A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
and
oligopolies An oligopoly (from Greek ὀλίγος, ''oligos'' "few" and πωλεῖν, ''polein'' "to sell") is a market structure in which a market or industry is dominated by a small number of large sellers or producers. Oligopolies often result fr ...
and promoting more competition), but that he came to the conclusion that they do more harm than good.
Thomas Sowell Thomas Sowell (; born June 30, 1930) is an American author, economist, political commentator and academic who is a senior fellow at the Hoover Institution. With widely published commentary and books—and as a guest on TV and radio—he becam ...
argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:
Alan Greenspan Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitled ''Antitrust,'' he says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its results—low prices. As long as a monopoly is not a
coercive monopoly In economics and business ethics, a coercive monopoly is a firm that is able to raise prices and make production decisions without the risk that competition will arise to draw away their customers. Greenspan, Alan''Antitrust'', in ''Capitalism:The ...
where a firm is securely insulated from ''potential'' competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.
Thomas DiLorenzo Thomas James DiLorenzo (; born August 8, 1954) identifies as an adherent of the Austrian School of economics. He is a research fellow at The Independent Institute, a senior fellow of the Ludwig von Mises Institute,Faculty Directoryan, ''accessed ...
, an adherent of the
Austrian School The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result exclusively from the motivations and actions of individuals. Austrian scho ...
of economics, found that the "trusts" of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all.
Ayn Rand Alice O'Connor (born Alisa Zinovyevna Rosenbaum;, . Most sources transliterate her given name as either ''Alisa'' or ''Alissa''. , 1905 – March 6, 1982), better known by her pen name Ayn Rand (), was a Russian-born American writer and p ...
, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations. Such laissez-faire advocates suggest that only a
coercive monopoly In economics and business ethics, a coercive monopoly is a firm that is able to raise prices and make production decisions without the risk that competition will arise to draw away their customers. Greenspan, Alan''Antitrust'', in ''Capitalism:The ...
should be broken up, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production to price-gouge consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention, and that there is no case of a coercive monopoly ever existing that was not the result of government policies. Judge
Robert Bork Robert Heron Bork (March 1, 1927 – December 19, 2012) was an American jurist who served as the solicitor general of the United States from 1973 to 1977. A professor at Yale Law School by occupation, he later served as a judge on the U.S. Cour ...
's writings on antitrust law (particularly ''
The Antitrust Paradox ''The Antitrust Paradox'' is an influential 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993. Bork has cr ...
''), along with those of
Richard Posner Richard Allen Posner (; born January 11, 1939) is an American jurist and legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chic ...
and other
law and economics Law and economics, or economic analysis of law, is the application of microeconomic theory to the analysis of law, which emerged primarily from scholars of the Chicago school of economics. Economic concepts are used to explain the effects of law ...
thinkers, were heavily influential in causing a shift in the U.S. Supreme Court's approach to antitrust laws since the 1970s, to be focused solely on what is best for the consumer rather than the company's practices.


See also

*
Thurman Arnold Thurman Wesley Arnold (June 2, 1891 – November 7, 1969) was an American lawyer best known for his trust-busting campaign as Assistant Attorney General in charge of the Antitrust Division in President Franklin D. Roosevelt's Department of Justic ...
* Barton–Rush Bill, a proposed franchise competition bill *
Contestable market In economics, the theory of contestable markets, associated primarily with its 1982 proponent William J. Baumol, held that there are markets served by a small number of firms that are nevertheless characterized by competitive equilibrium (and the ...
*
DRAM price fixing In 2002, the United States Department of Justice, under the Sherman Antitrust Act, began a probe into the activities of dynamic random-access memory (DRAM) manufacturers in response to claims by US computer makers, including Dell and Gateway, th ...
*
Duopoly A duopoly (from Greek δύο, ''duo'' "two" and πωλεῖν, ''polein'' "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market. It is the most commonly studied form of oligopoly due to its simplicit ...
*
Economic regulator A regulatory agency (regulatory body, regulator) or independent agency (independent regulatory agency) is a government authority that is responsible for exercising autonomous dominion over some area of human activity in a licensing and regula ...
*
EU competition law European competition law is the competition law in use within the European Union. It promotes the maintenance of competition within the European Single Market by regulating anti-competitive conduct by companies to ensure that they do not crea ...
*
Government monopoly In economics, a government monopoly or public monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a monopo ...
*Commissioner
Andrew L. Harris Andrew Lintner Harris (also known as The Farmer–Statesman) (November 17, 1835 – September 13, 1915) was one of the heroes of the Battle of Gettysburg during the American Civil War and served as the 44th governor of Ohio. Biography Harr ...
* Limit price *
Market anomaly A market anomaly in a financial market is predictability that seems to be inconsistent with (typically risk-based) theories of asset prices. Standard theories include the capital asset pricing model and the Fama-French Three Factor Model, but a ...
*
Monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The microeconomic theory of monopsony assumes a single entity ...
* New Brandeis movement *
Ordoliberalism Ordoliberalism is the German variant of economic liberalism that emphasizes the need for government to ensure that the free market produces results close to its theoretical potential but does not advocate for a welfare state. Ordoliberal ideals ...
*
Patent pool In patent law, a patent pool is a consortium of at least two companies agreeing to cross-license patents relating to a particular technology. The creation of a patent pool can save patentees and licensees time and money, and, in case of blocking ...
* SSNIP Test *
Trade Practices Act 1974 The ''Competition and Consumer Act 2010'' (CCA) is an Act of the Parliament of Australia. Prior to 1 January 2011, it was known as the ''Trade Practices Act 1974'' (TPA). The Act is the legislative vehicle for competition law in Australia, an ...
: Australian antitrust legislation


References


Footnotes


Citations


Works cited

* * *


Further reading

*W Adams and JW Brock, ''Antitrust Economics on Trial: Dialogue in New Learning'' (Princeton 1991) . *P Areeda and L Kaplow, ''Antitrust Analysis: Problems, Texts, Cases'' (1997) *O Black, ''Conceptual Foundations of Antitrust'' (2005) * RH Bork, ''
The Antitrust Paradox ''The Antitrust Paradox'' is an influential 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993. Bork has cr ...
'' (Free Press 1993) . * * Antonio Cucinotta, ed. ''Post-Chicago Developments in Antitrust Law'' (2003) * David S Evans. ''Microsoft, Antitrust and the New Economy: Selected Essays'' (2002) *
Herbert Hovenkamp Herbert Hovenkamp (born 1948) is an American legal scholar serving as James G. Dinan University Professor at the University of Pennsylvania Law School and the Wharton School of the University of Pennsylvania. Prior to that he held the Ben and Do ...
, 'Chicago and Its Alternatives' (1986) 6 Duke Law Journal 1014–1029 * John E Kwoka and Lawrence J White, eds. ''The Antitrust Revolution: Economics, Competition, and Policy'' (2003) *CJ Goetz, FS McChesney and TA Lambert, ''Antitrust Law, Interpretation and Implementation'' (5th edn 2012) *B Orbach and G Campbell
''The Antitrust Curse of Bigness''
Southern California Law Review (2012). * RA Posner, ''Antitrust Law: An Economic Perspective'' (1976) *ET Sullivan, H Hovenkamp and HA Shlanski, ''Antitrust Law, Policy and Procedure: Cases, Materials, Problems'' (6th edn 2009)


External links


United States Department of Justice Antitrust Division homepage
* ttps://web.archive.org/web/20081204085802/http://ec.europa.eu/comm/competition/index_en.html Official European Union Antitrust sitebr>Canadian Competition Bureau
{{Competition law by country Commercial crimes