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GUIDE TO ANTITRUST LAWS * Education * General * Dictionary * Economics * Corporate Finance * Roth IRA * Stocks * Mutual Funds * ETFs * 401(k) * Investing/Trading * Investing Essentials * Fundamental Analysis * Portfolio Management * Trading Essentials * Technical Analysis * Risk Management * Markets * News * Company News * Markets News * Trading News * Political News * Trends * Popular Stocks * Apple (AAPL) * Tesla (TSLA) * Amazon (AMZN) * AMD (AMD) * Facebook (FB) * Netflix (NFLX) * Simulator * Your Money * Personal Finance * Wealth Management * Budgeting/Saving * Banking * Credit Cards * Home Ownership * Retirement Planning * Taxes * Insurance * Reviews & Ratings * Best Online Brokers * Best Savings Accounts * Best Home Warranties * Best Credit Cards * Best Personal Loans * Best Student Loans * Best Life Insurance * Best Auto Insurance * Advisors * Your Practice * Practice Management * Continuing Education * Financial Advisor Careers * Investopedia 100 * Wealth Management * Portfolio Construction * Financial Planning * Academy * Popular Courses * Investing for Beginners * Become a Day Trader * Trading for Beginners * Technical Analysis * Courses by Topic * All Courses * Trading Courses * Investing Courses * Financial Professional Courses Submit Part of Guide to Antitrust Laws Part Of Guide to Antitrust Laws Explore The Guide * Overview * Antitrust Laws and Enforcement * Overview * Understanding Antitrust Laws * Federal Trade Commission (FTC) * Clayton Antitrust Act * Sherman Antitrust Act * Robinson-Patman Act * Types of Antitrust Violations * Overview * How and Why Companies Become Monopolies * Discriminating Monopoly * Price Discrimination * Predatory Pricing * Bid Rigging * Price Maker * Cartel * Monopolies * Overview * Monopolistic Markets * Monopolistic Competition * What Are the Characteristics of a Monopolistic Market? * Monopolistic Market vs. Perfect Competition * What are Some Examples of Monopolistic Markets? * A History of U.S. Monopolies * What Are the Most Famous Monopolies? * Oligopolies * Overview * Monopoly vs. Oligopoly * Oligopoly * Duopoly * What are Current Examples of Oligopolies? By Alexandra Twin Full Bio * LinkedIn Alexandra Twin has 15+ years of experience as an editor and writer, covering financial news for public and private companies. Learn about our editorial policies Updated November 04, 2021 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Full Bio Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. Learn about our Financial Review Board Fact checked by Timothy Li Fact checked by Timothy Li Full Bio * LinkedIn Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. Timothy has helped provide CEOs and CFOs with deep-dive analytics, providing beautiful stories behind the numbers, graphs, and financial models. Learn about our editorial policies Table of Contents Expand Table of Contents * What Is Antitrust? * Understanding Antitrust * The Antitrust Laws * Special Considerations * Antitrust Law Violation Example * What Are Antitrust Laws and Are They Necessary? * How Many Antitrust Laws are There? * Who Enforces Antitrust Laws? WHAT IS ANTITRUST? Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don't overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies. Antitrust laws also prevent multiple firms from colluding or forming a cartel to limit competition through practices such as price fixing. Due to the complexity of deciding what practices will limit competition, antitrust law has become a distinct legal specialization. KEY TAKEAWAYS * Antitrust laws were designed to protect and promote competition within all sectors of the economy. * The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the three pivotal laws in the history of antitrust regulation. * Today, the Federal Trade Commission, sometimes in conjunction with the Department of Justice, is tasked with enforcing federal antitrust laws. 1:35 ANTITRUST UNDERSTANDING ANTITRUST Antitrust laws are the broad group of state and federal laws that are designed to make sure businesses are competing fairly. The "trust" in antitrust refers to a group of businesses that team up or form a monopoly in order to dictate pricing in a particular market. Supporters say antitrust laws are necessary, arguing that competition among sellers gives consumers lower prices, higher-quality products and services, more choices, and greater innovation. Most people agree with this concept and the benefits of an open marketplace, although there are some who claim that allowing businesses to compete as they see fit would ultimately give consumers the best prices. THE ANTITRUST LAWS The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the key laws that set the groundwork for antitrust regulation.1 Predating the Sherman Act, The Interstate Commerce Act was also beneficial in establishing antitrust regulations, although it was less influential than some of the others.2 Congress passed the Interstate Commerce Act in 1887 in response to growing public demand that railroads be regulated. Among other requirements, the act ordered railroads to charge a fair fee to travelers and post those fees publicly. It was the first example of antitrust law but was less influential than the Sherman Act, passed in 1890.2 The Sherman Act outlawed contracts and conspiracies restraining trade and/or monopolizing industries in an attempt to stop competing individuals or businesses fixing prices, dividing markets, or attempting to rig bids. The Sherman Act laid out specific penalties and fines for violating the terms.1 In 1914, Congress passed the Federal Trade Commission Act, banning unfair competition methods and deceptive acts or practices. The Clayton Act was also passed in 1914, addressing specific practices the Sherman Act does not ban. For example, the Clayton Act prohibits appointing the same person to make business decisions for competing corporations.1 The antitrust laws describe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the specifics of each case.1 SPECIAL CONSIDERATIONS The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are tasked with enforcing federal antitrust laws. In some cases, these two authorities may also work with other regulatory agencies to ensure that certain mergers fit the public interest.3 The FTC mainly focuses on segments of the economy where consumer spending is high, including healthcare, drugs, food, energy, technology, and anything related to digital communications. Factors that could spark an FTC investigation include premerger notification filings, certain consumer or business correspondence, Congressional inquiries, or articles on consumer or economic subjects.3 If the FTC thinks that a law has been violated, the agency will try to stop the questionable practices or find a resolution to the anti-competitive portion of, say, a proposed merger between two competitors. If no resolution is found, the FTC may put out an administrative complaint and/or pursue injunctive relief in federal court.3 The FTC might also refer evidence of criminal antitrust violations to the DOJ. The DOJ has the power to impose criminal sanctions, as well as holding sole antitrust jurisdiction in certain sectors, such as telecommunications, banks, railroads, and airlines.3 ANTITRUST LAW VIOLATION EXAMPLE In early 2014, Google proposed an antitrust settlement with the European Commission. Google said it would display results from at least three competitors each time it showed results for specialized searches related to products, restaurants, and travel. Competitors, in turn, would be liable to pay Google each time someone clicked on specific types of results shown next to Google’s results, with the search engine picking up the bill for an independent monitor to oversee the process.4 The proposal stipulated that content providers like Yelp could opt to remove their content from Google's specialized search services without facing penalties. The search giant also suggested removing conditions making it difficult for advertisers to move their campaigns to competitors' sites; sites using Google’s search tool could have shown ads from other services.4 The proposal ultimately was not accepted.5 On Oct. 20, 2020, the U.S. Dept. of Justice filed an antitrust lawsuit against Google for anti-competitive practices related to its alleged dominance in search advertising.6 WHAT ARE ANTITRUST LAWS AND ARE THEY NECESSARY? Antitrust laws were implemented to prevent companies from getting greedy and abusing their power. Without these regulations in place, many politicians fear that big businesses would gobble up the smaller ones. This would result in less competition and choice for consumers, potentially leading, among other things, to higher prices, lower quality, and less innovation. HOW MANY ANTITRUST LAWS ARE THERE? There are three federal antitrust laws in effect today. They are the Sherman Act, the Federal Trade Commission Act, and the Clayton Act.1 WHO ENFORCES ANTITRUST LAWS? The Federal Trade Commission and the U.S. Department of Justice are responsible for making sure that antitrust laws are abided by. The former mainly focuses on segments of the economy where consumer spending is high, while the latter holds sole antitrust jurisdiction in sectors such as telecommunications, banks, railroads, and airlines and has the power to impose criminal sanctions.3 ARTICLE SOURCES Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. 1. Federal Trade Commission. "The Antitrust Laws." Accessed Nov. 4, 2021. 2. OurDocuments.gov. "Interstate Commerce Act (1887)." Accessed Nov. 4, 2021. 3. Federal Trade Commission. "The Enforcers." Accessed Nov. 4, 2021. 4. The New York Times. "Google Settles Its European Antitrust Case; Critics Remain." Accessed Nov. 4, 2021. 5. The Financial Times. "EU Rejects Google’s Antitrust Deal Again." Accessed Nov. 4, 2021. 6. The United States Department of Justice. "Justice Department Sues Monopolist Google for Violating Antitrust Laws." Accessed Nov. 20, 2021. Compare Accounts Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Provider Name Description Part Of Guide to Antitrust Laws Guide * Antitrust Laws: Keeping Healthy Competition in the Marketplace 1 of 24 * Understanding Antitrust Laws 2 of 24 * Federal Trade Commission (FTC) Definition 3 of 24 * Clayton Antitrust Act 4 of 24 * Sherman Antitrust Act Definition 5 of 24 * Robinson-Patman Act Definition 6 of 24 * How and Why Companies Become Monopolies 7 of 24 * How Discriminating Monopolies Work 8 of 24 * What Is Price Discrimination? 9 of 24 * Predatory Pricing 10 of 24 * What Is Bid Rigging? 11 of 24 * What Is a Price Maker? 12 of 24 * Cartel 13 of 24 * The Characteristics of Monopolistic Markets 14 of 24 * What Is Monopolistic Competition? 15 of 24 * What Are the Characteristics of a Monopolistic Market? 16 of 24 * Monopolistic Market vs. Perfect Competition: What's the Difference? 17 of 24 * What are Some Examples of Monopolistic Markets? 18 of 24 * A History of U.S. Monopolies 19 of 24 * What Are the Most Famous Monopolies? 20 of 24 * What's the Difference Between a Monopoly and an Oligopoly? 21 of 24 * What Is an Oligopoly? 22 of 24 * Duopoly 23 of 24 * What Are Current Examples of Oligopolies? 24 of 24 RELATED TERMS Sherman Antitrust Act Definition The Sherman Antitrust Act is a landmark U.S. law, passed in 1890, which outlawed trusts, monopolies, and cartels to increase economic competitiveness. more The Celler-Kefauver Act Definition The Celler-Kefauver Act was a law passed by the U.S. Congress in 1950 to prevent anti-competitive mergers and acquisitions (M&A). more Clayton Antitrust Act The Clayton Antitrust Act is designed to promote business competition and prevent the formation of monopolies and other unethical business practices. more Federal Trade Commission (FTC) Definition The FTC is an independent agency that aims to protect consumers and ensure a competitive market by enforcing consumer protection and antitrust laws. more What Is a Monopoly? A monopoly is the domination of an industry by a single company, to the point of excluding all other viable competitors. more Robinson-Patman Act Definition The Robinson-Patman Act is a federal law passed in 1936 to outlaw price discrimination. It amends the 1914 Clayton Antitrust Act. more Partner Links RELATED ARTICLES Sectors & Industries Analysis A HISTORY OF U.S. MONOPOLIES Government & Policy UNDERSTANDING ANTITRUST LAWS Company Profiles WHY DID MICROSOFT FACE ANTITRUST CHARGES IN 1998? Government & Policy A SHORT HISTORY OF THE US FEDERAL TRADE COMMISSION (FTC) Government & Policy WHAT’S IN BIDEN’S EXECUTIVE ORDER PROMOTING ECONOMIC COMPETITION? 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