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GUIDE TO ANTITRUST LAWS

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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

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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
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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.

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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

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