Antitrust Laws Examples: Everything You Need to Know
In addition, each state has antitrust laws that complement federal laws. Businesses must observe all antitrust laws as they relate to their commercial activities.3 min read
Federal antitrust laws examples include the following:
- Sherman Antitrust Act
- Clayton Act
- Federal Trade Commission Act
- Robinson-Patman Act
In addition, each state has antitrust laws that complement federal laws. Businesses must observe all antitrust laws as they relate to their commercial activities.
What Is Antitrust?
Antitrust laws are statues that apply to nearly all industries and levels of business. The laws are designed to protect competition. Antitrust laws govern transportation, manufacturing, marketing, and distribution. The laws prohibit several practices that restrain trade, and they're necessary for a free and open marketplace.
The types of illegal practices that antitrust laws target include the following:
- Predatory acts to achieve and maintain a monopoly
- Price-fixing conspiracies
- Corporate mergers that have the potential to reduce competition in particular markets
When competition exists among sellers, consumers benefit from lower prices, more choices, better quality, and greater innovation. Companies must provide higher quality products or charge lower prices in a competitive market if they want to be successful.
Violations of antitrust laws are viewed as white-collar crimes since they:
- Cause consumer prices to rise
- Hurt competition
- Hurt the economy
Main Antitrust Laws
In 1890, the Sherman Antitrust Act was passed. This is the main law regarding free market competition. This act prohibits contracts and conspiracies that hurt competition in order to form a monopoly.
The Clayton Act is a civil statute designed to protect competition and prevent skyrocketing prices due to certain business practices, acquisitions, and mergers. The act essentially gives the government the power to challenge large-scale moves by corporations, so it also creates a barrier against monopoly creation.
Another civil statute is the Federal Trade Commission Act, passed in 1914. This act protects healthy competition in the interstate commerce field.
The Robinson-Patman Act of 1936 governs price discrimination. Its purpose is to protect small businesses by limiting the ability of big companies to use their purchasing power to command discriminatory discounts.
Violations of Antitrust Laws
Rockefeller's Standard Oil is one of the most well-known antitrust law examples. The company dropped prices by more than 50 percent and bought up several of its competitors. As its control of the market increased, the company lowered production costs and prices even more while still making bigger profits.
The company bought up several refineries that weren't able to compete. When brought to trial, Standard Oil owned 64 percent of the market with 147 other competitors sharing the rest.
The Microsoft case is another famous example. When the tech company began bundling products such as Windows and Explorer, they ran afoul of the law. In this example, however, other market options existed, such as Apple. Consumers had choices in what to purchase, but Microsoft was still found guilty of violating anti-competition laws. The company lost nearly $70 billion in market value as a result.
Repercussions are still being felt from the forced breakup of AT&T. There are slight differences in this example because AT&T was permitted to work as a natural monopoly for many years. However, the Attorney General filed an antitrust lawsuit against the company in 1974. It took seven years before a verdict was reached. As a result, the company was divided into seven separate regional companies. Today, only three are left: AT&T, Qwest, and Verizon.
The division of Kodak is another example. At one point, the company controlled almost the entire camera and film market in America with a 96 percent share. Kodak won several antitrust lawsuits, but a couple of them led to stronger laws.
In 1921, the company was no longer allowed to sell private-label film under its label. It developed Kodacolor instead, and only Kodak could develop it. The company started including a fee in the pricing structure for processing and delivery. In 1954, this was deemed a violation of the Sherman Act for product “tying.” Kodak was then required to license the film processing to third-party vendors.
Antitrust laws give American consumers a number of benefits. When one company isn't allowed to control the market in a monopoly, the public can shop and compare. Along with lower prices, the diversity of products and services offers consumers a variety of options.
If you need help with legal matters, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.