Antitrust laws prohibit anti-competitive practices that restrict free trade and competition in the marketplace. Some common antitrust violations include:
Price Fixing
Price fixing occurs when competitors conspire to artificially set prices at a certain level. This eliminates price competition between firms and forces consumers to pay higher prices than they would if pricing was determined by normal market forces of supply and demand.
Bid Rigging
Bid rigging happens when competing firms or individuals collude to determine who will submit bids for contracts and at what prices. This scheme defrauds purchasers who expect to receive competitive bids.
Dividing Markets
Dividing markets refers to agreements among competitors to divide customers, territories, products or services among themselves to avoid competing with each other. This limits consumer choice and prevents competition that would normally happen across territories and product lines.
Tying Arrangements
Tying is when a seller requires a customer who purchases one product to also purchase a second product that the buyer may not want or need. This forces acceptance of the tied product and excludes other sellers from successfully competing for the tied product business.
Monopolization
Monopolization refers to anti-competitive conduct designed to build or maintain a monopoly or otherwise unlawfully acquire market power without superior performance. Tactics may include exclusionary conduct, predatory pricing, tying arrangements and acquisitions of rivals that substantially reduce competition.
Exclusive Dealing
Exclusive dealing agreements require a buyer to purchase products or services exclusively from one seller for a period of time. This can unlawfully foreclose competition in the marketplace by shutting out competing sellers from the relevant market.
Refusal to Deal
Refusal to deal involves an entity with market power using that power to refuse to deal with another entity, with the effect being to limit that other entity’s ability to compete. This conduct excludes rivals and harms the competitive process.
Mergers & Acquisitions
Mergers and acquisitions that significantly reduce competition in a market are prohibited under antitrust law. Competition authorities review M&A to determine whether the proposed transaction will have anti-competitive effects.
Predatory Pricing
Predatory pricing is when a company with market power deliberately prices its goods or services below cost in order to drive competitors out of business. Once competition is eliminated, the firm raising prices to monopoly levels.
Notable Antitrust Cases
Here are some examples of major antitrust cases in the United States:
Case | Year | Details |
---|---|---|
Standard Oil Co. of New Jersey v. United States | 1911 | Supreme Court ruled Standard Oil’s monopolistic practices violated the Sherman Antitrust Act and ordered the breakup of the company. |
United States v. Aluminum Co. of America | 1945 | Judge Learned Hand ruled that Alcoa monopolized the aluminum industry in violation of the Sherman Act. |
United States v. Microsoft Corp. | 1998 | DOJ and 20 states sued Microsoft for illegally maintaining its monopoly position by using exclusionary practices to fend off emerging threats to its operating system. |
United States v. Apple Inc. | 2013 | DOJ sued Apple and publishers for conspiring to raise prices of e-books in violation of Section 1 of the Sherman Act. |
Penalties for Antitrust Violations
There are a range of civil and criminal penalties that can be imposed for antitrust violations in the United States:
- Injunctive relief – Courts can issue injunctions to stop illegal conduct and remedy anticompetitive effects.
- Fines – Criminal antitrust violations carry fines up to $100 million for corporations and $1 million for individuals, plus up to 10 years imprisonment.
- Treble damages – Plaintiffs in civil antitrust suits can recover three times their actual damages.
- Restructuring – Divestiture, spin-offs and restructuring may be required to remedy anticompetitive harms.
Strong enforcement of antitrust laws aims to promote vigorous competition and consumer welfare. However, businesses must be careful to avoid collusion and exclusionary practices that unlawfully undermine the competitive process.
Conclusion
Antitrust laws are vital to protecting consumers and businesses from anti-competitive behavior that artificially inflates prices and limits choices. Key antitrust violations include price fixing, bid rigging, market division, tying, monopolization, exclusive dealing, refusal to deal and mergers that harm competition. Landmark antitrust cases have targeted monopolists like Standard Oil and Microsoft. Significant civil and criminal penalties serve as a deterrent to illegal anti-competitive activities.