Is your business being harassed by a bigger, more established company? Do you suspect a monopoly that clearly burdens other companies being formed in your area of business? Do you know of two or more companies that have met to discuss who will be the clear winner of a business contract? If you answered one or more of these questions, then you might want to consider filing an antitrust lawsuit! But what does “antitrust” even mean, and can you trust the legal process involved in it? Here’s what you need to know.
What is antitrust?
“Antitrust” simply refers to that which is against a trust or trust. According to Investopedia, trusts refer to groups of businesses that team up or form monopolies to dictate prices or other market forces in a given market. Trusts, or industrial monopolies, were first set up near the turn of the 20th century.
By the late 1800s and early 1900s, the term “trust” was used in the United States of America as a term to describe a new type of enormous corporation; as business tycoons in the banking, oil, railroad, and steel industries began to form larger corporations or conglomerates by corralling smaller businesses. With just one or two companies controlling an entire industry, there was no fair market competition. As a result, smaller businesses suffered, and consumers had fewer choices in the market. The prices of goods and services also went up. This caused hardship and threatened the prosperity enjoyed by the Americans of the time. President Theodore Roosevelt was the first to attempt to break up the many trusts and undo the economic havoc they created. He did so by enacting what was eventually known as “antitrust” laws.
What is antitrust law?
Antitrust law is a regulation that encourages and preserves competition among businesses in a given market by limiting the market powers of any particular firm or conglomerate. This means preventing any one business from taking over an entire industry and creating a monopoly. If you think about it, antitrust law is essentially the law of fair market competition. Antitrust laws are developed by governments, notably the American government, to protect consumers and regulate companies. Just remember that the ultimate objective of antitrust laws is to protect consumers by safeguarding the process of market competition and ensuring it fosters.
Antitrust laws were also created by the United States Congress to ensure that corporate mergers and acquisitions don’t manage to form monopolies and overly consolidate market power. Antitrust laws are an integral part of the foundation that supports U.S. capitalism.
Here are the three main ones:
The Sherman Antitrust Act – Passed in 1890. The fundamental law of antitrust policy in America. This law prohibits groups of businesses from working together or engaging in contracts, combinations, and conspiracies that restrain free trade (ex. creating a monopoly to control pricing in an industry).
The Federal Trade Commission Act – Passed in 1914. This law led to the creation of the Federal Trade Commission (FTC) as an independent government agency tasked with enforcing antitrust laws to protect the consumer.
The Clayton Antitrust Act – Also passed in 1914, revised in 1950. It allows the federal government to regulate large-scale business activities by corporations, especially those suspected of becoming monopolies and enforce antitrust provisions. It also expands upon the Sherman Antitrust Act by including ill-intended mergers and acquisitions in its scope.
Due to its complex nature, and the many factors involved in what makes certain business practices illegal, antitrust law is a unique legal specialization. Antitrust laws, and therefore, the nature of what is an antitrust lawsuit, are both continuing to be developed around the world as global markets change.
What is an antitrust lawsuit?
Antitrust lawsuits are legal means used to halt practices – by a trust – that restrain free trade in any given competitive market. Such lawsuits also aim to seek compensation for those harmed by these types of malpractices.
Antitrust lawsuits can also be filed individually by consumers, but most are class action cases because many people or consumers can become involved. Furthermore, any two or more business entities (companies or competitors of a specific company) may file an antitrust lawsuit claiming that a particular company is engaged in anti-competitive strategies. One must also know that there are various types of anti-competitive practices that become subjects of antitrust lawsuits.
The common types are listed below:
Monopolies – formed when one or more companies or entities have taken control of most businesses in an economic sector.
Agreement to divide markets – when companies agree to only sell to certain customers or only sell in certain parts of a country.
Bid rigging – when competing companies or entities agree in advance who will submit a winning bid for a business contract.
Exclusive dealing – when a distributor agrees to only deal with and purchase from a specific supplier or manufacturer, and by doing so, secures a significant amount of market share.
Price discrimination – when a seller reduces the prices of goods only in certain locations or gives promotions and rebates only to certain consumers.
Price fixing – when competing companies or entities agree to set prices of goods or services at a specific point or simply raise them.
Tying – when a company conditions a purchase of one good or service (the tying good or service) on the purchase of a second good or service (the tied good or service). Also known as bundling.
There is still some debate about whether antitrust laws are truly trustworthy, as some say that such laws can impede competition instead of promoting it and may discourage businesses from pursuing activities that would be beneficial to the market at large. Other theories suggest that antitrust laws should concentrate more on the benefits to consumers and overall efficiency, while alternative socioeconomic views see the role of antitrust law as being an exemplar of that which it is trying to curb (controlling market power). Be that as it may, if ever you find yourself in a legal bind by untrustworthy forces, now you know how to go about it!
Deinah Storm used to work in the corporate world as a marketing affiliate. She quit her job to pursue her passion for writing, but to this day, Deinah is committed to educating consumers about the different marketing scams and how to avoid them.