US anti-trust law is a collection of laws from the federal and state governments that govern the conduct and organization of commercial corporations, typically to promote fair competition for consumers.
The main legislative acts are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These laws, firstly, restrict the formation of cartels and prohibit other conspiracies that restrict trade. Secondly, they limit mergers and acquisitions of organizations, which can significantly reduce competition. Thirdly, they prohibit the creation of a monopoly and the abuse of monopoly power. US antitrust laws are briefly described in this article.
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Legislation has been evaluated differently by politicians at different times. The Federal Trade Commission, the U.S. Department of Justice, state governments and private individuals who are sufficiently affected can file a lawsuit to enforce antitrust laws. The scope and extent to which this area of ââlaw should interfere with the freedom of the enterprise to conduct business or protect small enterprises, communities and consumers is widely discussed.
One point of view, largely tied to the Chicago School of Economics, suggests that antitrust laws should focus solely on consumer benefits and overall efficiency, while a wide range of legal and economic theories view the role of antitrust law as a control of economic power . It exists strictly in the public interest.
Legal context
Although the term âtrustâ in this context has a specific legal meaning (when one person owns property in the interests of another), at the end of the 19th century this word was widely used to mean large business, since this legal tool was often used to combine companies. Large industrial conglomerates arose in large numbers in the 1880s and 1890s and were considered to have excessive economic power.
The Interstate Commerce Act of 1887 began a shift toward federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936 and the Cheller-Kefauer Act of 1950. Since many people are studying antitrust law, scientific articles about it have been written by many well-known economists around the world.
At this time, hundreds of small short railways were bought up and combined into giant systems. With regard to railways and financial problems, such as banks and insurance companies, separate laws and policies have emerged. People in favor of strong antitrust laws argued that the success of the US economy would require free competition and the ability for individual Americans to build their own businesses.
As Senator John Sherman said: If we do not tolerate the king as a political force, we must not tolerate the king for the production, transportation and sale of any necessities. Congress almost unanimously passed the Sherman Antitrust Act in 1890, and it remains the core of antitrust policy.
The law prohibits trade restriction agreements and abuse of monopoly power. This gives the Ministry of Justice the right to apply to the federal court for orders to end illegal behavior or apply remedies.
Decision-making
Government officials during the Progressive Era put the adoption and implementation of strong US antitrust laws on their agenda. President Theodore Roosevelt sued 45 companies under the Sherman Act, and William Howard Taft sued 75. In 1902, Roosevelt suspended the creation of the Northern Securities Company, which threatened to monopolize transportation in the Northwest.
Trusts and Companies
One of the most famous trusts was the Standard Oil Company; John D. Rockefeller, in the 1870s and 1880s, used economic threats against competitors and secret discount agreements with the railways to build the so-called monopoly in the oil business, although some small competitors remained in the business. In 1911, the Supreme Court ruled that in recent years (1900â1904), the Standard Oil Company violated Shermanâs law.
They broke the monopoly into three dozen separate companies that competed with each other, including Standard Oil of New Jersey (later known as Exxon, and now ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company from New York (Mobil, again later teamed up with Exxon to form ExxonMobil), California (Chevron) and so on.
Affirming the collapse, the Supreme Court added a ârule of reasonâ: not all large companies and not all monopolies are evil; and the courts (not the executive branch) must make this decision. To be harmful, trust had to somehow harm the economic environment of its competitors.
The 80s
In 1982, the Reagan administration used Shermanâs law to split AT&T into one long-distance company and seven regional âbellsâ, arguing that competition should replace the monopoly for the benefit of consumers and the economy as a whole.
The pace of business capture accelerated in the 1990s, but whenever one large corporation sought to acquire another, it first had to get approval from either the FTC or the Department of Justice. Often the government demanded the sale of certain subsidiaries so that the new company does not monopolize a specific geographic market.
End of the millennium
In 1999, a coalition of 19 states and the Federal Department of Justice sued Microsoft. A widely publicized study showed that Microsoft has combined many companies in an attempt to prevent competition from the Netscape browser. In 2000, the trial court ordered Microsoft to split into two parts, which prevented further bad behavior.
The Court of Appeal dismissed the judge from the case and terminated his discussion with the media while it was still pending. Having discussed issues before the new judge, Microsoft and the government settled the case. It was closed in exchange for Microsoft agreeing to cease many of the actions disputed by the government.
In his defense, CEO Bill Gates claimed that Microsoft has always worked on behalf of the consumer. A split in the company will reduce efficiency and slow down the pace of software development.
Functions of Antitrust Law
Prevention of collusion and cartels operating in conditions of trade restrictions is its main task. This reflects the view that each business is obliged to act independently in the market, and thus, make its profit solely by providing better and better products than its competitors.
The functions of US antitrust law are crucial. It does not take into account the decisions of one enterprise or one economic entity, even if the form of the entity may be two or more separate legal entities or companies. This reflects the opinion that if the enterprise (as an economic entity) has not acquired a monopoly position or has significant market power, then there will be no harm.
The same rationale has been extended to joint ventures, where corporate shareholders make decisions through the new company they create. In Texaco Inc. against Daguerre, the Supreme Court unanimously ruled that the price set by the joint venture between Texaco and Shell Oil was not considered an illegal agreement. Thus, the law makes "the main difference between concerted and independent action."
Main categories of agreements
Multidisciplinary behavior, as a rule, is considered more likely than single-profile behavior, which has a clearly negative effect and is âevaluated more strictlyâ. Typically, the law defines four main categories of agreements.
First, some agreements, such as pricing or dividing markets, are automatically illegal or illegal in themselves.
Secondly, since the law does not aim to prohibit any agreements that impede freedom of contract, he developed a ârule of reasonâ in which practice can restrict trade in a way that is considered positive or beneficial to consumers or society.
Thirdly, serious problems with the proof and identification of misconduct arise when enterprises do not enter into open contacts or simply exchange information, but act together.
Silent collusion, especially in concentrated markets with few competitors or oligopolists, has led to significant controversy as to whether antitrust authorities should intervene.
Fourth, the upstream or downstream vertical agreements between the business and the supplier or buyer raise concerns about the use of market power, but they generally obey a relaxed standard under the ârule of reasonâ.
Sherman Law Details
If the antitrust claim does not fall into the illegal category per se, the plaintiff must show that the behavior is harmful under the ârestriction of tradeâ in accordance with § 1 of the Sherman Act, according to âfacts specific to the business to which the restriction appliesâ. In essence, this means that if the plaintiff cannot point to a clear precedent similar to the situation, proving the anticompetitive effect is more difficult. The reason for this is that the courts tried to draw a line between actions that restrict trade in the âgoodâ versus the âbadâ way. In the first case, the US Supreme Court
In the first case, the US Supreme Court (US Association Against Trans-Missouri) found that railroad companies acted illegally, creating an organization that regulates freight prices. He also ruled that the railway companies acted illegally, creating an organization that regulates transportation prices.
Railways protested that their prices were low rather than high. The court found that this was not true, but stated that not all âtrade restrictionsâ could literally be illegal. Just as in accordance with general law, the restriction of trade was to be "unreasonable."
In the Chicago Board of Trade v. United States, the Supreme Court established a âgoodâ trade restriction. The Chicago Board of Trade had a rule according to which commodity merchants were not allowed to privately agree to sell or buy after the market closes (and then enter into transactions the next day open).
The reason the Trade Council adopted this rule was to provide equal opportunities for all traders to trade at a transparent market price. This clearly limited trade, but the Chicago Board of Trade argued that it was profitable. Brandis J., in deciding by a unanimous Supreme Court, held that this rule encouraged competition and was consistent with the rule of reason. This did not violate Shermanâs Law § 1.
Specialization
Although Shermanâs law of 1890 initially concerned, in general, cartels (where enterprises combined their activities to the detriment of others) and monopolies (where one business was so large that it could use its power to the detriment of others), it was recognized that this left a gap.
Instead of forming a cartel, enterprises can simply merge into one. The period between 1895 and 1904 It was marked by the âgreat merger movementâ when business competitors merged into even more giant corporations. However, after a literal reading of the Sherman Act, no remedy could be provided until the monopoly was already formed.
Claytonâs Law of 1914 attempted to fill this gap by providing jurisdiction to prevent mergers, primarily if they âsignificantly reduce competition.â
Historical meaning
Antitrust antitrust laws regarding monopolies are potentially the strongest in antitrust law. Remedies can lead to the breakup of large organizations, compliance with positive obligations, huge fines can be imposed and / or people can be sentenced to imprisonment.
According to § 2 of the Sherman Act of 1890, every "person who must monopolize or try to monopolize ... any part of trade or commerce between several states" commits a crime.
The courts interpreted this as meaning that the monopoly itself is not illegal, but only if it is acquired as a result of prohibited behavior.
Historically, when judicial remedies to combat bargaining power ceased, state legislatures or the federal government still intervened to acquire state ownership of the enterprise or subject the industry to regulation in specific sectors (often done, for example, in water, education, energy or healthcare).
The Public Services and Administration Act goes far beyond the scope of US anti-democratic and antitrust laws regarding monopolies. At one time it made a lot of noise.
When enterprises are not in state ownership, where regulation does not preclude the application of antitrust law (the prerequisites for the occurrence of which were discussed earlier), two requirements should be indicated with respect to the crime of monopolization.
First, the prospective monopolist must have sufficient power in a clearly defined market for its goods or services. Secondly, the monopolist had to use his power in a forbidden way. Categories of prohibited behavior are not closed and are disputed in theory. Historically, they included exclusive deals, price discrimination, refusal to supply fixed assets, product pegging and predatory prices.