Understanding Antitrust Laws

Generally speaking, competition in business is beneficial to consumers and businesses alike. It is also advantageous to the US economy. Open competition in the marketplace helps ensure that the prices for goods and services remain fair and reasonable. Without competition, or when one company monopolizes the market for a specific product or service, prices skyrocket and quality decreases.

With competition also comes innovation. When companies must compete, they are pushed to develop new and better products to secure a consumer’s business. Competition also encourages businesses to understand and respond to consumer needs or risk losing relevancy and market share.

Why Antitrust Laws Matter

Both federal and state governments have enacted antitrust laws to protect consumers, businesses, and the US economy at large. These laws prohibit anti-competitive and monopolistic business practices. By enforcing these laws, consumers are projected to save millions (if not billions) of dollars annually. In this blog, we will take a look at the three primary federal antitrust laws in the US.

There are three main federal antitrust laws:

  • The Sherman Antitrust Act
  • The Clayton Act
  • The Federal Trade Commission Act

Antitrust laws like these oversee a wide range of business practices, and as such antitrust legislation is incredibly nuanced. For example, it not only protects consumers from the harm that comes from price fixing, rigging bids, and customer allocation, but it also acknowledges that there are situations in which competitors need to be able to collaborate (such as when performing research).

Keep reading to learn more about these three federal antitrust laws.

The Sherman Antitrust Act

Dating back to the late 19th century, the Sherman Antitrust Act prohibits the unreasonable restraint of interstate and foreign trade through contracts, combinations, and conspiracies. It also criminalizes the monopolization of any part of interstate commerce. Examples of Sherman Antitrust Act violations include agreements to price fix or a monopoly achieved through competition suppression and/or anticompetitive conduct.

The Department of Justice is the only agency that can bring criminal charges under the Sherman Antitrust Act. Violators may face significant punitive fines (up to $1 million for individuals and $100 million for corporations) and prison time.

The Clayton Act

The Clayton Act, originally passed in 1940 and amended in 1950, prohibits certain mergers and acquisitions that would limit or reduce competition and which are likely to increase prices to consumers. If the Federal Government believes that a merger falls into this category, it will challenge it.

A recent, well-known example of a large acquisition that the Federal government challenged was Disney’s acquisition of 21st Century Fox. The deal was initially challenged due to concerns that the purchase would harm competition in the marketplace and cause consumer price increases. Ultimately, a settlement was reached in which Disney agreed to sell Fox’s 22 regional sports networks.

Unlike the Sherman Act, the Clayton Act carries no criminal penalties. Additionally, individuals and corporations planning a merger or acquisition of a certain size may be required to notify the Antitrust Division and the Federal Trade Commission before proceeding.

The Federal Trade Commission Act

This Act prohibits unfair methods of competition and/or unfair or deceptive practices concerning interstate commerce. The Federal Trade Commission Act created the Federal Trade Commission (FTC) to police Act violations. As such, the FTC is empowered through this Act to seek monetary redress and relief when a business’ conduct harms consumers.

This act also enables the FTC to define and prescribe rules and requirements prohibiting harmful business practices. Other responsibilities of the FTC include compiling information, conducting investigations, and making reports and legislative recommendations to both Congress and the public.

Like the Clayton Act, the Federal Trade Commission Act does not have criminal penalties.

Dealing with Antitrust Violations

While many Americans are unfamiliar with the specifics of antitrust laws, they likely have heard of some high-profile antitrust litigation cases. In particular, the pharmaceutical industry has had many antitrust issues in recent years. In particular, pay-for-delay and/or reverse payment issues have been common. In these situations, a branded drug manufacturer may agree to pay the producer of a generic drug to delay the release of their product. This harms competition and, by extension, consumers.

Industries that have recently been hit with antitrust violations:

  • Pharmaceuticals
  • Medical device manufacturing
  • Media and entertainment
  • Publishing
  • Tech

So, what should you do if you believe you have been harmed by an antitrust violation? This question has a relatively simple answer: contact a lawyer experienced in antitrust litigation, like Golomb Legal. In particular, we recommend working with a law firm that, like ours, is experienced in handling both individual and class action antitrust cases and which has a nationwide presence.

We know that going up against a major corporation, media conglomerate, or pharmaceutical company can be overwhelming and scary. Our team is here to help. Give our Philadelphia-based attorneys a call at (215) 278-4449 or contact us online to schedule a consultation.