Congress passed the first antitrust law, the Sherman Act, in 1890 with the goal of "preserving free and unfettered competition as the rule of trade." In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. With some revisions, these are the three core federal antitrust laws still in effect today.
The antitrust laws set forth unlawful mergers and business practices in general terms, leaving the courts to decide which ones are illegal based on the facts of each case. Since their inception, the antitrust laws have served to benefit consumers by protecting the process of competition. When markets are kept truly competitive, businesses tend operate more efficiently, keeping prices down, and quality of goods and services up.
Design of Enforcement - Enforcement of federal (and state) antitrust laws is designed to protect purchasers of commodity products or services. The federal government enforces three major federal antitrust laws (and many states also have their own antitrust laws as well). Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for impacted products and services.
The three major federal antitrust laws are:
(1) The Sherman Antitrust Act;
(2) The Clayton Act; and
(3) The Federal Trade Commission Act
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7
"Section 1" - 15 U.S.C. § 1- This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
"Section 2" - 15 U.S.C. § 2- The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.
The Sherman Act, however, is not violated simply when one firm's vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly.
Nor is the Sherman Act violated by “conscious parallelism.” Yes, it is fine to follow market pricing.
The Clayton Act - 15 U.S.C. §§ 12-27
The Clayton Act is a civil statute (carrying no criminal penalties) that prohibits mergers or acquisitions that are likely to lessen competition. Under this Act, the Government challenges those mergers that are likely to increase prices to consumers. All persons considering a merger or acquisition above a certain size (presently triggers at a transaction size of $80.8 million) must notify both the Antitrust Division and the Federal Trade Commission. The Act also prohibits other business practices that may harm competition under certain circumstances.
The Clayton Act also has a provision that triples damages for violating antitrust laws.
The Federal Trade Commission Act - 15 U.S.C §§ 41-58
This Act prohibits unfair methods of competition in interstate commerce, but carries no criminal penalties. The FTCA also created the Federal Trade Commission to police violations of the Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices, such as coercive monopoly.
The Department of Justice also often uses other laws to fight illegal activities, including laws that prohibit false statements to federal agencies, perjury, obstruction of justice, conspiracies to defraud the United States and mail and wire fraud. Each of these crimes carries its own fine and imprisonment term, which may be added to the fines and imprisonment terms for antitrust law violations.
How Are Antitrust Laws Enforced?
There are three main ways in which the federal antitrust laws are enforced:
(1) Criminal and civil enforcement actions brought by the Antitrust Division of the Department of Justice.
(2) Civil enforcement actions brought by the Federal Trade Commission.
(3) Lawsuits brought by private parties (direct purchasers) asserting claims.
The Department of Justice uses a number of tools in investigating and prosecuting criminal antitrust violations. Department of Justice attorneys often work with agents of the Federal Bureau of Investigation (FBI) or other investigative agencies to obtain evidence. In some cases, the Department may use court authorized searches of businesses and secret recordings by informants of telephone calls and meetings.
Corporate leniency/immunity: The Department of Justice may grant immunity from prosecution to co-conspirators (individuals or corporations) who provide timely information that is needed to prosecute others for antitrust violations, such as bid rigging or price fixing. This immunity is typically granted only to the first conspirator who walks in the door to spill the beans. Leniency is also typically granted based on continuing cooperation with respect to all known conspiracies.
This often results in a cascade of conspiracies being exposed within an industry.
A provision in the Clayton Act also permits private parties injured by an antitrust violation to sue in federal court for three times their actual damages plus court costs and attorneys’ fees. State attorneys general may bring civil suits under the Clayton Act on behalf of injured consumers in their States, and groups of consumers often bring suits on their own. Such civil suits following, and sometimes even in advance of or in place of, criminal enforcement actions can be a very effective additional deterrent to criminal activity.
The Department of justice specifically recognizes private civil enforcement as a needed tool in its arsenal.
Some states also have antitrust laws closely paralleling the federal antitrust laws, the state laws generally apply to violations that occur wholly in one state. These laws typically are enforced through the offices of state attorneys general.
To learn more about private antitrust enforcement, contact us today!