Antitrust and the Regulation of Trade in the United States
In the United States, both state and federal statutes seek to protect free trade by prohibiting activities that constitute an unlawful restraint, including price-fixing and the establishment of monopolies.
The Sherman Antitrust Act
The Sherman Antitrust Act was passed in 1890, to combat the use of certain types of trusts by corporations to circumvent state laws prohibiting corporations from owning the stock of other corporations. At that time, large corporations were using these trusts to purchase a controlling interest in their competitors, and then artificially raise prices by limiting supply. The act has two separate sections:
- A violation of Section One occurs when there is an agreement which unreasonably restrains competition, and which affects interstate commerce
- A violation of Section Two occurs when a single company has possession of monopoly power in a specific market, and that monopoly power came from willful acts of acquisition, rather than from a superior product, superior business skills, or historical accident.
Related GetLegal.TV Videos
Certain acts are considered to be “per se” violations of the Sherman Act, meaning that there does not need to be any inquiry into whether or not the action had an effect on the market. Per se violations include horizontal price fixing, horizontal market division, and concerted refusals to deal.
If an act is not per se violation, it may still run afoul of the law under the “rule of reason.” Under this provision, the court will look at the totality of the circumstances involved, seeking to determine whether the practice promotes or interferes with competition.
The Clayton Act
An unfortunate consequence of the Sherman Act was its use by corporations to prohibit any organization by workers. Furthermore, while the Sherman Act prohibited cartels or trusts, it did not preclude mergers. In the wake of the Sherman Act, the United States saw the largest number of mergers in American history, as business owners sought to accomplish through mergers what could not be done through other means.
The key components of the Clayton Act include:
- A prohibition on price discrimination between different purchasers, if doing so lessens competition
- A prohibition on certain types of exclusive dealings, or on requiring that buyers also purchase other products, when doing so will lessen competition
- A prohibition on mergers and acquisitions that will lessen competition
- A prohibition on any person being a director of two or more competing corporations
- An exemption for labor unions and agricultural organizations
Why the Supreme Court Matters
With the nomination of Judge Brett Kavanaugh to the Supreme Court, that august judicial body and its…Read More 20 Jul 2018, Friday
The End of MAVNI: Military Service and Paths to Citizenship
Back in 2009, the Department of Defense instituted a new program called MAVNI: Military Accessions V…Read More 16 Jul 2018, Monday
Child Protective Services Investigations Explained
Every state maintains an agency that is authorized to receive and investigate reports of alleged chi…Read More 06 Jul 2018, Friday