Antitrust law refers to the extensive category of federal and state laws that aim to ensure that enterprises operate honestly and fairly. The objective of these laws is to create a level playing field in the free market and disallow organizations from wielding excessive power.
Antitrust law perceives a trust as a large group of companies that work with each other or in combination to create a monopoly or control the market. The Interstate Commerce Act of 1887, the Sherman Act of 1890, the Federal Trade Commission Act of 1914 and the Clayton Act of 1914 are the most significant antitrust laws in the US.
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Need for Antitrust Laws
Antitrust laws disallow companies from indulging in specific activities aimed at developing monopolies. These regulations prohibit what some people perceive as deceptive trade practices that companies may want to employ to stay ahead of the competition. In other words, antitrust regulations forbid companies from using dirty poker to beat the competition.
What do antitrust laws disallow?
Antitrust regulations do not ban a company from holding a large market share if they achieve this by legitimate means. These laws ban any acts that are aimed at developing a monopoly using unfair strategies. The courts use the “rule of reason” test to establish whether an activity is illegal. They consider the business decision’s impact on the market.
Laws and court cases offer more direction
Courts offer more direction on the types of behaviors that constitute antitrust contraventions as government bodies, and private entities bring lawsuits against alleged violators.
The courts state that specific acts such as group boycotts, group agreements, or price fixing to control business activities in particular markets amount to antitrust activity by default. But no two cases are identical. In every case, the court has to understand exactly what transpired and arrive at a decision.
The Sherman Act is the fundamental law that disallows antitrust behavior. Courts can hand out civil and criminal penalties including up to ten years imprisonment and a fine of $1 million for each offense. Companies can also be levied with a fine that amounts to twice the amount of profits that they garnered from the illegal activity.
The Clayton Act, which is an antitrust Act that emerged soon after the Sherman Act, specifically identified unlawful behaviors. For instance, the Clayton Act disallows an intermingled directorship where one individual is in charge of making business decisions for two or more rival entities.
How does an organization know if they are contravening an antitrust law?
It is not always apparent on the surface whether a company is in violation of antitrust law. This aspect involves the specificities of each case. The courts and regulating bodies have to understand the facts of the case to arrive at a decision.
It is a wise move for companies to seek reliable legal counsel as they strategize significant changes such as mergers and acquisitions to ensure that they remain on the right side of antitrust laws.
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