Antitrust laws - also referred to as "competition laws" - are statutes developed by the U.S.

Government to protect consumers from predatory business practices by ensuring that fair
competition exists in an open-market economy. Antitrust laws are applied to a wide range of
questionable business activities, including but not limited to:

Market Allocation:
Suppose my company operates in the Northeast and your company does business in the
Southwest. If you agree to stay out of my territory, I won't enter yours, and because the
costs of doing business are so high that startups have no chance of competing, we both
have a de facto monopoly.

Bid Rigging: There are three companies in an industry, and all three decide to quietly
operate as a cartel. Company 1 will win the current auction, so long as it allows Company
2 to win the next and Company 3 to win thereafter. Each company plays this game so that
all retain current market share and price, thereby preventing competition.

Price Fixing: My company and your company are the only two companies in our
industry, and our products are so similar that the consumer is indifferent between the two
except for price. In order to avoid a price war, we sell our products at the same price to
maintain margin, resulting in higher costs than the consumer would otherwise pay.

Antitrust law is the law of competition, and it is perhaps the least understood law of all. This
article provides an overview and explanation of the essential principles of antitrust law, along
with comments on certain recurring themes and recent developments in the voluminous case law
by which the courts have struggled to give meaning and practical effect to the principal antitrust
statutes.
What Is Antitrust Law? Broadly speaking, antitrust laws seek to promote fair competition on
the merits and to protect consumers and wronged competitor businesses from anti-competitive
business practices practices undertaken in effort to undermine competitive commercial
behavior in a given market or line of commerce.
The antitrust laws therefore forbid the wrongful acquisition or preservation of monopoly power,
the abuse of monopoly power in order to establish a new monopoly, and concerted restraints of
trade (i.e., business practices undertaken by two or more firms that improperly stifle or suppress
competition on the merits in a given market). They also govern proposed mergers and
acquisitions that are sufficiently large to constitute a threat to competition, and they address
commercial practices that pose an arguable danger to competition on the merits in a properly
defined antitrust market.
The Principal Antitrust Offenses. Antitrust law is the law of competition. It is concerned with
wrongs committed against competition on the merits in a given line of commerce or market. It is
never enough for a plaintiff to allege that it has been harmed by an unscrupulous defendant.
Rather, an antitrust plaintiff must show that the defendant or defendants have undermined
competition in a distinct market, and that this injury to competition in general has specifically
harmed the plaintiff in particular. Thus a plaintiff in an antitrust case must make a showing of
antitrust harm with ensuing antitrust injury to the plaintiff itself.
Allow me the following example to illustrate the point more vividly. If I own a restaurant in San
Diego, and if I maliciously set fire to two other restaurants because I resent their flourishing
success, I have clearly broken the law: I can be prosecuted criminally for arson and sued by the
wronged, destroyed restaurants for intentional malfeasance, tortious interference, and very likely
other civil wrongs. But my act, however evil, causes no harm to the thriving restaurant scene in
San Diego. I have done nothing that even remotely upsets competition on the merits for
restaurant dining in San Diego.
But suppose that my restaurant and the two other restaurants are all located on a remote island in
the far away Pacific. If I burn them to the ground, then my restaurant alone will be the one
restaurant remaining for the residents of this otherwise idyllic island. Suppose that I start
charging them $50 for a plate of eggs and potatoes, quipping that if they dont like my service,
they can eat at some other restaurant oh, I forgot, there are no other restaurants! My act of
arson, if done under such circumstances, has likely caused harm to competition on the merits for
restaurant services on this island.

Lets suppose further that this remote Pacific Island is a territory of the United States and is
therefore subject to U.S. antitrust law. When I am sued for redress under these laws, my clever
antitrust attorneys will argue that, whatever else I might have done, I have not harmed
competition on the merits because if I try to raise my prices for my restaurant services, others
will soon establish competing restaurants to sell to customers who are disenchanted with my
prices. This is the stuff of antitrust law, not mere arson and malicious misconduct. In this case, I
would likely lose and be forced to pay three times the value of the harm that my misconduct has
caused to competitors and customers alike, assuming the customers started a class action and my
two ruined competitors also brought their own suit for lost profits. This is because a successful
plaintiff in an antitrust case is entitled to treble damages and attorneys fees and often can also
obtain injunctive relief.
Suppose that I set the fire in San Diego, but I have done so because my restaurant and the two
others are the only ones in the area that serve a rare delicacy cuisine known to its aficionados as
Fuji-style cooking. In such a case my erstwhile competitors might sue me under the antitrust
laws for causing antirust harm in the market for Fuji-style cooking in the San Diego region.
In other words, antitrust law is the law of competition, and it exists to protect against harm done
to an entire market, not harm done merely to a particular business or consumer.
The antitrust laws are set forth in various federal statutes, most notably the Sherman Act and the
Clayton Act. There are also copycat statutes in virtually every state. The federal statutes use
conspicuously general language to proscribe monopolization and restraints of trade, leaving
to the courts the task of articulating what is meant by these terms. The California antitrust
statutes in effect adopted the federal prohibition of restraints of trade, but do not prohibit
monopolization, and in recent years the federal courts and the California courts have diverged in
their analysis of trade restraints.
The two principal antitrust offenses are monopolization and conspiracy to restrain trade.
There is a third signal antirust offense, abuse of dominant position, which is not expressly
forbidden under the U.S. laws, but which is proscribed by the competition laws of other
jurisdictions, most notably the European Union and Canada. In the U.S., a plaintiff can assail this
kind of offense by claiming misuse of existing monopoly power to establish a new monopoly
(monopolization) or in an attempt to do so (attempted monopolization).
Monopolization. Monopoly power means the power held by a single firm to raise prices, offer
inferior products or impose other onerous terms on its customers for an extended period without
fear of losing business to a rival firm that can offer better prices, products or terms. It is thus the
power to restrict output (the quantity or quality of products sold) and is sometimes
characterized by the courts as the power to control prices or exclude competition. Practically
speaking, a firm has monopoly power if a substantial number of the customers who purchase the
kind of products it sells must purchase these products from it and cannot turn to a rival firm in
order to make the purchase, owing to high barriers to expansion and entry (i.e., existing rivals
cannot readily increase their own production in response to the monopoly firms raising of its
prices or imposition of onerous terms, and in addition new firms cannot readily enter the market
in order to do so).

Not every instance of monopoly power is unlawful. Some firms acquire it by superior skill or
from fortuitous circumstance. The offense of monopolization specifically condemns only the
wrongful acquisition or maintenance of monopoly power: A firm commits the offense and
becomes liable under Section 2 of the Sherman Act if it obtains or preserves monopoly power by
means of anticompetitive practices. To prove the offense, a plaintiff must show that (1) the
defendant wields monopoly power, and (2) the defendant used anticompetitive practices in order
to acquire or maintain this power.
There are various standards and tests used to decide these issues. The common feature of all
anticompetitive practices is that they hinder or ruin the commercial opportunities of the
defendants rivals more than they improve its own offerings. The best and simplest test to
evaluate whether a challenged practice is anticompetitive is to determine whether the defendant
has employed it to improve its own offerings or to sabotage or undermine its rivals, but there are
all manner of doctrines and theories on this essential, often elusive point. Broadly stated, a firm
commits unlawful monopolization if it employs commercial practices measures whose calculated
purpose and effect are to destroy its rivals opportunities, so that it alone can acquire or preserve
monopoly power over a certain line of goods or services for which there is no readily available
substitute (e.g., the market for food wrapping, but not the market for either cellophane wrapping
or tin foil, since either kind of wrapping is a readily available substitute for the other).
To prove monopolization, it is usually necessary to prove the relevant product and geographic
market in which the monopolization is alleged to have occurred. A claimant seeking relief for
alleged monopolization must therefore establish the proper definition of the relevant market,
and then demonstrate that (1) the alleged monopolist indeed possesses monopoly power in this
market; (2) the monopolist acquired or preserved its monopoly position by employing
exclusionary or anti-competitive practices that excluded its rivals from the market; and (3) the
claimant suffered proximate losses in direct consequence of the anticompetitive exclusion. A
claimant can be a wrongly excluded competitor, a suffering customer, or a class representative of
suffering customers (i.e., customers who have been obliged to submit to higher prices or other
commercial disadvantages).
It is likewise an offense for two or more independent firms to conspire together so that one firm
can acquire or maintain monopoly power. This offense is called conspiracy to monopolize. It is
also an offense when a firm employs anticompetitive practices with the specific intent of
acquiring monopoly power, but only if there is a dangerous probability that it will succeed in the
effort. These offense is called attemped monopolization.
The monopolization offenses are set forth in Section 2 of the Sherman Act and in the many cases
that have interpreted this statute.
Conspiracies to Restrain Trade. In addition, it is unlawful for two or more independent firms to
act in concert to restrain trade in a given line of commerce. Certain kinds of trade restraints
are deemed per se violations. Others are condemned after an abbreviated inquiry or a quick
look at the challenged practice. Still others are condemned, if ever, only after a laborious
examination of the challenged conduct in accordance with the so-called Rule of Reason.

To prove a per se violation of Section 1 of the Sherman Act, it is not necessary to prove the
relevant market or any anti-competitive consequence caused by the challenged conduct. It is
sufficient to prove that the challenged conduct occurred, and its anticompetitive effect is then
conclusively presumed. Even so, a private plaintiff must show that it suffered losses because of
an anticompetitive (or competition-suppressing) aspect of the per se violation. The per se
offenses in the modern era are limited to horizontal price-fixing (but not vertical price restraints
such as resale price maintenance), bid-rigging, and horizontal market allocation.
In addition, the courts use abbreviated reviews in order to condemn certain kinds of tying
arrangements and group boycotts. Broadly speaking, an unlawful tying arrangement is one by
which a firm that has market power in one product market sells the product in question to its
customers only on condition that they also purchase a second, separate product from it (there are
many ways by which firms attempt this practice). A group boycott occurs when two or more
direct competitors, possibly acting in connivance with their own supplier or customer, withhold
necessary resources from one or more targeted businesses, which in consequence cannot
become or remain viable competitors in a given line of commerce; the withheld resources are
typically certain kinds of supplies, or the use of a facility, or access to a market, and the
boycotting firms are typically dominant firms that jointly can exercise control over such a
resource. Unlike the true per se offenses, business justifications can be invoked to avoid liability
for unlawful tying or a group boycott, but both practices are highly suspect.
Other kinds of commercial practices are not deemed per se restraints of trade, but appear on their
face to be so clearly anti-competitive in nature and likely effect that the courts will condemn
them as unlawful trade restraints after a quick look at them.
Other practices are deemed impermissible trade restraints only upon being shown to violate the
Rule of Reason: A claimant in a rule-of-reason case must show that two or more firms have acted
in concert to impose trading practices that demonstrably harm competition on the merits in the
relevant market, thereby causing specific harm to the claimant. The courts have elaborated a
standard of proof that requires the claimant to make certain showings, which, if made, then
oblige the defendants to proffer pro-competitive justifications for their challenged practices. The
claimant can still prevail afterwards by establishing that the pro-competitive purposes could have
been reasonably accomplished by less restrictive measures, or that these pro-competitive
justifications serve as mere pretexts for anti-competitive practices.
Of note, a plaintiff can sometimes show that a trade restraint occurs when the defendant obliges
the plaintiff to submit to a commercial arrangement that by itself or along with other such
arrangements has the effect of harming competitive processes in a properly defined relevant
market.
To prove a rule of reason offense, it is typically necessary to establish the relevant product
and geographic market in which two or more firms have formed a contract, combination
or conspiracy in order to restrain trade. The conspiracy need merely be a tacit understanding.
Broadly speaking, a restraint of trade is a predatory commercial practice undertaken by coconspirators that impedes competitors, suppliers, customers or other market participants from
engaging in rational, pro-competitive conduct. The usual result of such practices is to afford the

conspirators increased sales at the expense of competitors or to allow them to make sales on
terms and conditions that the customers would not accept or prefer in a freely competitive
market.
The typical result is that customers are constrained to purchase goods or services on terms that
they would not accept if the conspirators had not undermined competition on the merits for their
business. Often, the undesirable result is that consumers must pay higher prices or accept inferior
service from less responsive, complacent suppliers who have succeeded at suppressing nascent
threats to their manner of doing business. The range of commercial practices that can constitute
an unlawful restraint of trade are very broad, but it can be difficult and expensive for a claimant
to prove restraints of trade under the Rule of Reason.
Defendants in Section 1 cases sometimes proclaim the lofty pro-competitive purposes of their
challenged practices, but a closer inspection sometimes reveals that their supposed procompetitive aims are neither promoted by the practices in question nor even related to them in
any meaningful way.
The offense of conspiracy to restrain trade is set forth in Section 1 of the Sherman Act and in the
voluminous case law that interprets this statute. Californias Cartwright Act likewise prohibits
trade restraints undertaken by two or more independent entities so long as the conduct in
question exerts a substantial effect on businesses or consumers in California. The California
courts historically have adopted federal case law interpretations of Section 1 in order to decide
claims brought under the Cartwright Act, but the California courts have declined to adopt certain
federal doctrines in the modern era that have significantly limited the reach of federal antitrust
laws, such as the modern federal doctrine on vertical price-fixing (resale price maintenance) and
the modern federal doctrine on predatory pricing.
To summarize, it might be said that an antitrust offense is a tort committed against a market
rather than against a particular business or person in the market. The classic antitrust offenses are
(1) the acquisition of monopoly power by improper means, (2) the preservation or enlargement
of monopoly power by improper means, (3) the abuse of monopoly power in one market to
obtain monopoly power in another market, and (4) conduct coordinated by two or more
companies that sabotage competition on the merits in a given market i.e., unlawful
restraints of trade.
A monopoly is not necessarily evil, nor does its mere existence violate the antitrust laws.
Monopolies are deemed necessary or even useful in some markets: For example, it was thought
until recently that electrical power could be best furnished by local monopolies, none of whom
ever competed against the others (this circumstance finally might change because of recent
developments in the relevant technologies). Nevertheless, it is always a violation of antitrust law
to use anti-competitive or predatory practices to acquire monopoly power in a particular market,
or to use such methods to preserve or enlarge monopoly power, or to abuse monopoly power in
one market in effort to obtain a monopoly in another market. It is likewise a violation of antitrust
law for two or more firms to act together in order to sabotage competition on the merits or
engage in any of the per se offenses. These practices monopolization and trade restraints
constitute the bread and butter of antitrust law.

Mergers and Acquisitions. Moreover, two firms can combine their operations by merger or
asset acquisition only if their combination does not undermine competitive processes or result in
a monopoly in one or more properly defined antitrust markets. If one or both firms are
sufficiently large and/or their contemplated combination is sufficiently large, then they must
obtain regulatory approval before undertaking the combination. This is a requirement of the
Hart-Scott-Rodino Act and the guidelines that govern its enforcement. To do so, the firms must
give notice of their proposed combination to the Federal Trade Commission (FTC) and to the
Antitrust Division of the United States Department of Justice (DOJ-Antitrust). Either agency
might then require further information and thereafter refuse to give approval or give approval
only on condition that one or both firms divest assets or business operations.
Some combinations do not require advance approval, but might later be challenged in court by
the FTC or DOJ-Antitrust, which might challenge a combination post-facto on the ground that it
has conferred excessive market power on the combined operation or has otherwise diminished
competition, even if the size of the companies or their transaction did not require approval in
advance under the Hart-Scott-Rodino Act.
It is never possible to analyze a proposed merger or acquisition without defining the proper
market for antitrust purposes and analyzing how this market will operate after the proposed
merger or acquisition takes place. Thus the DOJ-Antitrust has issued extensive guidelines that
explain how antitrust markets should be defined for the purpose of analyzing a proposed merger
or acquisition. These guidelines explain how the DOJ-Antitrust analyzes proposed horizontal and
non-horizontal mergers and acquisitions.
The FTC and/or DOJ-Antitrust can challenge a merger or asset acquistion under Section 7 of the
Clayton Act on the ground that it poses an incipient threat to competition in a properly defined
relevant market. Subject to various restrictions, a private litigant can also bring such a challenge.
The Antitrust Statutes. The antitrust laws are set forth in various federal and state statutes. The
federal statutes address interstate commerce, while the state ones address intrastate commerce
within the state. Owing to a very expansive interpretation of the term interstate commerce,
virtually any significant commercial transaction can be said to affect interstate commerce and
therefore be deemed subject to federal antitrust regulation. Even so, some practitioners prefer for
various reasons to plead their antitrust claims in state court, even when so doing means
overlooking significant aspects of the case.
The state statutes and case law incorporate the federal standards, so that in most instances it is
not possible to litigate an antitrust case in state court without having a thorough grasp of federal
antitrust law. Notably, California antitrust law incorporates and expands upon Section 1 of the
Sherman Act as well as the offenses of predatory pricing and unlawful price discrimination, but it
does not address the monopolization offenses.
Here is a brief summary of the principal federal statutes, followed by general comments on the
state statutes, nearly all of which are expressly modeled after the Sherman Act:

The Sherman Act. This statute is the premier article of federal law. It is the original,
principal, and foremost antitrust statute in the United States, setting forth the broad
statutory proscriptions that act as a charter of the marketplace and constitution of
competition law in American jurisprudence. The Sherman Act codifies the principal
antitrust offenses conspiracies to restrain trade, monopolization, attempted
monopolization, and conspiracies to monopolize. The Sherman Act is worded in broad,
open-ended language, so that clever competitors cannot elude its provisions by lawyerly
evasions and obfuscation. Its detractors have argued that the statutory language is so
broad and open-ended as to be almost meaningless, and that this circumstance has
allowed the courts excessive discretion in interpreting and applying it, so that the antitrust
law has become arbitrary and unpredictable. The rejoinder to this argument is that the
Sherman Act sets forth the fundamental standards, and it is for the courts to decide in
each case whether the challenged conduct constitutes monopolization of a line of
commerce or the concerted imposition of an improper restraint of a line of commerce. A
century of case law has helped to provide clarity and meaning to this statute, establishing
how it is supposed to be applied in order to forbid and sanction illegal trade restraints and
monopolization. Every antitrust lawyer must be familiar with this case law, especially the
leading cases issued by the U.S. Supreme Court and in the local appellate circuit.

The Clayton Act. This law is another federal statute that imposes restrictions on
proposed mergers and acquisitions. It also supplements the Sherman Act, prohibiting
certain kinds of commercial practices that excessively stifle competition on the merits. It
sets forth various civil remedies. Indeed, it was the Clayton Act that established a private
right of redress for civil relief under the Sherman Act (at 15 U.S.C. 15), awarding treble
damages and attorneys fees to a private plaintiff who prevails on a claim made under the
antitrust laws of the United States. In addition, the Clayton Act usefully allows the courts
to enjoin anti-competitive conduct before it actually causes harm.

The Robinson-Patman Act. This statute forbids sellers to make sales of the same or
similar products at the same time to commercial customers at different prices, if the
practices causes harm to competitive processes in the sellers market, the buyers markets
or in further downstream markets. This statute is highly technical and disfavored by the
modern courts, which are disinclined to meddle in the prices that a seller unilaterally sets,
but there are instances in which price discrimination remains actionable and can serve as
a potent antitrust claim.

The Federal Trade Commission Act. This is another federal statute that established the
Federal Trade Commission (FTC), which has regulatory authority to enforce the
Sherman Act, the Clayton Act, and the Robinson-Patman Act. Significantly, Section 5 of
the FTC Act confers additional authority on the FTC, allowing it to test the limits of
antitrust policy. An aggrieved firm that concludes that it has no civil remedy under the
Sherman Act or Clayton Act might decide that its best recourse is to complain to the FTC,
asking that it invoke its authority under Section 5 of the FTC Act in order to investigate
the matter and initiate administrative proceedings in order to enjoin the challenged
conduct.

The Hart-Scott-Rodino Act. This federal statute imposes disclosure requirements for
certain kinds of mergers, acquisitions, and other combinations of two or more business
operations. The duty to make a disclosure depends on the size of the transaction and the
size of the participating companies. If a firm wishes to conduct a transaction that is
covered by this Act, it must first make prescribed disclosures to the FTC and Department
of Justice-Antitrust Division, either of which can thereafter require additional disclosures,
object to the transaction, grant conditional approval (e.g., require a divestiture as a
condition of approval of the proposed transaction), or decline to object and allow the
proposed transaction to be consummated without further inquiry. It is sometimes possible
to obtain expedited approval and a waiver of the obligatory waiting period. If the FTC or
DOJ-Antitrust objects, the proponents of the merger can challenge the objection, abandon
the transaction, or modify their proposal and re-submit it.

State Antitrust Statutes. In addition to the federal statutes, each state in the United
States has its own antitrust statutes. These statutes, which govern intrastate commerce,
typically incorporate the statutory proscriptions and case law interpretations of the
Sherman Act, which remains the statute of reference and premier article of antitrust
legislation in the United States.

The Courts and Antitrust Theory. Since the antitrust statutes are couched in general language
(e.g., it is an offense to conspire to restrain trade), they have no practical meaning until the
courts actually enforce them against the businesses accused of violating them. It is therefore
impossible to understand antitrust law merely by reading the applicable statutes. It is necessary
to know the cases as well as their underlying reasoning, and it is equally necessary to have a
thorough grasp of antitrust theory (antitrust economics), which is elaborated and debated by
economists and law professors across the country, and which is often referred to expressly in the
cases.
Why Antitrust Law Matters. Antitrust law matters to consumers and businesses that have been
harmed by anti-competitive abuses or have been accused of employing them. The underlying
purpose of the antitrust laws is to promote robust competition in the markets and to prohibit anticompetitive monopolists, cartels, and conspiracies. To read more on this point, please see the
following article at this link.
Antitrust Sanctions, Civil and Criminal. An antitrust offender sued in civil court risks paying
treble damages (three times the value of proven harm caused by its offense), as well substantial
attorneys fees and costs. An antitrust defendant, even if it prevails, cannot recover its attorneys
fees, unless the case was demonstrably frivolous. An antitrust offender might also be enjoined
i.e., ordered to curtail certain business practices during the lawsuit and perhaps permanently if
the suspended practices are deemed at trial to be antitrust violations. Antitrust cases are usually
very costly to the alleged offender even if it prevails, but under the new pleading standards a
frivolous or poorly conceived case can be quickly terminated upon a well-stated motion to
dismiss. Firms that are tempted to monopolize a market or collude with others in order to gain an
insurmountable advantage over customers or rivals should well consider the perils of private
antitrust enforcement before embarking on their venture. The very practices that might generate

outsize profits today might later involve the participating firms in outsize antitrust litigation
tomorrow.
Conversely, an antitrust plaintiff can recover treble damages, injunctive relief, and its attorneys
fees and costs of suit (but not experts fees). In some cases, antitrust plaintiffs can obtain very
substantial judgments against solvent firms that must pay them.
In really egregious cases, which typically concern the well-established per se violations of
Section 1 of the Sherman Act, the alleged offenders might be subjected to criminal prosecutions,
and their officers and employees might be personally indicted, tried, and convicted. Criminal
prosecutions of antitrust law are typically conducted by the Antitrust Division of the United
States Department of Justice (DOJ-Antitrust), as well as by state prosecutors. The FTC, as
noted above, has strong regulatory powers and can readily refer matters to the DOJ or act in
concert with it. The DOJ-Antitrust sometimes collaborates with the United States Attorneys
Office, particularly in cases in which the charges include both antitrust offenses and alleged mail
fraud, bank fraud, wire fraud and/or RICO violations. The DOJ-Antitrust prosecutes both
criminal and civil claims, and the FTC prosecutes civil and administrative claims.
A corporation convicted of a criminal violation can be ordered to pay enormous restitution and
fines, and an individual can be ordered to pay enormous restitution and fines as well as serve
substantial terms in prison (up to ten years in a federal prison!). If a corporation is convicted of a
criminal violation, it will usually be sued civilly by the civil victims of the offense. It is often
sued merely upon news of an indictment or ongoing criminal investigation. Sometimes a
convicted firm must try to wade through a ruinous succession of civil cases from competitors and
customers. In many instances, a criminal conviction for antitrust violations foretells the demise
of the company that receives it.
Criminal prosecutions principally concern price-fixing, bid-rigging, horizontal market
allocations, and other brazen instances of antitrust wrongdoing. To prevail in a criminal
prosecution, the government must prove each element of the alleged offense beyond a reasonable
doubt and must prove that the defendant acted with the requisite scienter or criminal intent.
The requirement of scienter was imposed by the US Supreme Court in a case whose reach has
been significantly limited by appellate courts that have ruled that criminal intent in a prosecution
for a per se offense merely means the intention to commit an act in furtherance of a common
plan by which the per se violation was committed. Since most criminal violations concern per se
offenses, the requirement of proving criminal intent has been entirely circumscribed by these
cases, but the rationale for this limitation seems dubious (at least to the author of this article), and
the issue will likely be revisited by the US Supreme Court at some point or other.
The Origins of Antitrust Law, Briefly Stated. Antitrust law makes more sense if you have
some understanding of its origins. What, for example, does antitrust mean? As with everything
else, it all makes much more sense if you understand the first principles.
Antitrust law is really the law of competition. The term antitrust merely refers to the enormous
trusts set up in the U.S. in the late 1800s by the infamous robber baron magnates. These
trusts directly and indirectly controlled entire markets for petroleum production and transport,

steel production, banking, railroad transport, and various related industries and services. These
trusts imposed a stranglehold on competition in the different markets in which they operated and
threatened to undermine the charter principles of free-market economics. If unchecked, they
would have resulted in a society living at the mercy of a handful of monopolies and oligopolies
that completely dominated all the key sectors of the economy. By their immense concentration of
monopoly power and market power, they would have been able to raise prices, restrict output,
and exclude competitors with impunity. The antitrust laws were enacted to redress this evil and
to establish the law of competition in the United States.
Defending competition on the merits is the true aim of antitrust law. If a competitor merely
employs a sharp practice that is harmful to a rival or its customer, the antitrust laws offer no
relief. Broadly speaking, the antitrust laws take effect only where (1) predatory competitors
collude with one another in order to undermine competition on the merits by means of an
actionable restraint of trade; or (2) one or more predatory competitors act to exclude or
undermine other competitors in order to establish or preserve a monopoly position that one of
them holds; or (3) a proposed merger, acquisition or exclusive supplier arrangement threatens to
lessen competition unacceptably in a properly defined market. In each of these instances, the risk
is that one or more predatory competitors or a newly enlarged firm can sell goods or services at
higher prices without fear that their customers can seek relief by purchasing substitute goods or
services from a rival. Protecting competition on the merits and stopping predatory abuses that
cannot be redressed by ordinary competitive processes these are the proper aims of antitrust
law, though not always the result.
The antitrust laws aim to accomplish these purposes, and to this end they are worded in
remarkably open-ended language, so as to anticipate the sophistication and cunning of the
predatory firms, which, if given the tiniest loophole, would exploit it perfectly.
The Inescapable Injustice of Antitrust Law. The courts have tried for nearly a century to give
meaning to the broad standards enunciated in the principal antitrust statutes, and not surprisingly
they have often contradicted one another in their rulings: Some courts have been disposed to find
antitrust violations in every corner, while others have refused to see it in even the most brazen
instances of predatory exclusions and anti-competitive conspiracies. It sometimes seems as
though the many decisions, if considered as a whole, appear to be an unwieldy, incoherent
hodge-podge of ad hoc improvisations that hopelessly contradict one another, if not in specific
outcomes then in their underlying reasoning.
If laws should be generally understood in advance by the population whom they are supposed to
govern, then the antitrust laws have largely been a failure, since their meaning and practical
effect become clear only after the courts develop specific applications of the broad standards
given in the underlying statutes which they do only when called upon by an aggrieved private
litigant or a government prosecutor.
Thus one competitor might object to the business practices of its more successful rival. It then
brings an antitrust suit, or complains about the matter to the DOJ. A civil antitrust case is
brought, or, in some instances, a criminal proceeding is initiated. The court, having been thus
summoned, now decides whether or not there has been an antitrust violation and this it does

by applying the general formulas of the statutes to the specific business practices under
challenge. Whether or not the practice is improper becomes known only after the court has ruled.
This is inevitably followed by appeals made by the losing party, and then by further appeal. The
entire process can last for years.
This is a very curious brand of law, and one that appears to fail the first test of all laws: Is it
generally understood to forbid certain conduct in advance of the fact, or is its application
unpredictable, unknowable, seemingly arbitrary, and therefore disruptive?
Even so, firms that set out to destroy competition on the merits tend to be skillful, subtle, and
infinitely more pernicious to society than mere ordinary tortfeasors. The antitrust laws offer
meaningful redress, sufficient incentives to private litigants to enforce the laws of competition,
and real deterrence to those firms that might otherwise be inclined to seek profits by crushing
competitive conditions in the markets in which they operate. The antitrust laws must be stated in
general terms, or else they would be successfully eluded. The evil of these laws is therefore a
necessary one in this authors opinion.
The Injustice Is Necessary. It is impossible to foresee every sort of business arrangement that
might constitute an unfair practice that impedes the marketplace, and it is therefore impossible to
enumerate the forbidden practices. Thus the antitrust laws limit themselves to the statement of
general principles, and leave to the courts and regulatory authorities the difficult task of applying
these principles to contested business practices. In effect, the antitrust statutes are a constitution
of the marketplace, setting forth the broad principles of how markets should operate. The civil
and criminal penalties, including the onerous burden of treble damages, seem necessary because
they deter anti-competitive behavior, and also because they give strong incentive to victims to
come forward to complain of antitrust misconduct, which never could be adequately policed by
the DOJ, the FTC, or state prosecutors without the active cooperation of the aggrieved
competitors or customers whom the offender has run out of business or gouged into paying
monopoly prices.
Litigating An Antitrust Case. The devil truly does lie in the details, and it cannot be
emphasized enough how important it is to pay close attention to every item of communication
sent or received by the concerned parties. But none of this Spartan attention matters a whit,
unless the person paying it has a well-formed theory of the case that he has set out to prove. In
antitrust litigation, as in all other kinds of trial work, he who tells the better story wins the case.
But the story will ring false, unless it is backed up by the facts, which can be culled only by a
painstaking review of everything in sight and everything that is not in sight as well. You have to
know what to ask for, whom to ask, what to look for once you have the requested materials, and
how to organize it all.
Antitrust cases are won by perseverance, determination, unflagging attention to the trifles, and all
of this in service to proving a larger theory of the case that will convince both judge and jury.

Overview
The United States Antitrust laws seek to prohibit anticompetitive behavior and unfair business
practices while encouraging competition in the marketplace. As a result of the fear that
monopolies dominated the market in the late 1800s, the Sherman Antitrust Act was passed in
1890, and, though it has been expanded and amended by subsequent legislation, still forms the
basis of most antitrust law today.
Since the Sherman Act is grounded in the commerce clause and applies only to interstate
commerce, many states have adopted statutes that mirror the Sherman Act to govern intrastate
trade. For examples, see the Massachusetts Antitrust Act or the Virginia Antitrust Act.

Statutes & Interpretation

Statutes
Initially passed in 1890, the Sherman Act was intended to govern single-firm and multi-firm
conduct deemed anticompetitive. It is divided primarily into two sections. Section 1 focuses on
specific anticompetitive conduct and prohibits "every contract, combination in the form of trust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with
foreign nations." Section 2 highlights particular results deemed anticompetitive by nature and
prohibits actions that "shall monopolize, or attempt to monopolize, or combine or conspire with
any other person or persons, to monopolize any part of the trade or commerce among the several
States, or with foreign nations." Together, these two sections are intended to prohibit all
anticompetitive behavior.
The broad language of the Sherman Act produced a series of cases in the early twentieth century
with arguably inconsistent results, resulting in the passage of the Clayton Antitrust Act of 1914.
The Clayton Act lists additional prohibited conducts, such as price discrimination, exclusive
dealing agreements and tying agreements.
The Clayton Act was then amended by the Robinson-Patman Act of 1936, which addressed
specific acts of discriminatory pricing or allowances between similarly situated distributors in an
effort to maintain local stores' competitive stance against larger chain distributors.
The Clayton Act was most recently amended by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, which requires that companies planning significant mergers notify the government
in advance. For a more detailed explanation of the premerger notification requirements, see the
FTC premerger notification introductory guide.

In addition to the Sherman Act and its amendments, the Federal Trade Commission Act of 1914
prohibits all "unfair methods of competition" and "unfair or deceptive acts or practices" and
augments the Sherman Act by providing the Federal Trade Commission (FTC) the administrative
authority to close the gaps in or expand upon existing antitrust laws to ban new anticompetitive
practices not in existence at the time of the original acts' enactments.

Per Se Rule & Rule of Reason

It is important to note that the existence of a monopoly does not, by definition, run afoul of the
antitrust laws. The Supreme Court has interpreted the statutes to apply not to every restraint of
trade, but rather those deemed "unreasonable." For example, a monopoly may be permitted to
exist unless it was acquired or is maintained through the use of prohibited conduct. In the multifirm sphere, an agreement may technically restrain trade, so long as the restraint is not
unreasonable. The court has determined that some acts are per se unreasonable, while others are
subjected to a reasoned analysis.
Section 1 of the Sherman Act defines some actions as per se anticompetitive and violations of the
act. Violations resulting from companies engaging in these actions require no further inquiry into
the intentions of the company or the conduct's effects on the market.
When examining other potentially anticompetitive behaviors, the court employs a reasoned
analysis, examining intent, motive, the conduct itself and outcome to determine whether the
conduct encourages or suppresses market competition.

Prohibited Schemes & Applicable Tests

Monopolization: The Sherman Act, Section 2, prohibits monopolization and attempts or
conspiracies to monopolize. The courts apply the rule of reason when determining whether there
was the intent and the power to monopolize. A successful monopoly is not required for a
conviction.
Market Allocation: These are agreements in which competitors divide markets among
themselves. These violations are not limited to geographic market division; rather, competing
firms may not allocate specific customers or types of customers, products, or territories among
themselves. Market allocation is treated as a per se violation.
Price-Fixing: An agreement among competitors selling the same product or service to alter, fix,
or maintain the price at which products or services are sold. This may occur at the buyer or seller
level and is essentially any agreement among competitors that alters the ultimate price of the
goods or services. There are two primary types of price fixing: (1) Horizontal, an agreement
among competitors at the same level; and (2) Vertical, an agreement among parties in the same
distribution chain (i.e., a manufacturer-dealer or supplier-manufacturer agreement). Horizontal
price fixing is considered a per se violation, however, since 2007, vertical price fixing has been
determined using the rule of reason.

Predatory Pricing & Bidding: Predatory pricing occurs when companies price their products or
services below cost with the purpose of removing competitors from the market. Predatory
bidding, a variation on predatory pricing, occurs when a company bids up the price of raw
materials or other inputs to prevent competing companies from acquiring needed materials. Both
of these predatory schemes are per se violations, however the courts use a two part test to
determine whether they have occurred: (1) the violating company's production costs must be
higher than the market price of the good or service and (2) there must be a "dangerous
probability" that the violating company will recover the loss from above-cost materials or other
inputs.
Collusive Bidding: When two or more competitors agree to alter their bids for the purchase or
provision of a particular product or service. This practice is a per se violation.
Exclusive Dealing: An agreement mandating that a distributor purchase exclusively from a
particular manufacturer. In practice, however, requirements contracts are extremely common and
frequently permissible. The court applies the rule of reason when evaluating such arrangements.
Tying Arrangements: Agreements between provider and purchaser wherein the provider will only
agree to sell product A on the condition that the purchaser also either (1) buys product B from the
provider or (2) guarantees that it will not buy product B from another provider. These
arrangements are most commonly subject to the rule of reason; however, in extreme cases where
the agreement substantially restricts commerce, then it can be considered a per se violation.
Price Discrimination: This occurs when a provider charges competing purchasers different prices
for the same goods (not services) or varies the provision of allowances, such as compensation for
advertising or other services, between competing buyers. Often, price discrimination reflects the
variable costs of dealing with different buyers or the results of a bidding war for a particular
client. In these instances, price discrimination is permissible. In other cases, such conduct may be
a violation of the Robinson-Patman Act and is evaluated using the rule of reason.

Common Exemptions
Patent Owners: The Sherman Act exempted patent owners because public policy favors
innovation. However, Walker Process Fraud, the use of a fraudulently obtained patent to create or
maintain a monopoly, subjects the individual to criminal and civil prosecution.
Labor Unions & Agricultural Organizations: The Clayton Act provides an exemption for labor
unions and agricultural organizations.
Banks: The Securities and Exchange Act of 1934 regulates banking entities and the Supreme
Court decided in Credit Suisse Securities (USA) v. Billing (05-1157) that, in cases where
securities laws and antitrust laws conflict, securities laws prevail.
Nonprofits: The Nonprofit Institutions Act permits nonprofits to purchase and vendors to
supply supplies for use by the organization at a reduced price without violating the RobinsonPatman Act.

Sports Leagues: Generally, mergers and joint agreements of professional football, baseball,
basketball, or hockey leagues are exempted from antitrust law under 15 U.S.C. 1291 et seq.
However, the Supreme Court recently ruled in American Needle Inc. v. NFL (2010) that the NFL
constitutes a cartel of independent businesses and may be subject to antitrust law.

Enforcement
Federal
The Supreme Court has established that all violations of the Sherman Act are also violations of
the Federal Trade Commission Act, enabling both the Department of Justice, Antitrust Division
(DOJ) and the FTC to enforce the antitrust laws. In fact, the two agencies complement each
other. Before beginning an investigation, the agencies will consult one another to avoid
duplication of efforts. Both the DOJ and the FTC may bring civil actions to enforce the antitrust
laws, though only the DOJ may bring a criminal suit.
In practice, the FTC tends to focus on specific segments of the economy, including health care,
pharmaceuticals, professional services, food, energy, and high tech industries.

State
State attorneys general may bring antitrust suits pursuant to both state and federal antitrust laws.
For federal suits, they may file on behalf of individuals residing in the state or on behalf of the
state as a purchaser.

Private Parties
The most common source of antitrust suits is a private business seeking civil damages for
another's violation of the Sherman or Clayton Acts. Private parties may also seek injunctive relief
preventing anticompetitive conduct or bring a suit under state laws; however private parties may
not file a suit pursuant to the Federal Trade Commission Act.

Additional Resources
Government Resources

The FTC has prepared 25 fact sheets addressing specific common questions and issues in
antitrust law. These may be accessed online through the FTC Guide to the Antitrust Laws.
The individual fact sheets are provided as links in the most relevant sections of the guide.

For additional guidance on permissible collaboration, see Antitrust Guidelines for

Collaborations Among Competitors, prepared by the FTC.

DOJ Antitrust Primer