COMPETITION AND THE ANTITRUST LAWS

Competition creates significant consumer benefits including increased innovation, increased efficiency of companies making and selling products and services, greater variety and higher quality of goods and services, and lower prices.

The competitive process, left free of interference, makes life harder for businesses by increasing their uncertainty. That uncertainty forces suppliers to be more efficient and more creative to avoid losing business to competitors that are more efficient and more creative.

Antitrust laws protect consumers by protecting the competitive process from interference either by companies acting together to avoid having to compete or by individual companies with substantial market power of their own taking improper actions in order to avoid having to compete.

ANTITRUST LAWS AND ENFORCEMENT

Federal antitrust laws are enforced by both the Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC).

The DOJ enforces antitrust laws by bringing both civil and criminal antitrust cases in federal courts against companies and individuals violating federal antitrust statutes. The FTC enforces the same federal statutes by bringing civil actions either in federal courts or before the agency itself; the FTC has no authority to bring criminal cases. In addition to its authority to file cases in federal courts, the FTC includes a branch that brings cases and a separate group of five commissioners who can decide cases brought before them and impose certain civil measures such as injunctions. The FTC also has a consumer protection mandate under which it enforces laws and regulations relating to privacy, deception, fraud, and unfair business practices.

In addition to the federal antitrust laws, each state and the District of Columbia has its own antitrust statutes, which are usually similar–but not identical– to federal antitrust statutes. Because the state laws are not identical, they can, and do, make illegal certain conduct that is not necessarily illegal under federal law. State antitrust laws are enforced by state attorneys general, who can file both civil and criminal antitrust actions in state courts. State attorneys general also can file federal antitrust claims on behalf of citizens of their states.

Finally, private parties also can bring antitrust actions. Both consumers and competing businesses that believe they have been harmed by anticompetitive conduct can bring civil antitrust cases seeking to enforce both federal and state antitrust laws and to recover money for the damages they have suffered.

FEDERAL ANTITRUST LAWS

The main federal antitrust statute is the Sherman Act. The Sherman Act is written as a criminal statute: It defines particular anticompetitive conduct as a crime, which is the source of the DOJ's ability to bring criminal cases. It also is the source of the DOJ's right to enforce the same statutes by bringing civil cases. The DOJ uses its discretion to decide whether a civil action or a criminal action is the best way to enforce against any particular violation of the antitrust laws. By tradition, the DOJ pursues criminal actions against a narrow range of conduct that the courts have determined to be so overwhelmingly likely to result in competitive harm that the conduct itself is illegal without any need to examine its actual effects. This category of per se anticompetitive conduct is also the source of many private lawsuits that consumers and business customers have brought against companies that violate the antitrust laws.

Section 1 of the Sherman Act prohibits "every contract, combination ... or conspiracy, in restraint of trade." This is the federal antitrust statute that is most often used to punish conduct by two or more entities, for example, agreements to fix prices, to rig bids, or to refuse to deal with certain suppliers or customers ("boycotts").

Section 2 of the Sherman Act prohibits acts to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any portion of [interstate] trade or commerce." This is the federal antitrust statute that is most often used to punish conduct by a single entity, or so-called "unilateral conduct," although it also prohibits agreements to monopolize, overlapping with Section 1.

The Robinson-Patman Act makes it unlawful to discriminate in price in the sale of commodities (meaning goods, not services) of "like grade and quality to different purchasers" at the wholesale level where that discrimination causes competitive problems downstream in the retail sales of those goods.

The Federal Trade Commission Act is the federal statute that created and provides enforcement authority for the FTC. Although the FTC cannot directly enforce the Sherman Act, it can prohibit conduct that violates the Sherman Act as an "unfair method of competition" under Section 5 of the FTC Act. Section 5 also prohibits "deceptive acts and practices," which is the basis of the FTC's consumer protection enforcement mandate.

WHY ANTITRUST COMPLIANCE MATTERS

Antitrust violations can lead to significant consequences.

Criminal antitrust violations can end with jail sentences, fines, and other problems.

  • Individuals can be sent to jail for up to 10 years for antitrust violations.
  • Individuals also face fines of up to $1 million, in addition to jail sentences of up to 10 years.
  • Corporations can face fines in an amount calculated as the highest of
    • up to $100 million or
    • twice the loss inflicted on customers or,
    • twice the unlawful gain to the offending corporation.

Companies committing antitrust violations can also face future business restrictions. Companies convicted of criminal violations of the antitrust laws can be barred from federal and state business, and can lose commercial customers as well.

Antitrust violations also can result in treble damages in civil lawsuits. This means that if a company is found to have violated the antitrust laws in a lawsuit brought by consumers or by companies that were customers or competitors (or both), the company may have to pay those customers or competitors not just the full amount by which they were damaged–for example, the full amount that they were overcharged by a company engaged in price fixing–but three times the amount of those actual damages.

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