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Antitrust and Trade Law

What Is Antitrust Law?

Antitrust law is a broad category of U.S. federal law that regulates business enterprises. Antitrust law attempts to curtail monopolistic business activity and strives to promote a free market economy that provides consumers with a reasonable amount of choice in services, products, and costs.

How Do Antitrust Laws Apply to Business Practices?

There are several ways in which a business enterprise can be in violation of the antitrust law. The courts examine possible antitrust violations under a standard of “per se violations.” Under this framework, all that must be proven in court is that the accused actually committed one of several “per se violations.” The intent of the accused or the effects of their actions are irrelevant. 

The Three Main Antitrust / Trade Regulation Laws

There are three main statutory schemes that make up the U.S. antitrust law. Either the Antitrust Division of the Justice Department or the Federal Trade Commission primarily enforces all three federal statutes.

  • Sherman Act of 1890 – Prohibits contracts or conspiracies that restrain trade and create monopolization. A violation can result in criminal penalties, substantial fines and, for individual transgressors, prison terms. In addition, court orders restraining future violations are also available. Primarily the Antitrust Division of the Justice Department enforces the provisions of the Sherman Act.
  • Clayton Act of 1914 – Deals with specific types of illegal restraints including exclusive dealing arrangements, tie-in sales, price discrimination, mergers and acquisitions, and interlocking directorates. The Clayton Act carries only civil penalties and is enforced jointly by both the Antitrust Division and the Federal Trade Commission. The Act also provides for a private lawsuit in Federal Court for damages and to restrain future violations.
  • Federal Trade Commission Act – Administered solely by the Federal Trade Commission, this act is a catch-all enactment which has been construed to include all the prohibitions of the other antitrust laws. In addition, it may be utilized to fill what may appear to be loopholes in the more explicit regulatory statutes.

Much of the antitrust law is found in the Sherman Act, which is a federal statute that prohibits "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize."

However, the Supreme Court decided that the Sherman Act does not prohibit every restrain on trade, but only those that are unreasonable. Unreasonable restraints of trade include:

  • Forcing or coercing someone to quit doing business or to change their business so that they won't compete in the market.
  • Agreeing to fix prices to force other competitors out of business.
  • Creating a monopoly.
  • Creating a non-compete clauses or other contract provisions to keep another out of business.
  • Tortious interference with a contract or business agreement that negatively affects another's ability to do business freely.

The Sherman Anti-Trust Act

In 1890, Congress passed the Sherman Anti-Trust Act in an effort to prevent unfair competition through monopolies and trusts (trade contracts). A monopoly exists when one business controls all, or the majority of, a particular market.

Monopolies are harmful to competition because when one firm or agency controls a particular market the lack of competition adversely affects consumers. For example, a firm with a monopoly can charge whatever they want for their good or service because there is no competition to drive down prices.

Does the Sherman Act Apply to All Businesses?

The Constitution limits the application of the Act to any activities related to interstate commerce. This includes local business and transactions that have an "affect" on interstate commerce. So the Sherman Act is broadly interpreted to protect consumers from monopolistic activities.

What Are the Penalties for Violating the Sherman Act?

It is considered a felony for an individual or corporation to monopolize any part of interstate trade or commerce. Also included are attempts to monopolize, or conspiring to monopolize trade. If found guilty, an individual can face a fine of up to $350,000 and imprisonment of up to three years. Corporations can face a fine of up to $10,000,000. The government also has the power to seize any property related to the unlawful trade practice.

What Are Some Examples of Antitrust Laws Being Violated?

Some examples of Anti-trust laws that are being violated are:

  • large price changes of very similar product
  • suspicious statements from seller
  • company having low bidder on all contracts
  • having large unexplainable dollar difference between bids

What are Penalties for Violating Antitrust Laws?

Penalties for violating antitrust laws include criminal and civil penalties:

  • Violations of the Sherman Act individuals can be fined up to $350,000 and sentenced to up to 3 years in prison. Companies can be fined up to $10 million.
  • Violations of the Clayton Act individuals injured by antitrust violations can sue the violators in court for three times the amount of damages actually suffered. These are known as treble-damages, and can also be sought in class-action antitrust lawsuits. Damages also include attorneys' fees and other litigation costs.
  • Violations of the Federal Trade Commission Act the FTC has the authority to issue an order that the violator stop its anticompetitive practices.
  • Violations of state antitrust laws state antitrust laws often prohibit the same kinds of conduct as the federal antitrust laws. As a result, the penalties state laws impose are also similar and can range from criminal to civil sanctions.

How Are Antitrust Laws Enforced?

Antitrust laws are enforced through the government and the people. There are criminal and civil penalties for any violation of antitrust laws. Individuals that are found in violation of antitrust laws can face penalties such as fines, damage awards and even prison time. The government encourages private individuals to report and take action when they see an antitrust violation, which is why they allow individuals and companies to be able to bring suit. In addition, federal and state antitrust laws provide for triple damages.

Who Has the Authority to Enforce Antitrust Laws?

The authority to enforce antitrust laws is shared between the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ). The FTC can file antirust lawsuits in either federal court, or in an administrative hearing. Only the DOJ can bring charges under the Sherman Act, the main antitrust law. Also, under the Hart-Scott-Rodino Act, state attorney generals can file antitrust lawsuits in state or federal court.

How Do Antitrust Laws Apply to the Health Care Industry?

Antitrust law in the health care industry have only developed recently, within the past thirty years. Before the 1970s, antitrust laws were generally not applied to "learned professions" like medicine and law. During that time, however, health care expanded from a local profession to a national service. In 1975, the Supreme Court ruled that antitrust law is applicable to the practice of medicine, and other "learned professions."

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