United States Antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. (The concept is called competition law in other English-speaking countries.) The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts, first, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations that could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power.
The Federal Trade Commission, the U.S. Department of Justice, state governments and private parties who are sufficiently affected may all bring actions in the courts to enforce the antitrust laws. The scope of antitrust laws, and the degree to which they should interfere in an enterprise's freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. One view, mostly closely associated with the "Chicago School of economics" suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controlling economic power in the public interest.
Although "trust" has a specific legal meaning (where one person holds property for the benefit of another), in the late 19th century the word was commonly used to denote big business, because that legal instrument was frequently used to effect a combination of companies. Large manufacturing conglomerates emerged in great numbers in the 1880s and 1890s, and were perceived to have excessive economic power. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914, the Robinson–Patman Act of 1936, and the Celler–Kefauver Act of 1950.
At this time hundreds of small short-line railroads were being bought up and consolidated into giant systems. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) People for strong antitrust laws argued that, in order for the American economy to be successful, it would require free competition and the opportunity for individual Americans to build their own businesses. As Senator John Sherman put it, "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life." Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives the Justice Department the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.
Public officials during the Progressive Era put passing and enforcing strong antitrust high on their agenda. President Theodore Roosevelt sued 45 companies under the Sherman Act, while William Howard Taft sued 75. In 1902, Roosevelt stopped the formation of the Northern Securities Company, which threatened to monopolize transportation in the Northwest (see Northern Securities Co. v. United States).
One of the more well known trusts was the Standard Oil Company; John D. Rockefeller in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900–1904) Standard had violated the Sherman Act (see Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known as Exxon and now ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), and so on. In approving the breakup the Supreme Court added the "rule of reason": not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors.
United States Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 despite never having delivered the benefits to consumers that Standard Oil did. In fact, it lobbied for tariff protection that reduced competition, and so contending that it was one of the "good trusts" that benefited the economy is somewhat doubtful. Likewise International Harvester survived its court test, while other monopolies were broken up in tobacco, meatpacking, and bathtub fixtures. Over the years hundreds of executives of competing companies who met together illegally to fix prices went to federal prison.
In 1914 Congress passed the Clayton Act, which prohibited specific business actions (such as price discrimination and tying) if they substantially lessened competition. At the same time Congress established the Federal Trade Commission (FTC), whose legal and business experts could force business to agree to "consent decrees", which provided an alternative mechanism to police antitrust.
American hostility to big business began to decrease after the Progressive Era. For example, Ford Motor Company dominated auto manufacturing, built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted manufacturing efficiency. Welfare capitalism made large companies an attractive place to work; new career paths opened up in middle management; local suppliers discovered that big corporations were big purchasers. Talk of trust busting faded away. Under the leadership of Herbert Hoover, the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of "respectable business".
During the New Deal, attempts were made to stop cutthroat competition. The National Industrial Recovery Act (NIRA) was a short-lived program in 1933–35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. The Robinson-Patman Act of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business, the New Deal policymakers federal and state regulation—controlling the rates and telephone services provided by AT&T, for example—and by building up countervailing power in the form of labor unions.
The antitrust environment of the 70's was dominated by the case United States v. IBM, which was filed by the U.S. Justice Department in 1969. IBM at the time dominated the computer market through alleged bundling of software and hardware as well as sabotage at the sales level and false product announcements. It was one of the largest and certainly the lengthiest antitrust case the DoJ brought against a company. In 1982, the Reagan administration dismissed the case, and the costs and wasted resources were heavily criticized. However, contemporary economists argue that the legal pressure on IBM during that period allowed for the development of an independent software and personal computer industry with major importance for the national economy.
In 1982 the Reagan administration used the Sherman Act to break up AT&T into one long-distance company and seven regional "Baby Bells", arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. The pace of business takeovers quickened in the 1990s, but whenever one large corporation sought to acquire another, it first had to obtain the approval of either the FTC or the Justice Department. Often the government demanded that certain subsidiaries be sold so that the new company would not monopolize a particular geographical market.
In 1999 a coalition of 19 states and the federal Justice Department sued Microsoft. A highly publicized trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from the Netscape browser. In 2000, the trial court ordered Microsoft to split in two, preventing it from future misbehavior. The Court of Appeals affirmed in part and reversed in part. In addition, it removed the judge from the case for discussing the case with the media while it was still pending. With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged. In his defense, CEO Bill Gates argued that Microsoft always worked on behalf of the consumer and that splitting the company would diminish efficiency and slow the pace of software development.
Preventing collusion and cartels that act in restraint of trade is an essential task of antitrust law. It reflects the view that each business has a duty to act independently on the market, and so earn its profits solely by providing better priced and quality products than its competitors. The Sherman Act §1 prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." This targets two or more distinct enterprises acting together in a way that harms third parties. It does not capture the decisions of a single enterprise, or a single economic entity, even though the form of an entity may be two or more separate legal persons or companies. In Copperweld Corp. v. Independence Tube Corp. it was held an agreement between a parent company and a wholly owned subsidiary could not be subject to antitrust law, because the decision took place within a single economic entity. This reflects the view that if the enterprise (as an economic entity) has not acquired a monopoly position, or has significant market power, then no harm is done. The same rationale has been extended to joint ventures, where corporate shareholders make a decision through a new company they form. In Texaco Inc. v. Dagher the Supreme Court held unanimously that a price set by a joint venture between Texaco and Shell Oil did not count as making an unlawful agreement. Thus the law draws a "basic distinction between concerted and independent action". Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unambiguously negative effect and "is judged more sternly". Generally the law identifies four main categories of agreement. First, some agreements such as price fixing or sharing markets are automatically unlawful, or illegal per se. Second, because the law does not seek to prohibit every kind of agreement that hinders freedom of contract, it developed a "rule of reason" where a practice might restrict trade in a way that is seen as positive or beneficial for consumers or society. Third, significant problems of proof and identification of wrongdoing arise where businesses make no overt contact, or simply share information, but appear to act in concert. Tacit collusion, particularly in concentrated markets with a small number of competitors or oligopolists, have led to significant controversy over whether or not antitrust authorities should intervene. Fourth, vertical agreements between a business and a supplier or purchaser "up" or "downstream" raise concerns about the exercise of market power, however they are generally subject to a more relaxed standard under the "rule of reason".
Some practices are deemed by the courts to be so obviously detrimental that they are categorized as being automatically unlawful, or illegal per se. The simplest and central case of this is price fixing. This involves an agreement by businesses to set the price or consideration of a good or service which they buy or sell from others at a specific level. If the agreement is durable, the general term for these businesses is a cartel. It is irrelevant whether or not the businesses succeed in increasing their profits, or whether together they reach the level of having market power as might a monopoly. Such collusion is illegal per se.
Bid rigging is a form of price fixing and market allocation that involves an agreement in which one party of a group of bidders will be designated to win the bid. Geographic market allocation is an agreement between competitors not to compete within each other's geographic territories.
If an antitrust claim does not fall within a per se illegal category, the plaintiff must show the conduct causes harm in "restraint of trade" under the Sherman Act §1 according to "the facts peculiar to the business to which the restraint is applied". This essentially means that unless a plaintiff can point to a clear precedent, to which the situation is analogous, proof of an anti-competitive effect is more difficult. The reason for this is that the courts have endeavoured to draw a line between practices that restrain trade in a "good" compared to a "bad" way. In the first case, United States v. Trans-Missouri Freight Association, the Supreme Court found that railroad companies had acted unlawfully by setting up an organisation to fix transport prices. The railroads had protested that their intention was to keep prices low, not high. The court found that this was not true, but stated that not every "restraint of trade" in a literal sense could be unlawful. Just as under the common law, the restraint of trade had to be "unreasonable". In Chicago Board of Trade v. United States the Supreme Court found a "good" restraint of trade. The Chicago Board of Trade had a rule that commodities traders were not allowed to privately agree to sell or buy after the market's closing time (and then finalise the deals when it opened the next day). The reason for the Board of Trade having this rule was to ensure that all traders had an equal chance to trade at a transparent market price. It plainly restricted trading, but the Chicago Board of Trade argued this was beneficial. Brandeis J., giving judgment for a unanimous Supreme Court, held the rule to be pro-competitive, and comply with the rule of reason. It did not violate the Sherman Act §1. As he put it,
Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question, the court must ordinarily consider the facts peculiar to the business to which the restraint is applied, its condition before and after the restraint was imposed, the nature of the restraint, and its effect, actual or probable.
Although the Sherman Act 1890 initially dealt, in general, with cartels (where businesses combined their activities to the detriment of others) and monopolies (where one business was so large it could use its power to the detriment of others alone) it was recognized that this left a gap. Instead of forming a cartel, businesses could simply merge into one entity. The period between 1895 and 1904 saw a "great merger movement" as business competitors combined into ever more giant corporations. However upon a literal reading of Sherman Act, no remedy could be granted until a monopoly had already formed. The Clayton Act 1914 attempted to fill this gap by giving jurisdiction to prevent mergers in the first place if they would "substantially lessen competition".
Dual antitrust enforcement by the Department of Justice and Federal Trade Commission has long elicited concerns about disparate treatment of mergers. In response, in September 2014, the House Judiciary Committee approved the Standard Merger and Acquisition Reviews Through Equal Rules Act ("SMARTER Act").
The law's treatment of monopolies is potentially the strongest in the field of antitrust law. Judicial remedies can force large organizations to be broken up, be run subject to positive obligations, massive penalties may be imposed, and/or the people involved can be sentenced to jail. Under §2 of the Sherman Act 1890 every "person who shall monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States" commits an offence. The courts have interpreted this to mean that monopoly is not unlawful per se, but only if acquired through prohibited conduct. Historically, where the ability of judicial remedies to combat market power have ended, the legislature of states or the Federal government have still intervened by taking public ownership of an enterprise, or subjecting the industry to sector specific regulation (frequently done, for example, in the cases water, education, energy or health care). The law on public services and administration goes significantly beyond the realm of antitrust law's treatment of monopolies. When enterprises are not under public ownership, and where regulation does not foreclose the application of antitrust law, two requirements must be shown for the offense of monopolization. First, the alleged monopolist must possess sufficient power in an accurately defined market for its products or services. Second, the monopolist must have used its power in a prohibited way. The categories of prohibited conduct are not closed, and are contested in theory. Historically they have been held to include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing.
In theory, which is hotly contested, predatory pricing happens when large companies with huge cash reserves and large lines of credit stifle competition by selling their products and services at a loss for a time, to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in further technological research, since there are no competitors left to gain an advantage over. High barriers to entry such as large upfront investment, notably named sunk costs, requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return to predatory pricing long enough to force the competitor out of business. Critics argue that the empirical evidence shows that "predatory pricing" does not work in practice and is better defeated by a truly free market than by antitrust laws (see Criticism of the theory of predatory pricing).
Antitrust laws do not apply to, or are modified in, several specific categories of enterprise (including sports, media, utilities, health care, insurance, banks, and financial markets) and for several kinds of actor (such as employees or consumers taking collective action).
First, since the Clayton Act 1914 §6, there is no application of antitrust laws to agreements between employees to form or act in labor unions. This was seen as the "Bill of Rights" for labor, as the Act laid down that the "labor of a human being is not a commodity or article of commerce". The purpose was to ensure that employees with unequal bargaining power were not prevented from combining in the same way that their employers could combine in corporations, subject to the restrictions on mergers that the Clayton Act set out. However, sufficiently autonomous workers, such as professional sports players have been held to fall within antitrust provisions.
Second, professional sports leagues enjoy a number of exemptions. Mergers and joint agreements of professional football, hockey, baseball, and basketball leagues are exempt. Major League Baseball was held to be broadly exempt from antitrust law in Federal Baseball Club v. National League. Holmes J held that the baseball league's organization meant that there was no commerce between the states taking place, even though teams traveled across state lines to put on the games. That travel was merely incidental to a business which took place in each state. It was subsequently held in 1952 in Toolson v. New York Yankees, and then again in 1972 Flood v. Kuhn, that the baseball league's exemption was an "aberration". However Congress had accepted it, and favored it, so retroactively overruling the exemption was no longer a matter for the courts, but the legislature. In United States v. International Boxing Club of New York, it was held that, unlike baseball, boxing was not exempt, and in Radovich v. National Football League (NFL), professional football is generally subject to antitrust laws. As a result of the AFL-NFL merger, the National Football League was also given exemptions in exchange for certain conditions, such as not directly competing with college or high school football. However, the 2010 Supreme Court ruling in American Needle Inc. v. NFL characterised the NFL as a "cartel" of 32 independent businesses subject to antitrust law, not a single entity.
Third, antitrust laws are modified where they are perceived to encroach upon the media and free speech, or are not strong enough. Newspapers under joint operating agreements are allowed limited antitrust immunity under the Newspaper Preservation Act of 1970. More generally, and partly because of concerns about media cross-ownership in the United States, regulation of media is subject to specific statutes, chiefly the Communications Act of 1934 and the Telecommunications Act of 1996, under the guidance of the Federal Communications Commission. The historical policy has been to use the state's licensing powers over the airwaves to promote plurality. Antitrust laws do not prevent companies from using the legal system or political process to attempt to reduce competition. Most of these activities are considered legal under the Noerr-Pennington doctrine. Also, regulations by states may be immune under the Parker immunity doctrine.
The remedies for violations of U.S. antitrust laws are as broad as any equitable remedy that a court has the power to make, as well as being able to impose penalties. When private parties have suffered an actionable loss, they may claim compensation. Under the Sherman Act 1890 §7, these may be trebled, a measure to encourage private litigation to enforce the laws and act as a deterrent. The courts may award penalties under §§1 and 2, which are measured according to the size of the company or the business. In their inherent jurisdiction to prevent violations in future, the courts have additionally exercised the power to break up businesses into competing parts under different owners, although this remedy has rarely been exercised (examples include Standard Oil, Northern Securities Company, American Tobacco Company, AT&T Corporation and, although reversed on appeal, Microsoft). Three levels of enforcement come from the Federal government, primarily through the Department of Justice and the Federal Trade Commission, the governments of states, and private parties. Public enforcement of antitrust laws is seen as important, given the cost, complexity and daunting task for private parties to bring litigation, particularly against large corporations.
The federal government, via both the Antitrust Division of the United States Department of Justice and the Federal Trade Commission, can bring civil lawsuits enforcing the laws. The United States Department of Justice alone may bring criminal antitrust suits under federal antitrust laws. Perhaps the most famous antitrust enforcement actions brought by the federal government were the break-up of AT&T's local telephone service monopoly in the early 1980s and its actions against Microsoft in the late 1990s.
Additionally, the federal government also reviews potential mergers to attempt to prevent market concentration. As outlined by the Hart-Scott-Rodino Antitrust Improvements Act, larger companies attempting to merge must first notify the Federal Trade Commission and the Department of Justice's Antitrust Division prior to consummating a merger. These agencies then review the proposed merger first by defining what the market is and then determining the market concentration using the Herfindahl-Hirschman Index (HHI) and each company's market share. The government looks to avoid allowing a company to develop market power, which if left unchecked could lead to monopoly power.
The United States Department of Justice and Federal Trade Commission target nonreportable mergers for enforcement as well. Notably, between 2009 and 2013, 20% of all merger investigations conducted by the United States Department of Justice involved nonreportable transactions.
Despite considerable effort by the Clinton administration, the Federal government attempted to extend antitrust cooperation with other countries for mutual detection, prosecution and enforcement. A bill was unanimously passed by the US Congress; however by 2000 only one treaty has been signed with Australia. On 3 July 2017 the Australian Competition and Consumer Commission announced it was seeking explanations from a US company, Apple Inc. In relation to potentially anticompetitive behaviour against an Australian bank in possible relation to Apple Pay. It is not known whether the treaty could influence the enquiry or outcome.
In many cases large US companies tend to deal with overseas antitrust within the overseas jurisdiction, autonomous of US laws, such as in Microsoft Corp v Commission and more recently, Google v European Union where the companies were heavily fined. Questions have been raised with regards to the consistency of antitrust between jurisdictions where the same antitrust corporate behaviour, and similar antitrust legal environment, is prosecuted in one jurisdiction but not another.
State attorneys general may file suits to enforce both state and federal antitrust laws.
Private civil suits may be brought, in both state and federal court, against violators of state and federal antitrust law. Federal antitrust laws, as well as most state laws, provide for triple damages against antitrust violators in order to encourage private lawsuit enforcement of antitrust law. Thus, if a company is sued for monopolizing a market and the jury concludes the conduct resulted in consumers' being overcharged $200,000, that amount will automatically be tripled, so the injured consumers will receive $600,000. The United States Supreme Court summarized why Congress authorized private antitrust lawsuits in the case Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262 (1972):
Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. By offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as "private attorneys general".
The Supreme Court calls the Sherman Antitrust Act a "charter of freedom", designed to protect free enterprise in America. One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace.
We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace--both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace ... In final analysis, size in steel is the measure of the power of a handful of men over our economy ... The philosophy of the Sherman Act is that it should not exist ... Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men ... That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it.— Dissenting opinion of Justice Douglas in United States v. Columbia Steel Co.
By contrast, efficiency argue that antitrust legislation should be changed to primarily benefit consumers, and have no other purpose. Free market economist Milton Friedman states that he initially agreed with the underlying principles of antitrust laws (breaking up monopolies and oligopolies and promoting more competition), but that he came to the conclusion that they do more harm than good. Thomas Sowell argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:
In short, the financial demise of a competitor is not the same as getting rid of competition. The courts have long paid lip service to the distinction that economists make between competition—a set of economic conditions—and existing competitors, though it is hard to see how much difference that has made in judicial decisions. Too often, it seems, if you have hurt competitors, then you have hurt competition, as far as the judges are concerned.
Alan Greenspan argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitled Antitrust, he says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its results—low prices. As long as a monopoly is not a coercive monopoly where a firm is securely insulated from potential competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.
Thomas DiLorenzo, an adherent of the Austrian School of economics, found that the "trusts" of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all. Ayn Rand, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations. Such laissez faire advocates suggest that only a coercive monopoly should be broken up, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production to price-gouge consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention and that there is no case of a coercive monopoly ever existing that was not the result of government policies.
Judge Robert Bork's writings on antitrust law (particularly The Antitrust Paradox), along with those of Richard Posner and other law and economics thinkers, were heavily influential in causing a shift in the U.S. Supreme Court's approach to antitrust laws since the 1970s, to be focused solely on what is best for the consumer rather than the company's practices.
A consent decree is an agreement or settlement that resolves a dispute between two parties without admission of guilt (in a criminal case) or liability (in a civil case), and most often refers to such a type of settlement in the United States. The plaintiff and the defendant ask the court to enter into their agreement, and the court maintains supervision over the implementation of the decree in monetary exchanges or restructured interactions between parties. It is similar to and sometimes referred to as an antitrust decree, stipulated judgment, settlement agreements, or consent judgment. Consent decrees are frequently used by federal courts to ensure that businesses and industries adhere to regulatory laws in areas such as antitrust law, employment discrimination, and environmental regulation.Dividing territories
Dividing territories (also market division) is an agreement by two companies to stay out of each other's way and reduce competition in the agreed-upon territories. The process known as geographic market allocation is one of several anti-competitive practices outlawed under United States antitrust laws. The term is generally understood to include dividing customers as well.
For example, in 1984, FMC Corp. and Asahi Chemical agreed to divide territories for the sale of microcrystalline cellulose, and later FMC attempted to eliminate all vestiges of competition by inviting smaller rivals also to collude.Essential facilities doctrine
The essential facilities doctrine (sometimes also referred to as the essential facility doctrine) is a legal doctrine which describes a particular type of claim of monopolization made under competition laws. In general, it refers to a type of anti-competitive behavior in which a firm with market power uses a "bottleneck" in a market to deny competitors entry into the market. It is closely related to a claim for refusal to deal.
The doctrine has its origins in United States law, but it has been adopted (often with some modification) into the legal systems of the United Kingdom, Australia, South Africa, and the European Union.Ethyl Gasoline Corp. v. United States
Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940), was a decision of the United States Supreme Court that limited the doctrine of the Court's 1938 decision in General Talking Pictures Corp. v. Western Electric Co. Beginning with the 1926 decision in United States v. General Electric Co., the Supreme Court made a sharp distinction between (i) post-sale restraints that a patentee imposed on purchasers of a patented product and (ii) restrictions (limitations) that a patentee imposed on a licensee to manufacture a patented product: the former being illegal and unenforceable under the exhaustion doctrine while the latter were generally permissible under a lenient "rule of reason." Thus, under the General Talking Pictures doctrine, a patent holder may permissibly license others to manufacture and then sell patented products in only a specified field (market), such as only a particular type of product made under the patent or only a particular category of customer for the patented product. The Ethyl decision held, however, that a patent licensing and distribution program based on both the sale of a patented product and licenses to manufacture a related product was subject to ordinary testing under the antitrust laws, and accordingly was illegal when its effect was to "regiment" an entire industry.Gene Kimmelman
Gene Kimmelman is a consumer protection advocate who specializes in competition law and United States antitrust law.High-Tech Employee Antitrust Litigation
High-Tech Employee Antitrust Litigation is a 2010 United States Department of Justice (DOJ) antitrust action and a 2013 civil class action against several Silicon Valley companies for alleged "no cold call" agreements which restrained the recruitment of high-tech employees.
The defendants are Adobe, Apple Inc., Google, Intel, Intuit, Pixar, Lucasfilm and eBay, all high-technology companies with a principal place of business in the San Francisco–Silicon Valley area of California.
The civil class action was filed by five plaintiffs, one of whom has died; it accused the tech companies of collusion between 2005 and 2009 to refrain from recruiting each other's employees.Hipster Antitrust
Hipster Antitrust refers to the movement to shift the focus of United States antitrust law from the maximization of consumer welfare to include other goals, such as income inequality, unemployment, and wage growth. Senator Cory Booker has been described as an ally of the Hipster Antitrust movement.., and has called on the United States Department of Justice Antitrust Division and Federal Trade Commission to focus their enforcement efforts more on helping workers. The movement has also been called the "New Brandeis Movement", a reference to former Supreme Court Justice Louis Brandeis.
The term "appeals to nostalgia for old-fashioned antitrust enforcement". The term originally began as a Twitter hashtag, and rose to prominence when Senator Orrin Hatch used the term during multiple speeches on the United States Senate floor. Some proponents of the movement believe the term is pejorative.
The term was coined by Konstantin Medvedovsky, an attorney at Dechert, and popularized by former Federal Trade Commissioner Joshua D. Wright.
The term has since been the subject of both academic conferences, research papers and academic journalsHistory of United States antitrust law
The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.Merger guidelines
The Merger guidelines are a set of internal rules promulgated by the Antitrust Division of the United States Department of Justice (DOJ) in conjunction with the Federal Trade Commission (FTC). These rules, which have been revised a number of times in the past four decades, govern the extent to which these two regulatory bodies will scrutinize and/or challenge a potential merger on grounds of market concentration or threat to competition within a relevant market.
The merger guidelines have sections governing both horizontal integration and vertical integration.Pacific Bell Telephone Co. v. linkLine Communications, Inc.
Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U.S. 438 (2009), was a United States Supreme Court case in which the Court unanimously held that Pacific Bell d/b/a AT&T did not violate the Sherman Antitrust Act when it charged other Internet providers a high fee to buy space on its phone lines to deliver an Internet connection. The court ruled that where there is no duty to deal at the wholesale level and no predatory pricing at the retail level, a firm is not required to price both of these services in a manner that preserves its rivals’ profit margins.
This case was initiated by Internet service providers (ISP), alleging that incumbent telephone companies that owned infrastructure and facilities needed to provide digital subscriber line (DSL) service monopolized and attempted to monopolize regional DSL market. The ISP's claimed that the telephone companies accomplished this by squeezing the providers' profits by charging them high wholesale price for DSL transport and charging consumers low retail price for DSL Internet service. Ultimately, the court noted that this case as not moot, but that it was not clear that the providers had unequivocally abandoned their price-squeeze claims, and prudential concerns favored answering the question presented.Patent misuse
In United States patent law, patent misuse is a patent holder's use of a patent to restrain trade beyond enforcing the exclusive rights that a lawfully obtained patent provides. If a court finds that a patent holder committed patent misuse, the court may rule that the patent holder has lost the right to enforce the patent. Patent misuse that restrains economic competition substantially can also violate United States antitrust law.Pujo Committee
The Pujo Committee was a United States congressional subcommittee in 1912–1913 that was formed to investigate the so-called "money trust", a community of Wall Street bankers and financiers that exerted powerful control over the nation's finances. After a resolution introduced by congressman Charles Lindbergh Sr. for a probe on Wall Street power, congressman Arsène Pujo of Louisiana was authorized to form a subcommittee of the House Committee on Banking and Currency. In 1913–1914, the findings inspired public support for ratification of the Sixteenth Amendment that authorized a federal income tax, passage of the Federal Reserve Act, and passage of the Clayton Antitrust Act.Reverse payment patent settlement
Reverse payment patent settlements, also known as "pay-for-delay" agreements, are a kind of an agreement that settles patent infringement litigation, in which the company that has brought the suit agrees to pay the company it sued. That is, the patentee pays the alleged infringer to end the lawsuit and stop challenging the validity of the disputed patent. These agreements are distinct from most patent settlements, which usually involve the alleged infringer paying the patent holder.Reverse payment patent settlements result from a peculiarity in US regulatory law arising from the Hatch-Waxman Act passed in 1984. The law encourages patent infringement litigation with incentives outside the patent system. Under the Act, the first generic company to successfully challenge the patents of the innovative company, and that has its Abbreviated New Drug Application (ANDA) accepted by the FDA, is awarded with six months of exclusivity. During that time that FDA is not allowed to approve any other company's ANDA, and only the originator company and the winning generics company can market the drug. Because of the lack of competition, the price that the generic company can charge during this period is much higher than it eventually will be when other generic companies are allowed to sell the drug as well. In settling the litigation, the generics company can calculate the income it would get due to that 6 month administrative exclusivity, and the innovator can calculate the amount of money it would lose from sales to the generic company. The parties might agree that a cash payment from the innovator to the generic company is an arrangement in which both parties benefit more than they would if the litigation were to continue.The settlements have been criticized as anti-competitive and thus violating United States antitrust law, and contrary to the public interest, principally because they frustrate the purpose of the Hatch-Waxman Act, which was to increase competition and incentive the entry of generic drugs.The first ruling by the US Supreme Court in relation to reverse payment settlements came in 2013, in which the Court ruled that the "Federal Trade Commission can sue pharmaceutical companies for potential antitrust violations" in the face of such settlements. Following that case, which involved Solvay Pharmaceutical's drug AndroGel and a reverse payment settlement between Solvay and Actavis, the number of academic papers about reverse payment patent settlement greatly increased.Rule of reason
The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal per se, other actions, such as possession of a monopoly, must be analyzed under the rule of reason and are only considered illegal when their effect is to unreasonably restrain trade. William Howard Taft, then Chief Judge of the Sixth Circuit Court of Appeals, first developed the doctrine in a ruling on Addyston Pipe and Steel Co. v. United States, which was affirmed in 1899 by the Supreme Court. The doctrine also played a major role in the 1911 Supreme Court case Standard Oil Company of New Jersey v. United States.Second request
In United States antitrust law, a second request is a discovery procedure by which the Federal Trade Commission and the Antitrust Division of the Justice Department investigate mergers and acquisitions which may have anticompetitive consequences.Unilateral policy
Under a Unilateral Policy (or "Colgate Policy" or "Unilateral Minimum Retail Price Policy") a manufacturer, without any agreement with the reseller, announces a minimum resale price and refuses to make further sales to any reseller that sells below the announced price. Unilateral policy is a form of resale price maintenance that enables a manufacturer to influence the price at which its distributors and dealers resell its products without a formal contract regarding the resale price. The policy was first identified in United States v. Colgate & Co., 250 U.S. 300 (1919).United States Department of Justice Antitrust Division
The United States Department of Justice Antitrust Division is a law enforcement agency responsible for enforcing the antitrust laws of the United States. It shares jurisdiction over civil antitrust cases with the Federal Trade Commission (FTC) and often works jointly with the FTC to provide regulatory guidance to businesses. However, the Antitrust Division also has the power to file criminal cases against willful violators of the antitrust laws. The Antitrust Division also works with competition regulators in other countries.Vertical restraints
Vertical restraints are competition restrictions in agreements between firms or individuals at different levels of the production and distribution process. Vertical restraints are to be distinguished from so-called "horizontal restraints", which are found in agreements between horizontal competitors. Vertical restraints can take numerous forms, ranging from a requirement that dealers accept returns of a manufacturer's product, to resale price maintenance agreements setting the minimum or maximum price that dealers can charge for the manufacturer's product.
So-called "intrabrand restraints" such as resale price maintenance govern products made by a particular manufacturer, while "interbrand restraints" regulate a dealer's or manufacturer's relationship with its trading partner's rivals (e.g., "English clauses"). Quintessential examples of interbrand restraints include tying contracts, whereby a purchaser agrees to purchase a second product as a condition of obtaining a so-called "tying" product, and exclusive dealing agreements, whereby a dealer agrees not to purchase products from suppliers that are rivals of the manufacturer.White Court (judges)
The White Court refers to the Supreme Court of the United States from 1910 to 1921, when Edward Douglass White served as Chief Justice of the United States. White, an associate justice since 1894, succeeded Melville Fuller as Chief Justice after the latter's death, and White served as Chief Justice until his death a decade later. He was the first sitting associate justice to be elevated to chief justice in the Court's history. He was succeeded by former president William Howard Taft.
The White Court was less conservative than the preceding Fuller Court, though conservatism remained a powerful force on the bench (and would remain so through the mid-1930s). The most notable legacy of White's chief-justiceship was the development of the rule of reason doctrine, used to interpret the Sherman Antitrust Act, and foundational to United States antitrust law. During this era the Court also established that the Fourteenth Amendment protected the "liberty of contract." On the grounds of the Fourteenth Amendment and other provisions of the Constitution, it controversially overturned many state and federal laws designed to protect employees.