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Competition law





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Competition law. known in the United States as antitrust law. are laws that promote or maintain market competition by regulating anti-competitive conduct. [1]

The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the twentieth century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks.

Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level. [1]

The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral Negotiations, the World Trade Organisation (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis. [2]

Competition law, or antitrust law, has three main elements:

  • prohibiting agreements or practices that restrict free trading and competition between business. This includes in particular the repression of free trade caused by cartels.
  • banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
  • supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

Law governing competition are found in over two millennia of history. Roman Emperors and Medieval monarchs alike used tariffs to stabilize prices or support local production. The formal study of "competition ", began in earnest during the 18th century with such works as Adam Smith 's The Wealth of Nations. Different terms were used to describe this area of the law, including "restrictive practices", "the law of monopolies", "combination acts" and the "restraint of trade".

An early example of competition law is the Lex Julia de Annona. enacted during the Roman Republic around 50 BC. [5] To protect the grain trade, heavy fines were imposed on anyone directly, deliberately and insidiously stopping supply ships. [6] Under Diocletian in 301 AD an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday goods. [6]

More legislation came under the Constitution of Zeno of 483 AD, which can be traced into Florentine Municipal laws of 1322 and 1325. [7] This provided for confiscation of property and banishment for any trade combination or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights. [8] Justinian I subsequently introduced legislation to pay officials to manage state monopolies. [8] As Europe slipped into the dark ages. so did the records of law making until the Middle Ages brought greater expansion of trade in the time of lex mercatoria .

See also: Lex Mercatoria and Guilds

Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest. [8] The Domesday Book recorded that "foresteel" (i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England. [9] But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 1266 [10] to fix bread and ale prices in correspondence with grain prices laid down by the assizes. Penalties for breach included amercements, pillory and tumbrel. [11] A fourteenth century statute labeled forestallers as "oppressors of the poor and the community at large and enemies of the whole country." [12] Under King Edward III the Statute of Laborers of 1349 [13] fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law. Also under Edward III, the following statutory provision outlawed trade combination. [14]

". we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain."

Examples of legislation in mainland Europe include the constitutiones juris metallici by Wenceslaus II of Bohemia between 1283 and 1305, condemning combination of ore traders increasing prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno 's legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed "to prevent losses resulting from monopolies and improper contracts which many merchants and artisans made in the Netherlands." In 1553 King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilize prices, in the face of fluctuations in supply from overseas. So the legislation read here that whereas,

"it is very hard and difficult to put certain prices to any such things. [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects." [15]

Around this time organizations representing various tradesmen and handicrafts people, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835..

Judge Coke in the 17th century thought that general restraints on trade were unreasonable

The English law of restraint of trade is the direct predecessor to modern competition law. [22] Its current use is small, given modern and economically oriented statutes in most common law countries. Its approach was based on the two concepts of prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade. For example, in Nordenfelt v. Maxim, Nordenfelt Gun Co. [23] a Swedish arm inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way."

To be consider whether or not there is a restraint of trade in the first place, both parties must have provided valuable consideration for their agreement. In Dyer's case [24] a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed,

"per Dieu, if the plaintiff were here, he should go to prison until he had paid a fine to the King."

The common law has evolved to reflect changing business conditions. So in the 1613 case of Rogers v. Parry [25] a court held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held that a man cannot bind himself to not use his trade generally by Chief Justice Coke. This was followed in Broad v. Jolyffe [26] and Mitchell v. Reynolds [27] where Lord Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications, commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v. Roussillon [28] Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promise's protection. So in the Nordenfelt [23] case Lord Macnaughton ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v. The Provident Supply and Clothing Co. [29]




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