lawyer

Antitrust laws, or competition laws. are laws which prohibit anti-competitive behavior and unfair business practices. The laws make illegal certain practices deemed to hurt businesses or consumers or both, or generally to violate standards of ethical behavior. Government agencies known as competition regulators regulate antitrust laws, and may also be responsible for regulating related laws dealing with consumer protection. Antitrust laws become a legislative inducement towards fairness and are used as a key for principled business relationships.

Antitrust laws prohibit agreements in restraint of trade, monopolization and attempted monopolization, anticompetitive mergers and tie-in schemes, and, in some circumstances, price discrimination in the sale of commodities.

Efficiency-oriented economists reject the goal of competition and instead argue that antitrust legislation should be changed to primarily benefit consumers. No congress or administration has supported this position. These economists largely ignore the political issues that motivated the laws in the first place.

Anticompetitive agreements among competitors, such as price fixing and customer and market allocation agreements, are typical types of restraints of trade proscribed by the antitrust laws. These type of conspiracies are considered pernicious to competition and are generally proscribed outright by the antitrust laws. Resale price maintenance by manufacturers is another form of agreement in restraint of trade. Other agreements that may have an impact on competition are generally evaluated using a balancing test, under which legality depends on the overall effect of the agreement.

Monopolization and attempted monopolization are offenses that may be committed by an individual firm, even without an agreement with any other enterprise. Unreasonable exclusionary practices that serve to entrench or create monopoly power can therefore be unlawful. Allegations of predatory pricing by large companies can be the basis for a monopolization claim, but it is difficult to establish the required elements of proof. Large companies with huge cash reserves and large lines of credit can stifle competition by engaging in predatory pricing; that is, by selling their products and services at a loss for a time, in order 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.

From an economics perspective, the relatively recent industrial organization research has focused on construction of microeconomic models that predict and/or explain the prevalence of imperfectly competitive markets and deviations from competitive behavior, partly as a response to the criticisms of antitrust laws and policies by the Chicago School and by members of the law and economics school of thought.

There are three main elements to antitrust or competition law:

• It may prohibit agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.
• It may ban abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position.
• It may supervise 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.

A business with a monopoly over certain products or services may be in violation of antitrust laws if it has abused its dominant position or market power. Although not all anti-competitive behavior which is subject to antitrust laws involve illegal cartels or trusts, the following types of activity are generally prohibited.

• Bid rigging - A form of price fixing and market allocation, and involves an agreement in which one party of a group of bidders will be designated to win the bid
• Predatory pricing - The practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors
• Price fixing - An agreement between business competitors selling the same product or service regarding its pricing
• Tying - The practice of making the sale of one good conditional on the purchase of a second distinctive good
• Vendor lock-in - Is a situation in which a customer is so dependent on a vendor for products and services that he or she cannot move to another vendor without substantial switching costs, real and/or perceived
• Geographic allocation - An agreement between competitors to not compete within each other's geographic territories.
• Walker Process fraud - Illegal monopolization through the maintenance and enforcement of a patent obtained via fraud on the Patent Office (the term comes from the Supreme Court case Walker Process Equipment, Inc. v. Food Machinery Chemical Corp. 382 U.S. 172 (1965)).

Consumer protection laws seek to regulate certain aspects of the commercial relationship between consumers and business. such as by requiring minimum standards of product quality, requiring the disclosure of certain details about a product or service (e.g. with regard to cost, or implied warranties), or prescribing financial compensation for product liability. Consumer protection laws are distinct from antitrust. Some consumer protection laws are enforced by the U.S. Federal Trade Commission, which also has antitrust responsibilities. However, many competition agencies—including the Justice Department antitrust division and the European Commission Directorate General for competition—lack authority over consumer protection.

Laws governing competition law are found in over two millennia of history. Roman Emperors and Mediaeval monarchs alike used the use of tariffs to stabilize prices or support local production. 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." The formal study of "competition," began in earnest during the eighteenth century with such works as Adam Smith 's The Wealth of Nations.