Antitrust Law
Antitrust law refers to legislation designed to promote fair competition and prevent monopolistic practices in the marketplace. It aims to protect consumers by prohibiting activities such as price-fixing, bid-rigging, and other anti-competitive behaviors. Antitrust laws are enforced by government agencies to ensure that businesses operate within the boundaries of fair competition.
7 Key excerpts on "Antitrust Law"
eBook - ePub- Alan Devlin(Author)
- 2014(Publication Date)
- Routledge(Publisher)
...The principal tool that antitrust policymakers use to scrutinise business strategies is economics. They look to price- and game-theoretic models to understand the likely effects of impugned conduct, and use empirical methods to determine the consequences of behaviour already undertaken. As a result, antitrust has grown in economic sophistication over the last several decades, so much so indeed that – to a significant degree – antitrust has become a field of applied economics. This Part explores economic principles relevant to competition policy, explaining Antitrust Law’s economic purpose and analysing a variety of business phenomena.Before addressing the economics of competition law and exploring the schools of thought that have influenced this field, it is first necessary to address antitrust’s purpose. At a broad level, the role is axiomatic: to promote competition. The conviction that competition is desirable lies at the heart of antitrust policy. When companies strive to outdo each other by developing new and better products, lowering prices, increasing operational efficiency, and reducing costs, tremendous gains ensue for consumers and the economy alike.Commentators widely accept, though not universally, that economic efficiency is the principal goal of US Antitrust Law. On this view, liberalising markets to enable firms to innovate and compete – but modestly limiting firms’ freedom of operation under the Antitrust Laws – increases wealth, economic growth, and international competitiveness, while reducing inflation. Competition causes price to drop toward marginal cost, allowing consumers to purchase products or services that they value more than they cost society to provide. This effect not only promotes consumer welfare, it enhances the amount of wealth in society. Similarly, Darwinian competition forces companies to make the most efficient possible use of scarce inputs, getting more from less, thus freeing up resources that society can use elsewhere...
eBook - ePubPredatory Pricing in Antitrust Law and Economics
A Historical Perspective
- Nicola Giocoli(Author)
- 2014(Publication Date)
- Routledge(Publisher)
...Introduction 1 Three basic dichotomies Antitrust Law is about competition. It aims at guaranteeing economic agents’ freedom to compete as the best way to promote maximum social welfare. Simple as they may seem, these statements are far from undisputed or self-explanatory. Controversy about the meaning and goal of Antitrust Law is as old as the law itself – and even older, as it dates back to mid-nineteenth-century debates over the British common law restraints of trade. One may legitimately ask what “competition,” “freedom to compete” and “social welfare” exactly mean. Recognizing them as technical terms does not help, because two technical and only partially overlapping jargons apply in the field of antitrust: the language of law and the language of economics. The economic point of view has been on the rise during the last three decades of Antitrust Law, but still the subject belongs to the legal realm. Antitrust enforcement is part of the legal (and administrative) system; acquainted as they may be with economics, judges and agencies adjudicate cases following legal rules. Even within the boundaries of economics, unsettled issues exist. For example, economists have different ideas of what “competition” actually means. What is competition? Two main characterizations prevail. 1 In the first, competition is viewed as a process, the product of the actions and reactions of sellers and buyers bargaining in the marketplace. It is a force operating in the market that does not coincide with any given market structure. Alternatively, competition may be characterized as a state ; that is, as a specific market structure, endowed with certain desirable properties relating to equilibrium output and price. Historically speaking, the former view was typical of nineteenth-century classical economists, the latter of twentieth-century neoclassical ones...
eBook - ePubPricing on Purpose
Creating and Capturing Value
- Ronald J. Baker(Author)
- 2010(Publication Date)
- Wiley(Publisher)
...The act was thought the perfect remedy to stop any business from monopolizing its market and to restore efficient competition to the economy. Over the years, antitrust policy has evolved through further legislative acts and amendments, regulatory guidelines and judicial interpretation, which obviously have implications for various pricing decisions. Although services are not subject to certain provisions of these laws—for instance, price discrimination—many businesses are affected, and the laws need to be taken into account when formulating pricing strategy. This chapter is not intended to be a comprehensive examination of the legal and strategic ramifications of Antitrust Law, but rather to serve as an introduction to the cornerstones of federal antitrust legislation and landmark cases, the justifications for them, and the criticisms leveled against them in recent years. Each state has its own antitrust provisions, and will not be addressed here due to space considerations. The major antitrust legislation and landmark cases are as follows: Source: Stiglitz and Walsh, 2002: 279 Sherman Antitrust Act, 1890 Made acts in restraint of trade illegal. Standard Oil and American Tobacco Cases, 1911 Broke up both firms (each of which accounted for more than 90% of their industry) into smaller companies. The Federal Trade Commission Act (FTC Act), 1914; establishment of the Federal Trade Commission Established to investigate unfair practices and issue orders to “cease and desist.” Clayton Act, 1914 Outlawed unfair trade practices...
eBook - ePubMeasuring Business Interruption Losses and Other Commercial Damages
An Economic Approach
- Patrick A. Gaughan(Author)
- 2020(Publication Date)
- Wiley(Publisher)
...However, the whole issue of not protecting competitors from large, winner‐take‐all, firms is being reevaluated in light of the great consolidation that has occurred in many US industries. Economics of Monopoly Antitrust Laws are based on the principle that there are certain benefits of competition that are reduced when markets are monopolized. From a legal perspective, the basic element of a monopolization claim are “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” 6 A claim of attempted monopolization requires the plaintiff to prove a “dangerous probability” of achieving monopoly power. 7 In order to understand why the law seeks to promote competition and avoid monopolies, it is necessary to understand the benefits of market competition. In order to understand these benefits, it is necessary to explore the microeconomics of market structures. In microeconomics, there are several different broad forms of market structure. At one extreme is pure competition, which is a market structure characterized by many independent sellers each selling a small fraction of total market output. Being so small, their impact on the market is insignificant, and they cannot do anything to influence market price. That is, the market price does not change when they vary their output. In addition, pure competition assumes that the products produced in the competitive market are homogeneous and undifferentiated. Based on these assumptions, the firms in the industry are price takers; they cannot do anything to influence market price. The assumption of being a price taker means that the demand curve is a flat, horizontal line. This line also becomes the firm’s marginal revenues curve...
- Scott D. Gilbert(Author)
- 2020(Publication Date)
- Business Expert Press(Publisher)
...In the United States, these laws include the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914. 6 Most adults and many kids know what a market is, by practical experience. In the world of Antitrust Law and economics, the definition of a “market” can be key to arguments about who did what to whom. For the purposes of this chapter, a market is an institution that facilitates the distribution of goods 7 to society, via buyers’ payment of money for sellers’ goods, at a known price. A competitive marketplace is one in which there are many buyers and sellers, with no one buyer or seller able to significantly influence price. In such a market, each buyer and seller is a price-taker—choosing an amount to buy or sell at the given market price. Earlier, Chapters 2 through 4 discussed markets for consumer goods, labor, and financial instruments like government bonds. Implicitly, those discussions assumed that market participants are price-takers, and that market price is at its competitive market equilibrium level—such that there is neither a shortage nor a surplus of goods or services in the marketplace. Chapter 2 also presented some basic market principles, the 7th of which is: “Markets are a socially desirable way to allocate society’s resources and distribute its goods, most of the time,” a result also known as the First Fundamental Welfare Theorem of economic theory. To better understand the virtues of competition and the woes of anticompetitive conduct, it’s useful to model the benefits of a market in competitive equilibrium. Equilibrium is a natural outcome of perfectly competitive markets, whereas disequilibrium—with a surplus or shortage—is a jarring outcome that tends to vanish over time due to the actions of market participants faced by surplus or shortage...
eBook - ePubThe Rise of Law and Economics
An Intellectual History
- George L. Priest(Author)
- 2020(Publication Date)
- Routledge(Publisher)
...9 The influence of law and economics on regulation and Antitrust Law Modern law and economics has changed the way scholars, judges, and lawyers view all of law, but the most spectacular successes of the discipline in terms of direct influence on substantive law have occurred in the fields of economic regulation and Antitrust Law. The deregulation movement of the 1970s is entirely attributable to law and economics scholarship. Federal regulatory institutions, some established in the nineteenth century and others during the New Deal, have been completely eliminated; still others have had their authority limited or diminished. Today, there is little impetus toward expanded economic regulation. 1 Similarly, since the late 1970s, in Antitrust Law, the Supreme Court has totally overturned the legal rules it had developed, some since 1911, especially with respect to vertical practices, but extending more broadly. As will be explained, the Supreme Court has directly adopted, and has implemented in many decisions, the Chicago-School consumer welfare standard for evaluating industrial practices. These changes resulted from the ascendance of law and economics and, especially, from the work of Aaron Director, his students, and his journal, the Journal of Law & Economics, at the University of Chicago Law School. Chapter 4 described the University of Chicago Law School’s Antitrust Project, led by Aaron Director, which subjected New Deal policies both with respect to industrial regulation and to Antitrust Law as formulated by the Supreme Court in the 1940s, 1950s, and 1960s to unrelenting scrutiny and criticism...
eBook - ePub- Richard A. Posner(Author)
- 2009(Publication Date)
- University of Chicago Press(Publisher)
...PART FOUR ADMINISTERING Antitrust Law NINE Toward the Simplification of Antitrust Doctrine Having completed our tour of substantive antitrust policy, I want now and in the next chapter to explore some of the implications for the overall structure and enforcement of Antitrust Law. This chapter is about the need for statutory reform, and the next is about enforcement. There are six major federal antitrust statutes: sections 1 and 2 of the Sherman Act, sections 2, 3, and 7 of the Clayton Act, and section 5 of the Federal Trade Commission Act. And section 2 of the Sherman Act, with its separate prohibitions of monopolizing, attempting to monopolize, and conspiring to monopolize, is really three statutes in one. If the analysis in the preceding chapters is sound, this elaborate statutory edifice is almost entirely superfluous. Section 1 of the Sherman Act, which forbids contracts, combinations, and conspiracies in restraint of trade, is sufficiently broad to encompass any anticompetitive practice worth worrying about that involves the cooperation of two or more firms. Virtually all the practices discussed in this book, including all the exclusionary practices, involve such cooperation. The only truly unilateral acts (in the sense of acts that do not involve cooperation with another firm) by which firms can get or keep monopoly power are practices like committing fraud on the Patent Office, bringing a harassing lawsuit against a competitor, poisoning a competitor's product or introducing a computer virus into it, or blowing up the competitor's plant; and fraud, force, and abuse of process are adequately punished under other statutes. The other exclusionary practices, though unilateral in the sense of not necessarily or typically involving cooperation between competitors, do require a contract, express or implied, with someone outside the firm engaging in the practice...
