Paralegal Guide: Antitrust Resources
Free market economic models function on the presumption that businesses attract customers by providing the best product at the best price. That is, when a customer shops for an item, he will buy from the company that offers the most value for the least amount of money. When two or more businesses produce similar items, the customer must choose which item is a better value. Thus, the businesses are forced to compete with each other for the customer’s money. Thus, business competition within a given market keeps prices reasonable. However, sometimes situations arise wherein a company completely corners a given market and business competition is eliminated. When a company develops a monopoly, it can charge any arbitrary price since customers only have one option. Monopolization leads to a failure of the free trade system.
Corporate monopolies, or trusts, dominated the United States oil, steel, and railroad markets in the 19th century until Congress passed the first of the antitrust laws, discussed in depth here by the Federal Trade Commision (FTC), in 1890. Called the Sherman Act, this law was a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” Two more antitrust laws–the Federal Trade Commission Act and the Clayton Act, both passed in 1914–form the backbone of the antitrust laws still used today.
In essence, all the antitrust laws work to protect market competition so that consumers are treated fairly. The Sherman Act outlaws unreasonable restraint of trade and attempts to form monopolies. It also prohibits price-fixing, also known as bid-rigging, in which business competitors come to a prearranged agreement about the price of a given product. Furthermore, it is illegal and considered fundamentally unfair for corporations to divide up markets in order to sell only to a certain group. Finally, two companies cannot agree to boycott a third company. Individuals and businesses that violate antitrust laws can be criminally prosecuted by the U.S. Department of Justice.
The FTC was created as a result of the Federal Trade Commission Act, which bans unfair or deceptive business practices. The Clayton Act addressed specific violations not included in the Sherman Act, such as unlawful mergers and interlocking directorates: when one person makes business decisions for two companies. Courts have the freedom to decide on an individual case basis whether a company’s business practices are unfair or not. In addition, many states have their own antitrust laws. State attorneys generals may also file suits to enforce both state and federal antitrust laws.
Antitrust suits can be filed by the FTC and the U.S. Department of Justice: Antitrust Division. Two of the most famous cases involving antitrust laws are those involving the mandated 1980s breakup of AT&T and the actions taken against Microsoft in the late ‘90s.
United States v. AT&T was a landmark antitrust case in which the U.S. government accused the telecom company American Telephone & Telegraph of anti-competition actions–specifically, that AT&T had a monopoly over American telecommunication services. In 1974, the Federal Communications Commission believed AT&T was using profits from its subsidiary company, Western Electric, to subsidize the costs of its network. This practice is illegal under antitrust law. A case was filed in which the U.S. Department of Justice argued that AT&T should be broken up into seven regional Bell operating companies and a stunted AT&T, a suggestion that spurred heated public debate. Some people believed that breaking up AT&T would allow competitors to break into the market, encouraging innovation. Others said that in order to maintain uniform telecommunications standards, an exception to the antitrust laws should be made for AT&T. Opponents worried that a corporate breakup would leave a disorganized, confusing telecom industry.
In 1982, AT&T at length agreed to a settlement in which the company kept control of its long-distance services, Western Electric, and Bell Laboratories. However, it had to divest its 22 local phone service monopolies.
Another major antitrust case involved PC giant Microsoft. U.S. v. Microsoft was filed in 1998 on the premise that Microsoft had a monopoly over Intel-based PCs because its web browser, Internet Explorer, was bundled with its Microsoft Windows operating system. Selling them in a bundle was allegedly the reason Internet Explorer cornered the browser market: everyone who used Windows had a copy of Internet Explorer, whereas people had to acquire other browsers separately. The implied inconvenience was suspected to have restricted the browser market. Secondary matters disputed whether Microsoft manipulated its application interfaces to favor Internet Explorer and dealt with restrictive licensing agreements.
According to Microsoft, Internet Explorer and Windows were bundled together because they were inextricably linked products which were one and the same. Opponents claimed the browser was a separate product capable of working without Windows, on the basis that a version of Internet Explorer was available for Mac OS. In the end, and after appeal, a settlement was reached in which Microsoft had to share its application programming interfaces with third-party companies. In addition, it had to appoint a panel who would have access to all Microsoft records, source code, and systems for five years so that compliance could be assured.
U.S. v. Microsoft is a very complex case, the decisions of which have been reviewed many times. For the most updated information on the case, visit the U.S. Department of Justice Antitrust Case Filings.
Supreme Court Opinions
The Supreme Court is the highest judicial power in the United States, and as such, federal antitrust suits often fall under its jurisdiction. The Supreme Court maintains a comprehensive, searchable website that displays recent decisions, opinions, and an argument calendar. Additionally, you can access the Federal Judicial Center. You can also search an archive of past decisions Cornell’s Supreme Court Collection. Finally, stay up to date national justice issues when you visit the Office of the Attorney General.
- The National Association of Attorneys General lists each state’s Attorney General along with the web site, where you can file consumer complaints.
- For an overview of each of the U.S. antitrust laws, see the Federal Trade Commission’s Guide to Antitrust Laws.
- You can also use the USDOJ’s Antitrust Division compliance assistance resources, includes recent antitrust filings, press releases, compliance reports, and where to report violations.
- The American Antitrust Institute strives to increase business competition and challenge abusive economic practices.
- The American Bar Association Section of Antitrust Law provides an online document library for antitrust resources for members.
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