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Antitrust Laws Meaning

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On the other hand, Efficiency argues that antitrust law should be amended primarily to benefit consumers and not to pursue another objective. Free market economist Milton Friedman explains that he initially agreed with the basic principles of antitrust law (breaking down monopolies and oligopolies and promoting more competition), but concluded that they do more harm than good. [3] Thomas Sowell argues that even if a superior firm replaces a competitor, it does not follow that competition is over: another historical cartel case is United States v. American Tobacco Co., 221 U.S. 106 (1911). In that case, the Court stated that the Sherman Act does not prohibit having a monopoly. Instead, it only prohibits bad deeds that are used to gain a monopoly. The dual application of antitrust law by the Department of Justice and the Federal Trade Commission has long raised concerns about the different treatment of mergers. In response, the House Judiciary Committee approved the Smarter Act in September 2014. [29] Usually, when most people hear the term “antitrust law,” they think of monopolies. Monopolies refer to the domination of an industry or sector by an enterprise or enterprise with the elimination of competition. Antitrust laws exist to promote competition among sellers, limit monopolies and give consumers more opportunities. Antitrust law is the broad category of federal and state laws designed to keep business operations honest and fair.

Antitrust laws govern how companies do business. The aim is to create a level playing field in the free market and to prevent companies from having too much power. Under antitrust law, a trust is a large group of companies that work together or join forces to form a monopoly or control the market. Major antitrust laws in the United States include the Interstate Commerce Act of 1887, the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. Antitrust laws, also known as competition laws, are laws developed by the U.S. government to protect consumers from predatory business practices. They ensure fair competition in an open market economy. These laws have evolved with the market and vigilantly protect against potential monopolies and disruptions to the productive ebb and flow of competition. The following information about these laws is taken from Antitrust Enforcement and the Consumer Guide. Alan Greenspan argues that the very existence of antitrust laws discourages businessmen from certain activities that could be socially useful, lest their business actions be deemed illegal and dismantled by the government. In his essay Antitrust Law, he says, “No one will ever know what new products, processes, machines, and economic mergers that were killed by the Sherman Act before they were born did not materialize.

No one will ever be able to calculate the price we have all paid for this law which, by inducing a less efficient use of capital, has kept our standard of living lower than would otherwise have been possible. Those who, like Greenspan, oppose antitrust law tend to compete not as an end in itself, but because of its results – low prices. As long as a monopoly is not a coercive monopoly when an enterprise is safely isolated from potential competition, it is argued that the enterprise must maintain low prices to prevent competition. Therefore, legal action is inappropriate and unfairly harms the business and consumers. [4] The Sherman Act prohibits “any contract, combination or conspiracy to restrict trade” and any “monopolization, attempted monopolization, conspiracy or combination to monopolize.” A long time ago, the Supreme Court ruled that the Sherman Act does not prohibit any restrictions on trade, but only those that are unreasonable. For example, an agreement between two people to form a partnership restricts trade in one direction, but must not do so inappropriately and may therefore be legal under antitrust laws. On the other hand, some actions are considered so harmful to competition that they are almost always illegal. This includes clear agreements between competing individuals or companies to set prices, divide markets or manipulate offers. These acts constitute violations “in themselves” of the Sherman Act; In other words, no defence or justification is allowed. The federal government can file civil lawsuits to enforce laws through the antitrust division of the U.S. Department of Justice and the Federal Trade Commission.

Only the U.S. Department of Justice can initiate antitrust criminal proceedings under federal antitrust laws. [47] Perhaps the federal government`s most notorious antitrust enforcement actions were the dissolution of AT&T`s monopoly of local telephone services in the early 1980s[48] and its actions against Microsoft in the late 1990s.