Antitrust laws help ensure a vigorous, competitive marketplace to maintain fair prices, the availability of an array of products, and quality goods and services. Diligent antitrust enforcement also helps businesses by protecting them from unfair competition and providing a level playing field.
Antitrust violations are sometimes difficult to detect. Information from consumers, business people and government employees can be instrumental in efforts to detect illegal activities.
The antitrust laws are a system of state and federal laws that prohibit unwarranted restraints on free and open competition. They allow the civil and criminal legal actions to be brought against individuals and businesses acting in restraint of trade. The law provides that anyone injured by an antitrust offense may recover from the wrongdoer three times the damages suffered.
Antitrust offenses almost always raise the prices paid by consumers. Being forced to pay illegally high prices is the equivalent of having money stolen from your pocket. Even relatively small price increases can have a tremendous overall effect statewide and nationwide. The economy and consumers suffer from the economic dislocations caused by antitrust offenses. And, when federal, state or local governments pay too much for goods or services because of antitrust violations, either taxes must be raised or services must be reduced.
The cost of doing business affects the profit a business will make. If the price of goods or services used by your business is raised by antitrust restraints, your cost of doing business will rise. Some antitrust offenses, such as boycotts, can make it impossible for you to do business.
The following discussion will identify the most important activities of which you should be aware.
It is illegal for any competitors to have any agreement to raise, stabilize or otherwise affect prices. The agreement need not be in writing or otherwise formalized–even an informal understanding concerning prices between competitors is illegal. The agreement need not set specific prices–any agreement affecting price levels is illegal. Even a practice of exchanging price information with competitors, where this practice affects prices, violates the antitrust laws.
Example: The owners of three major appliance stores meet informally and agree that the prices of refrigerators are too low. They promise to notify one another before deviating from their established prices. From then on, they offer fewer price reductions on refrigerators. The store owners have engaged in horizontal price-fixing.
Bid-rigging is an important type of horizontal price-fixing in which competitors agree in some way to affect the outcome of competitive bids. Submission of identical bids, if done pursuant to an agreement of the bidders, is one form of bid-rigging. Agreements among bidders to take turns in winning bids, to allocate opportunities to bid, or simply not to bid on certain contracts, are all examples of bid-rigging and are all illegal.
Example: A number of office machine distributors agree that, in bidding for government purchases of typewriters, they will take turns discounting from list price. Each distributor will bid at a discount only when it is his turn. The distributors have rigged the bids.
Other agreements among competitors
In addition to price-fixing, any other agreement among competitors which restrains competition is usually illegal. For example,
are almost always illegal, regardless of justification. Joint ventures undertaken by competitors can be legal, within certain limits.
Example: Two shoe manufacturers agree to stop selling to a discount shoe store because its prices are too low. The manufacturers have engaged in a boycott.
Vertical price-fixing (resale price maintenance)
Any agreement between a seller and a buyer regarding the price at which the buyer resells a product is illegal. Any attempt by a seller to have a buyer enter into such an agreement is also illegal.
Example: A manufacturer of light bulbs complains to a hardware store because the store is selling bulbs below the suggested retail price. The store promises that it will in the future keep its light bulb price within 10 percent of the suggested retail price. The manufacturer and the store are engaged in vertical price-fixing.
Other agreements between sellers and buyers
While agreements between a buyer and a seller that affect prices are always illegal, agreements that restrict the buyer’s freedom to resell products can also be illegal. These agreements include restrictions on where and to whom the buyer may resell the product. Such restraints are illegal whenever they harm competition more than they help it.
Example: A clothing manufacturer discovers that two of its wholesale distributors are trying to sell its product to the same store and that they are offering discounts in order to make the sale. The manufacturer forbids one of the wholesalers to sell to the store. The manufacturer has placed a customer restriction on the wholesaler.
Sellers sometimes require a buyer to purchase a product the buyer does not want in order to be allowed to buy a product the buyer does want. Such requirements are called tying arrangements. Tying is generally illegal where the seller has some degree of control over the market for the product the buyer wants.
Example: A wholesale book distributor is the only company distributing a best-selling book in the city, but it requires bookstores to buy a certain number of less popular books if they want the bestseller. The distributor is imposing a tying arrangement.
A business may not unfairly keep others from competing with it. Businesses may and should compete vigorously to obtain customers, and growth through superior ability and efficiency is not illegal. However, a business with significant market power may not, without any legitimate business justification, take actions that exclude or handicap its competitors.
Example: The owner of three of the four ski areas in a popular resort stops participating in a popular joint marketing plan to offer lift tickets that are good at any of the four ski areas at the resort. If there is no legitimate business justification for the refusal other than to harm its smaller competitor, the owner of the three ski areas is monopolizing the market at that resort.
Businesses may not merge with or acquire other businesses, when the effect may be substantially to lessen competition. The purpose of this federal statute is to stop the anti-competitive effects of increasing concentration or market power at an early stage. Such mergers and acquisitions may result in higher prices for consumers and other buyers. Mergers between competitors are more likely to raise concerns, but mergers between companies in other relationships, such as supplier and customer, may also be illegal.
Example: An isolated county has three hospitals. Two hospitals are large and provide a wide range of medical services. The third hospital is smaller and provides fewer services. Because of driving distances, it is very unlikely that patients will go to hospitals outside of the county. It is also very unlikely that any new hospitals will be built within the county in the foreseeable future. If the two large hospitals seek to merge, the transaction will violate the law.
What You Can Do
Determining whether antitrust issues exist require the help of people who are being harmed by the business practices or employees of the companies who are implementing the strategies to help identify the violations. Subtle restraints might never come to light unless alert citizens help point them out.
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