Antitrust Laws: Constitutional Foundation And Rationale

The constitutional basis for antitrust legislation in the United States is rooted in the power of Congress to regulate interstate commerce. The primary objective of antitrust laws is to promote and protect competition, ensuring that businesses compete fairly and consumers benefit from lower prices, higher quality products, more choices, and greater innovation. The key pieces of federal antitrust legislation include the Sherman Act, the Clayton Act, and the Federal Trade Commission Act. These laws aim to prevent anticompetitive practices, such as unlawful mergers, monopolies, price fixing, and conspiracies that restrain trade. The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) are responsible for enforcing these laws and promoting competition in the marketplace.

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The Sherman Act

The purpose of the Sherman Act is to preserve a competitive marketplace and protect consumers from market failure. It is not intended to protect competitors from legitimately successful businesses or prevent businesses from gaining honest profits. Instead, it aims to prevent anticompetitive conduct and protect consumers, taxpayers, and workers from the negative consequences of such actions. The act also authorizes private parties injured by conduct violating the act to bring suits for treble damages.

The Clayton Act

• Price discrimination between different purchasers if such discrimination substantially lessens competition or tends to create a monopoly.
• Sales on the condition that the buyer does not deal with the competitors of the seller ("exclusive dealings").
• Sales on the condition that the buyer also purchases another different product ("tying") but only when these acts substantially lessen competition.
• Section 7 of the Act prohibits mergers and acquisitions where the effect "may be substantially to lessen competition or to tend to create a monopoly."

An important distinction between the Clayton Act and the Sherman Act is that the Clayton Act contains safe harbors for union activities. Section 6 of the Act exempts labor unions and agricultural organizations, stating that "the labor of a human being is not a commodity or article of commerce." As a result, boycotts, peaceful strikes, peaceful picketing, and collective bargaining are not regulated by this statute.

The Federal Trade Commission Act

The Federal Trade Commission (FTC) is tasked with enforcing federal antitrust laws, often in conjunction with the U.S. Department of Justice. The FTC focuses on segments of the economy where consumer spending is high, including healthcare, drugs, food, energy, technology, and anything related to digital communications. The FTC's competition mission is to enforce the rules of the competitive marketplace — the antitrust laws. These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices.

The FTC Act was passed by Congress in 1914, creating the FTC and banning unfair competition methods and deceptive acts or practices. The FTC Act is one of the three core federal antitrust laws still in effect today, along with the Sherman Act and the Clayton Act. These laws have had the same basic objective for over 100 years: to protect the process of competition for the benefit of consumers, ensuring strong incentives for businesses to operate efficiently, keep prices down, and maintain quality.

The FTC's Bureau of Competition, working with the Bureau of Economics, enforces the antitrust laws for the benefit of consumers. The FTC Act is designed to ensure that businesses are competing fairly and that consumers have access to a free and open marketplace with lower prices, higher-quality products and services, more choices, and greater innovation. The FTC investigates potential violations of the antitrust laws, including premerger notification filings, certain consumer or business correspondence, congressional inquiries, or articles on consumer or economic subjects. If the FTC finds that a law has been violated, it will attempt to stop the questionable practices or find a resolution to the anticompetitive portion of a proposed merger or acquisition.

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Interstate Commerce Act

The Interstate Commerce Act, passed on February 4, 1887, was the first example of antitrust law in the United States. The Act was passed by Congress in response to growing public demand for the regulation of railroads, which had been privately owned and entirely unregulated following the Civil War. The Act created an Interstate Commerce Commission (ICC), a five-member enforcement board, to oversee the conduct of the railroad industry and ensure fair practices.

The Interstate Commerce Act addressed the problem of railroad monopolies by setting guidelines for how railroads could do business. Specifically, the Act required railroads to charge a "just and reasonable" fee to travellers and to post those fees publicly. It prohibited special rates or rebates for individual shippers, “preference” in rates for any particular localities, shippers, or products, and long-haul/short-haul discrimination. The Act also forbade the pooling of traffic or markets and established the ICC, which heard complaints against railroads and issued cease-and-desist orders to combat unfair practices.

While the ICC was the first independent regulatory agency of the US government, its jurisdiction was limited to companies that operated across state lines. Over time, the courts narrowed the agency's authority further, and in 1995, Congress abolished the ICC, transferring its remaining functions to the Surface Transportation Board.

Although the Interstate Commerce Act was less influential than subsequent antitrust legislation, such as the Sherman Act, it marked a significant turning point in federal policy. It demonstrated that Congress could apply the Constitution's "Commerce Clause" more expansively to national issues involving commerce across state lines, transforming the Clause into a powerful legislative tool for addressing national problems.

Anticompetitive practices

Antitrust laws are designed to prevent anticompetitive practices and promote competition within all sectors of the economy. They are enforced by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ), who work to ensure that businesses are competing fairly and that consumers benefit from vigorous competition. The constitutional basis for antitrust legislation is the power of Congress to regulate interstate commerce, as seen in the Gibbons v. Ogden case and the Interstate Commerce Act.

The Clayton Act, passed in 1914, further strengthened antitrust laws by addressing specific practices not clearly prohibited by the Sherman Act. This included banning mergers and acquisitions that substantially lessen competition or lead to monopolies. The Clayton Act also prohibited discriminatory pricing and authorized private parties to take legal action against anticompetitive practices.

In addition to mergers and acquisitions, anticompetitive practices can involve conspiracies to defraud, mail and wire fraud, money laundering, kickbacks, and obstruction of justice, among other crimes. Antitrust laws also focus on preventing collusion between multiple firms to limit competition through practices like price fixing, bid rigging, market allocation, and wage manipulation. These practices are criminal violations under the Sherman Act, and agreements that reduce competition may be subject to civil enforcement.

The complexity of identifying anticompetitive practices has led to antitrust law becoming a distinct legal specialization. The FTC and DOJ work together with other regulatory agencies to ensure that mergers serve the public interest and do not hinder competition. The FTC's Bureau of Competition enforces antitrust laws, focusing on sectors with high consumer spending, such as healthcare, drugs, food, energy, and technology.

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