Antitrust Law & Economics in a Nutshell

Antitrust law regulates business activities to promote fair competition.

Antitrust law affects virtually all areas of business and the economy. This body of law, rooted in economic principles of free trade and competition, seeks to ensure that corporations compete fairly by forbidding monopolies, price-fixing schemes and other acts that restrain healthy competition vital to a free market economy.

Function

Antitrust law refers to the body of law that regulates commerce by prohibiting monopolies and unfair trade restraints. West's Encyclopedia of American Law states that antitrust law seeks to foster fair competition among businesses and is premised on the economic theory that free trade benefits consumers, companies and the economy as a whole.

History

U.S. antitrust law originated in the 19th century in response to public anger over large monopolies, known as trusts, in the mining and manufacturing industries, according to West's Encyclopedia. Mergers among many industries after the Civil War concentrated industrial power into the hands of a small number of people, such as corporate giants John D. Rockefeller and Andrew Carnegie. The 19th century trusts set prices and drove competitors out of business. These and other abuses fueled calls for reform, resulting in the passage of the Sherman Antitrust Act in 1890.

Identification

The U.S. Department of Justice's trusts division and the Federal Trade Commission are the two agencies responsible for enforcing antitrust law. In addition the U.S. Supreme Court plays a central role in determining how antitrust laws are applied, according to West's Encyclopedia.

Effects

Beginning in the 1970s and 1980s, courts became less interventionist in antitrust cases, and these cases became more difficult for plaintiffs to win, says West's Encyclopedia. Courts increasingly accepted economic efficiency as a justification for companies that dominated their industries to continue their practices. Since the 1980s, the government has taken a more favorable view of corporations forming conglomerates through mergers, according to West's.

References

• West's Encyclopedia of American Law: Antitrust Law

Resources

• IP Watchdog: Antitrust Law Basics