Keith Mack
The Federal Trade Commission (FTC) enforces antitrust laws that promote competition and protect consumers from anticompetitive mergers and business practices. The FTC's Bureau of Competition works with the Bureau of Economics to enforce these laws, which proscribe unlawful mergers and business practices, leaving courts to decide which ones are illegal. The FTC shares enforcement of antitrust laws with the Department of Justice (DOJ), with the FTC responsible for civil enforcement and the DOJ's Antitrust Division having the power to bring both civil and criminal actions. The FTC's competition mission is to enforce the rules of the competitive marketplace to promote vigorous competition and protect consumers. The effectiveness of the FTC in regulating antitrust laws can be assessed through an examination of its authority, enforcement actions, and impact on competition and consumer welfare.
| Characteristics | Values |
|---|---|
| Purpose | Promote vigorous competition and protect consumers from anticompetitive mergers and business practices |
| Core Federal Antitrust Laws | Sherman Act, Federal Trade Commission Act, and Clayton Act |
| State Laws | Most states have antitrust laws enforced by state attorneys general or private plaintiffs |
| FTC Composition | Five commissioners nominated by the President and subject to Senate confirmation, serving seven-year terms |
| FTC Authority | Civil enforcement of antitrust laws, investigation of unfair methods of competition, and review of proposed mergers |
| DOJ Authority | Criminal sanctions and antitrust jurisdiction in certain industries (telecommunications, banks, railroads, airlines) |
| Enforcement Actions | Administrative or judicial process initiated if there is "reason to believe" the law is violated |
| Appeals | Initial decision by an administrative law judge can be appealed to the Commission and then to higher courts |
| Penalties | Civil penalties, consumer redress, injunction, criminal antitrust violations referred to DOJ |
| Private Enforcement | Private parties can bring suits to enforce antitrust laws, especially under the Sherman and Clayton Acts |
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What You'll Learn
The FTC's competition mission
The Bureau of Competition investigates unfair methods of competition and other antitrust violations. It also reviews proposed mergers and investigates other non-merger business practices that may impair competition. Such non-merger practices include horizontal restraints, involving agreements between direct competitors, and vertical restraints, involving agreements among businesses at different levels in the same industry.
The FTC shares enforcement of antitrust laws with the Department of Justice (DOJ). The FTC is responsible for civil enforcement of antitrust laws, while the DOJ's Antitrust Division has the power to bring both civil and criminal actions in antitrust matters. The FTC and DOJ often work together to provide support for competitive analysis, and they consult with each other before opening investigations to avoid duplicating efforts.
The FTC can seek a preliminary injunction to block a proposed merger pending a full examination of the transaction. It can also refer evidence of criminal antitrust violations to the DOJ. In addition to federal statutes, the FTC also works with state attorneys general to enforce state antitrust laws.
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Antitrust laws and the Sherman Act
The Sherman Act was the first antitrust law passed by Congress in 1890. It was a "comprehensive charter of economic liberty" aimed at preserving free and unfettered competition as the rule of trade. The Act broadly prohibits anticompetitive agreements and unilateral conduct that monopolizes or attempts to monopolize the relevant market. It outlaws "every contract, combination, or conspiracy in restraint of trade" and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize".
The Supreme Court decided that the Sherman Act does not prohibit every restraint of trade, only those that are unreasonable. For example, an agreement between two individuals to form a partnership may be lawful under the antitrust laws. However, certain acts are considered so harmful to competition that they are almost always illegal and are considered "per se" violations of the Sherman Act. These include arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids.
The Sherman Act authorizes the Department of Justice to bring suits to prohibit conduct violating the Act and also authorizes private parties injured by such conduct to bring suits for treble damages. The penalties for violating the Sherman Act can be severe, with criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison.
The federal government began filing cases under the Sherman Act in 1890, with varying degrees of success. Some notable cases include United States v. Motion Picture Patents Co. (1915), where the company was found to have abused its monopolistic rights, and United States v. AT&T Co., which resulted in the breakup of the company in 1982.
In addition to the Sherman Act, two other core federal antitrust laws were passed: the Federal Trade Commission Act and the Clayton Act, both in 1914. These laws, along with the Sherman Act, are enforced by the FTC and the U.S. Department of Justice (DOJ) Antitrust Division, with some overlap in their authorities. The agencies work together to enforce antitrust laws and promote competition in the marketplace for the benefit of consumers.
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Antitrust enforcement
The FTC shares antitrust enforcement with the U.S. Department of Justice's (DOJ) Antitrust Division, which has the power to bring civil and criminal actions. The FTC and DOJ often work together, consulting before opening investigations to avoid duplication. The DOJ has sole antitrust jurisdiction in certain industries, such as telecommunications and banking, and can obtain criminal sanctions.
Private parties, including businesses and individuals, can also bring suits to enforce antitrust laws, particularly under the Sherman and Clayton Acts. State attorneys general also play a role in antitrust enforcement, bringing suits under federal or state antitrust laws, especially in matters concerning local businesses or consumers.
The FTC's antitrust enforcement powers have been used in recent years to challenge mergers, such as between Microsoft and Activision Blizzard, and to promote the "right to repair" policy, taking action against companies limiting independent repair work. The FTC's enforcement actions can be appealed to the Commission, and ultimately to the U.S. Supreme Court.
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The FTC's Bureau of Competition
The Federal Trade Commission's (FTC) Bureau of Competition enforces the nation's antitrust laws, which form the foundation of a free market economy. Antitrust laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices.
The Bureau of Competition works in tandem with the Bureau of Economics to enforce these laws for the benefit of consumers. It has developed resources to explain its work, including an overview of the types of matters it investigates, such as anticompetitive mergers and conduct. The Bureau maintains statistics on the FTC's competition enforcement actions and has several divisions dedicated to specific industries and types of investigations.
For example, Mergers I reviews potentially anticompetitive mergers and acquisitions in healthcare-related industries, including pharmaceuticals, medical devices, and consumer health products. Mergers III has successfully challenged anticompetitive mergers in diverse industries, including online real estate listing services, mortgage loan origination systems, and oil and gas. Anticompetitive Practices II is the Bureau's newest division, housing lawyers with expertise in various areas of antitrust law. This division investigates potentially anticompetitive conduct, actively litigates to enforce antitrust laws, and challenges monopolies.
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Antitrust violations
Antitrust laws are enforced by both the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) Antitrust Division. While their authorities overlap, the two agencies complement each other in practice. The FTC devotes most of its resources to segments of the economy where consumer spending is high, such as healthcare, pharmaceuticals, professional services, food, energy, and certain high-tech industries like computer technology and internet services.
The DOJ has sole antitrust jurisdiction in certain industries, including telecommunications, banks, railroads, and airlines. Only the DOJ can obtain criminal sanctions. The FTC, on the other hand, can seek civil penalties or an injunction for violations of its orders. In some cases, the FTC can refer evidence of criminal antitrust violations to the DOJ.
The three core federal antitrust laws are the Sherman Act, the Federal Trade Commission Act, and the Clayton Act, which were passed in 1890, 1914, and 1914, respectively. The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade" and any "monopolization, attempted monopolization, or conspiracy to monopolize." Certain acts are considered per se violations of the Sherman Act, including plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are considered so harmful to competition that they are almost always illegal and carry severe penalties.
The FTC Act covers other practices that harm competition but may not fall neatly into categories of conduct formally prohibited by the Sherman Act. The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates. It prohibits mergers and acquisitions that may substantially lessen competition or create a monopoly. The Clayton Act also authorizes private parties to sue for triple damages when they have been harmed by conduct that violates either the Sherman or Clayton Act.
In addition to federal antitrust laws, most states have their own antitrust laws, which are enforced by state attorneys general or private plaintiffs. State attorneys general play an important role in antitrust enforcement, particularly on matters of local concern. They can bring federal antitrust suits on behalf of individuals residing within their states or on behalf of the state as a purchaser.
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Frequently asked questions
The FTC's competition mission is to enforce the rules of the competitive marketplace, also known as antitrust laws. These laws promote competition and protect consumers from anticompetitive mergers and business practices.
The FTC shares the enforcement of antitrust laws with the Department of Justice (DOJ). The FTC is responsible for civil enforcement of antitrust laws, while the DOJ's Antitrust Division has the power to bring both civil and criminal actions in antitrust matters. The FTC's Bureau of Competition investigates and enforces antitrust laws, while the Bureau of Economics enforces these laws for the benefit of consumers.
The FTC has taken action against the merger between Microsoft and Activision Blizzard, alleging that it would suppress competitors. The FTC also enforces the right to repair and takes action against companies limiting repair work at independent shops. Additionally, the FTC regulates the funeral home industry to protect consumers from deceptive practices.
The three core federal antitrust laws are the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. These laws proscribe unlawful mergers and anticompetitive business practices, with the Sherman Act specifically outlawing monopolization and conspiracies in restraint of trade.
