Breaking Up Big Tech: Antitrust Laws In Action

Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don't overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies. The term antitrust comes from the late 19th century when American industrialists used trusts—legal arrangements where one is given ownership of property to hold solely for another's benefit—to consolidate separate companies into large conglomerates.

The history of antitrust law in the United States began with the Sherman Antitrust Act of 1890, which made it illegal to form a monopoly or restrain trade. This was followed by the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, which further clarified and strengthened antitrust regulations. These three laws form the basis of antitrust law in the United States and are enforced by the Federal Trade Commission and the Department of Justice.

Antitrust laws are designed to prevent anti-competitive practices such as price fixing, bid rigging, market allocation, and monopolization. They also regulate mergers and acquisitions to ensure that they do not lessen competition or create monopolies. In some cases, antitrust laws may lead to the break-up of companies that have become monopolies, as was the case with Standard Oil, which was broken up into 33 separate companies in 1911.

Predatory pricing

In the United States, predatory pricing is prohibited by federal antitrust laws, including the Sherman Act, the Clayton Act, and the Federal Trade Commission Act. These laws aim to promote economic competition and prevent unjustified monopolies. Antitrust laws are enforced by the Federal Trade Commission (FTC) and the Department of Justice (DOJ), which investigate potential violations and take legal action when necessary.

Bid rigging

In a bid rigging scheme, companies may decide in advance who will win a bidding process. This can be achieved through various methods, such as bid rotation, where companies take turns submitting the lowest bid, or bid suppression, where one or more bidders refrain from bidding to guarantee that a particular party wins. Another tactic is complementary bidding, where companies intentionally submit uncompetitive bids to ensure that a preselected bidder is chosen.

The practice of bid rigging is a felony and is punishable by fines, imprisonment, or both under the Sherman Antitrust Act of 1890. It is also illegal in most countries outside the United States. Federal and state laws allow private parties harmed by anticompetitive bid rigging to bring antitrust lawsuits seeking damages and injunctive relief.

Price fixing

An example of price fixing is when a group of competing optometrists agreed not to participate in a vision care network unless the network raised reimbursement rates for patients covered by its plan. The FTC deemed this to be illegal price fixing as it resulted in higher costs for consumers.

Monopolies

The first antitrust law was the Sherman Antitrust Act of 1890, which outlaws "every contract, combination, or conspiracy in restraint of trade" and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize". The Sherman Act also makes it illegal to form a monopoly and gives the Justice Department the power to go to federal court to stop monopolistic behaviour or impose remedies.

The Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914 are the other two key pieces of antitrust legislation. The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (the same person making business decisions for competing companies). The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or deceptive acts or practices".

Antitrust laws are designed to protect and promote competition within all sectors of the economy. They are also intended to ensure fair competition and prevent unfair business practices that could harm consumers.

Mergers and acquisitions

In the US, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) are responsible for enforcing antitrust laws. The DOJ has sole jurisdiction over certain sectors, such as telecommunications, banks, railroads, and airlines, and can impose criminal sanctions. The FTC focuses on segments of the economy with high consumer spending, such as healthcare, drugs, food, energy, technology, and digital communications.

Antitrust laws regulate mergers and acquisitions to prevent anti-competitive behaviour and the formation of monopolies. A merger or acquisition may be deemed illegal if it substantially lessens competition or creates a monopoly. This can harm consumers by leading to higher prices, reduced choice, and lower quality products and services. It can also harm workers by potentially lowering wages and reducing employment options.

There are three types of mergers: horizontal, vertical, and potential competition mergers. Horizontal mergers occur between firms with dominant market shares, and the FTC must assess whether the new entity will exert monopolistic and anti-competitive pressures on the remaining firms. Vertical mergers can improve cost savings and business synergies, but they may also negatively impact competition if a competitor is unable to access supplies. Potential competition mergers involve dominant firms acquiring new or potential market entrants, which can reduce competition and hinder market entry.

To prevent anticompetitive mergers and acquisitions, the FTC and DOJ review proposed mergers and acquisitions, particularly those that are likely to substantially lessen competition or create a monopoly. This process typically involves defining the relevant market and assessing market concentration using the Herfindahl-Hirschman Index (HHI) and each company's market share.

In addition to federal antitrust laws, most US states have their own antitrust laws, enforced by state attorneys general or private plaintiffs.

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