Antitrust law is a complex area of federal and state
statutory law, the primary purpose of which is to prevent businesses from
creating unjust monopolies or competing unfairly in the marketplace. Antitrust
law seeks to maximize market efficiency and to protect consumers. Many specific
actions are covered by these laws, including pricing policy, terms of trade,
customer and territory selection, bundling of services, advertising and sales
technology, and mergers and acquisitions. An experienced antitrust attorney who
stays abreast of current developments in this area should be able to advise
businesses on how to avoid antitrust problems.
Businesses are prohibited by antitrust laws from forming or
trying to form a monopoly. The law also restricts the way businesses interact
with their competitors and customers.
A business has a monopoly in the market if it has such an
advantage over all other businesses in that field that it is said to have
economic control. The company with the monopoly may be the only manufacturer of
a particular commodity, or it may provide a service in the community to
virtually all consumers desiring the service. A natural monopoly is one over
which the business has no control--it forms in the natural course of a growing
economy. The market may be so specialized, for example, that no other
businesses have found it feasible to establish themselves in that area. Power
companies often have natural monopolies. Natural monopolies are not illegal. It
is illegal, though, for a business to conspire with others to drive its
competitors out of business in order to create a monopoly.
Arrangements between competitors are called horizontal
arrangements under antitrust law. Some of these arrangements run afoul of
antitrust laws. Generally, the agreements businesses enter into are unlawful
only if they are for the intentional purpose of restraining trade or gaining a
monopoly in the market. Some agreements are per se illegal,
however. A per se illegal relationship with a competitor is one in which no
anti-competitive intention must be proved. The arrangement itself, no matter
what the purpose, is against the law.
A collective refusal to deal, also
called a group boycott, is a concerted decision by competitors not to do
business with another business. Unlike a single company's boycott, or a boycott
by consumers of a particular business, a group boycott is unlawful because it
has the effect of restraining freedom of trade. Collective refusals to deal are
per se violations of the antitrust laws, that is, even if the businesses do not
intend to restrain competition, their group boycott violates antitrust law.
Obviously, a joint venture is not
in and of itself an unlawful business action. However, depending upon the
parties involved, joint ventures sometimes violate antitrust laws. If a joint
venture between several competitors in a market excludes others--especially if
there are more businesses included in the joint venture than those
excluded--there may be an antitrust violation. For example, if all photography
equipment and processing companies in Fort Lauderdale form a joint venture,
excluding two independent film processing stores, the participants in the joint
venture probably are engaging in unlawful business actions.
When competing businesses agree to
divide up the market between themselves, they have engaged in market division.
They may divide the market geographically, agreeing they will not enter the
geographic area assigned to their competitors for the purpose of selling their
products or services. They may divide the market by product, agreeing not to
manufacture certain products so as to allow competitors to do so. They even may
allocate particular customers between themselves. If the purpose and effect of
dividing the market is to limit competition between them, the businesses have
engaged in an unlawful antitrust activity.
Horizontal price fixing is the
agreement between competitors to set their prices the same or within the same
range. For example, if the major airlines meet and agree to offer a particular
price on round-trip tickets to the Caribbean, they have fixed prices in
contravention of the antitrust laws. Depending on the circumstances, price
fixing is per se illegal.
Tying occurs generally when a
company requires buyers to purchase one product or service (called the
"tied" product or service) in order to obtain another product or
service (the "tying" product or service), and the arrangement
restrains trade. Illegal tying is a per se violation of the antitrust laws.
Three elements must be present to constitute an illegal tie-in per se:
·
A tying scheme must exist, in which buyers are required
to buy one commodity or service in order to obtain another commodity or service
·
The seller must have enough economic power in the tying
product to allow it to significantly restrict the market for the tied product
·
A fairly substantial amount of interstate commerce in
the tied product must be affected
Tying is an antitrust concern not
because it restrains competition in the tying product, but because it restrains
trade in the market for the tied product. Thus, for example, a computer system
manufacturer that licensed a very popular computer operating system software
only to buyers of its not-so-popular computer system was held to have violated
antitrust laws by unlawful tying. The manufacturer had the leverage in the
market to require some purchasers to buy something they did not really want.
There was a demand in the market for purchase of the products separately.
Antitrust law prohibits some actions
between businesses at different levels of the market. Agreements or actions
between businesses and customers, between manufacturers and distributors, or
between distributors and retailers, are called vertical arrangements. As a
general rule, vertical arrangements are less likely than horizontal
arrangements to violate antitrust laws.
Although generally companies are
free to do business with whomever they chose, some antitrust laws put a
limitation on this freedom. Exclusive dealing arrangements, like market
divisions, are illegal if they have the effect of lessening competition. A
company that manufactures beach wear, for example, may not enter into a
contract to sell its products to a retailer on the condition that the retailer refuse
to carry any other lines of beach wear. The retailer should be able to carry
the products of competing businesses.
If it is intended to injure
competition, or if it has that effect, discriminating in price is prohibited by
antitrust law. Sellers are not allowed to charge two purchasers different
prices for the same product, unless it is for a lawful purpose. For instance, a
sale to dispose of damaged or perishable goods is not price discrimination in
contravention of antitrust law. On the other hand, it is unlawful for a
petroleum distributor to offer to one gas station but not others petroleum at a
discount.
Under some antitrust laws, a
manufacturer requiring a distributor or retailer to sell its product at a set
price is unlawful price fixing. Usually there must be a showing that the fixed
resale price was required or compelled, for example, as part of a distributor
agreement. Merely suggesting a resale price is not unlawful.