Term Paper: Antitrust Laws

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Antitrust Laws in the United States

United States can be considered unique in its formulation and enforcement of antitrust laws. This is because no other country has equivalent body of laws dealing specifically with monopolies and restrictive business practices with the possible exception of Canada. The reason lies in the fact that America has a very dominant, influential and vibrant business world. The United States enjoy a very pre-eminent position in the world of commerce and it would be natural to assume that there exists a connection between economic success and the existence of this special body of law. "The basic antitrust statutes are few in number: The Sherman Act of 1890; the Clayton Act, first enacted in 1914 and significantly amended in 1936 by the Robinson-Patman Act and in 1950 by the Celler-Kefauver Antimerger Act; and the Federal Trade Commission Act of 1914."

Even the most passioante supporter of American's economic success would hardly claim that these laws are the reason for America's eminent position in economic progress. But many well-qualified persons in the United States do, in fact, believe that the antitrust laws make an important contribution to economic stability and rise; other countries have frequently been instructed by spokesmen of the United States, to have similar laws in their countries in order to fully enjoy the advantages of competition.

Competition between firms is, after all, the most desirable trait of economic activity that works as a stimulus to improved methods and provides protection against indifference to the wishes of consumers. It would thus make no sense if firms were allowed to crush competition by signing agreements in private or by acquiring private monopoly power.

Even if it is accepted that there may be situations in which competition may justifiably be mitigated or restrained, it seems questionable whether the job of deciding which these situations are and what form of restraint to adopt should be left to those upon whom competition is expected to exercise a salutary influence. For external safeguards and stimuli are often irksome and there are other reasons than good ones for being rid of them.

The substantive provisions of the antitrust laws are few and brief; they are contained in seven sections taken from three statutes -- the Sherman Act of 1890 and the Clayton Act and Federal Trade Commission Act of 1914. The two latter statutes have been amended in important ways by subsequent measures which will be mentioned below. There are some other minor laws, dealing particularly with restrictive practices in the importation of goods into the United States, but these are not essential to the story. The Sherman Act of 1890 contains two main prohibitions:

Section I. 'Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is hereby declared to be illegal....'

Section 2 'Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor....'.

The Clayton Act of 1914 declares illegal four specified types of restrictive or monopolistic practice. They are in brief: a. price-discrimination (section 2), b. exclusive dealing and tying contracts (section 3), c. - acquisitions of competing companies (section 7), d. (d) interlocking directorates (section 8).

All these sections are qualified by provisos (some more elaborately defined than others) to the general effect that the practice concerned becomes unlawful only when its 'effect may be to substantially lessen competition or tend to create a monopoly'. The section dealing with price-discrimination was revised in the Robinson-Patman Act of 1936 and that dealing with acquisitions in the Celler-Kefauver Act of 1950.

The Federal Trade Commission Act of 1914 is concerned largely with the setting up of the Commission and the mechanics of its operation. Section 5 of the Act, however, contains one important substantive provision, which reads (as amended by the Wheeler-Lea Act of 1938) as follows: 'Unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce are hereby declared illegal.'

The prohibitions of the Sherman Act create criminal offences punishable by fines and even imprisonment. Their enforcement, like that of any other criminal law, is a police function and is directed by the United States Department of Justice. The Sherman Act, however, also charges the Department of justice with the duty of instituting proceedings in equity to prevent and restrain violations of the law. The significance of this is that a court of equity may translate the general terms of the Act into a set of detailed injunctions regulating the future conduct of businesses found to be in violation of the law and may even order the dissolution of such businesses or divest them of subsidiary parts, where these measures are found to be necessary to prevent continuing violations. From the point-of-view of maintaining competition these measures of equity relief are often more important to the Department of justice than criminal penalties. It will be found, therefore, that much of the Sherman Act case-law consists of suits in equity; civil and criminal actions are sometimes taken concurrently or in quick succession.

The Department of Justice may also institute civil proceedings under the Clayton Act, but this is a shared responsibility because section I of that Act vests in the Federal Trade Commission the authority to enforce compliance with its provisions. The substantive provisions of the Clayton Act do not create criminal offences and the Commission has no criminal jurisdiction: it is a quasi-judicial administrative tribunal which is empowered to conduct hearings in respect to suspected violations of the law and, if violations are found, to issue 'cease and desist' orders against further infringement. The Commission's 'cease and desist' order, which is subject to review by appellate courts, plays much the same role under the Clayton Act that a trial court's equity decree plays in civil proceedings under the Sherman Act.

The Federal Trade Commission is also charged with securing compliance with the general ban on 'unfair methods of competition' in section 5 of the Federal Trade Commission Act. This section does not create criminal offences and there is only the Commission's form of civil proceeding to enforce it. Section 5 is, however, of great importance, because the courts have ruled that the phrase 'unfair methods of competition' covers conduct that would also violate the Sherman Act and consequently that the Commission may exercise jurisdiction over what could equally well be Sherman Act cases. It has even been held by the Supreme Court that the Department of Justice and the Commission may proceed separately against the same offenders. It will thus be found in the case-law that many proceedings that are in all but name Sherman Act cases are taken by the Federal Trade Commission. Indeed, although it is established in principle that some forms of restrictive conduct may be 'unfair methods of competition' without 'assuming the proportions' of Sherman Act violations, it is rare in practice to come across instances; section 5 adds comparatively little to substantive antitrust law.

The enforcement of the antitrust laws does not depend exclusively on the Department of Justice and the Federal Trade Commission. The Sherman and Clayton Acts permit any private person who suffers damage as a result of violations to sue offenders and recover 'threefold the damages by him sustained'. A number of the cases described below will be 'treble damage' actions of this kind. No action for damages is available under the Federal Trade Commission Act.

When we discuss the antitrust laws, we must not forget to mention the exemptions from the statutes. The Sherman Act is very comprehensive rather all embracing legislation as far as its terms and conditions are concerned, therefore any exception must be specified in amending legislation. These amendments have been made over the period of time and some exceptions have emerged as the result.

The first important and broad exemption applies to labor. Even though before 1914, many cases concerning labor had been settled with the Sherman Act but section 6 of the Clayton Act changed things dramatically since it declared 'that the labor of a human being is not a commodity or article of commerce'. Later legislation has reinforced this position and the antitrust laws do not now apply to the activities of trade unions directed to promoting the interests of their members. This rule holds even when the union action is bound to impair business competition, so long as the union is pursuing its own rightful objectives and is not acting in collusion with employers. For example, a strong union may be able to prevent the products of a non-union factory from reaching the market or to keep goods from low-wage areas out of high-wage areas. The economic effects of such action may be much the same as those of a trade boycott or price-fixing arrangement but no antitrust… [END OF PREVIEW]

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