In the U.S., both federal and state laws prohibit anticompetitive conduct and mergers. While this can be an annoyance to some business owners, the goal is to give American consumers, workers, and taxpayers the benefits of competition, including high-quality products and services, low prices, a fairer labor market, and efficient operations.
Below, we cover the most important antitrust laws to know about and how they could affect the way you do business.
The Sherman Act
The Sherman Act outlaws “every contract, combination, or conspiracy in restraint of trade,” as well as any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” This doesn’t necessarily include every agreement to restrain trade, just those that a judge deems unreasonable.
If you are found in violation of the Sherman Act and earned $100 million or less from your illegal activities, you can expect to pay up to $100 million as a corporation and $1 million as an individual (along with up to 10 years in prison) in criminal penalties. More concerningly for large corporations, the fine could be increased to twice the amount your business gained from the illegal acts or twice the amount your victims lost if either of those was over $100 million.
To keep your business from having to pay these harsh penalties, avoid any activities that might be seen as monopolization or forming an agreement that significantly restrains trade. If your firm has suppressed competitors to maintain its market power for a product or service, you could face criminal or civil prosecution. Plain arrangements with your competition to fix prices, rig bids, or divide markets are nearly always illegal, but less obvious activities could lead to legal trouble as well.
The Clayton Act
The Clayton Act goes further than the Sherman Act. It prohibits a wide range of activities that could restrict competition, including tying agreements, predatory pricing, and mergers that could reduce competition. As amended by the 1936 Robinson-Patman Act, the Clayton Act also bans some discriminatory practices related to dealings between merchants.
Another key fact about the Clayton Act for businesses: it allows private parties to sue for triple damages if they have been harmed by conduct that goes against either the Sherman or the Clayton Act. To avoid legal challenges under the Clayton Act, don’t do any of the following:
- Force customers to buy one product in order to purchase a second, more popular product.
- Merge your company with another in a way that creates a near-monopoly in a market or substantially lessens competition.
- Plan a large merger or acquisition without notifying the government of your plans in advance.
- Set prices below cost for the purpose of driving competitors out of business.
- Sit on the board or otherwise put yourself in a position to make business decisions for a competing organization. These activities are prohibited because they could allow for synchronized pricing changes and labor negotiations that could reduce both organizations’ competitive vigor and have a negative impact on both consumers and workers.
The Federal Trade Commission Act
The Federal Trade Commission Act bans “unfair or deceptive acts or practices” and “unfair methods of competition.” It covers a broader range of practices that harm competition than the Sherman Act.
Because of the Federal Trade Commission Act, the FTC has the authority to enforce U.S. antitrust laws. All violations of the Sherman Act also violate the FTC Act, so the FTC can bring cases under the FTC Act against the same activities that violate the Sherman Act.
Other Antitrust Laws
The Washington State Consumer Protection Act is a relatively new law. It aims to protect consumers from unfair methods of competition and practice in the conduct of any trade or commerce. A consumer may bring a claim under this law for any business activity that has the capacity to deceive substantial portions of the public.
http://apps.leg.wa.gov/RCW/default.aspx?cite=19.86
The federal Antitrust Division enforces a variety of other laws to fight illegal activities related to anticompetitive conduct. These include offenses that could compromise the integrity of an antitrust investigation, such as mail and wire fraud, money laundering, kickbacks, bribery, perjury, false statements to federal agents, obstruction of justice, and conspiracies to defraud the U.S.
If you’re not sure how your business plans fit with these laws, you may want to speak to a business lawyer. At the Anderson Hunter Law Firm, we are here to help you understand antitrust law and any other legal matters that could affect your business. Request a consultation with us today if you have questions or need legal advice.