Competitve Business Laws

The United States has several antitrust laws that encourage competition and promote the production of quality goods and services at the lowest prices for the consumer. Antitrust laws are based on the notion that the economy functions best when competitors have limits for permitted activities. The idea is that the free market place has reasonable limits on the activities of businesses participating in the marketplace. Along with antitrust laws creating fair competition and affordable pricing, its biggest focus is related to monopolies. Anti-monopoly laws have four principal areas: agreements between or among competitors, contract arrangements between purchasers and sellers, the pursuit or care of monopoly power, and company mergers.

Different Antitrust laws have been created to help provide a guideline for competitive balance in the marketplace. The Sherman Anti-trust Act of 1890 is the foundation for U.S. antitrust regulation, with the majority of states statues based off it. It was the first measure passed by congress to prohibit abusive monopolies or trust. A trust is an arrangement where stockholders in several companies transfer their shares to a single set of trustees. In exchange, the stockholders would receive a certificate entitling them to a specified share of the consolidated earnings of these companies. The trusts came to dominate a number of major industries which made it a monopoly. A monopoly is a situation in which there is a single supplier or seller of a good or service for which there are no close substitutes. Economists and others have long known that unregulated monopolies tend to damage the economy by charging higher prices, providing inferior goods and services and suppressing innovation, therefore making the free marketplace unbalanced.

Over the years Congress has made several amendments to the Sherman Antitrust laws of 1890, such as the Clayton Antitrust Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950. The Clayton Antitrust Act of 1914 was put into place to basically clarify and strengthen the vague language used in the Sherman Act of 1890. This allowed Congress to put an end to illegal business practices that were conducive to the formation of monopolies or that resulted from them and closing loopholes that businesses where using as a result of the broad language used in the Sherman Act. For example, specific forms of holding companies and interlocking directorates were forbidden, as were discriminatory freight and shipping agreements, as well as the distribution of sales in regards to territories among natural competitors. The Robinson-Patman Act of 1936 was another amendment created to enforce the price and prevent any forms of discrimination among customers under section 2 of the Clayton Act.  The Celler-Kefauver Act of 1950 was created to strengthen Section 7 in the Clayton Act prohibiting one firm from securing either stocks or physical assets (facilities, or equipment) of another firm when the acquisition would reduce competition (i.e. Walmart vs. competition).  It also extended the coverage of antitrust laws to all forms of mergers whenever the effect would substantially lessen competition and tend to create a monopoly (i.e. Progressive Energy and Duke Energy). Earlier legislative measures only restricted horizontal mergers, like those involving firms that produce the same type of goods. In contrast, the Celler-Kefauver Act went farther by restricting mergers of companies in different industries creating conglomerate mergers. Stopping companies like American Telephone and Telegraph (AT&T) and Microsoft Corp. from creating huge monopolies in the telecommunications world.