Anti-Trust & Unfair Trade Practices

An Overview of Monopoly and Antitrust law

On July 29, 2020, the heads of the biggest companies in the technology industry, Google, Apple, Facebook, and Amazon, testified before a congressional subcommittee concerning whether they have amassed too much power. The subcommittee conducting the hearing is the House of Representatives’ Subcommittee on Antitrust, Commercial, and Administrative Law. The hearing was attended by Apple’s Tim Cook, Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, and Google’s Sundar Pichai. The Subcommittee also wanted Twitter’s Jack Dorsey to testify, but he did not attend.

The Subcommittee explored whether these companies face sufficient competition and examined the companies’ business practices. Amazon has been recently scrutinized for collecting data on its independent business partners that sell on its platform in order to offer its own products that undercut those sellers. Each company has also generally been accused of employing predatory behavior aimed at reducing competition. Each of the respective companies’ CEOs generally testified that they face competition in the marketplace, and that they do not have a dominant market share in any market.

Another major concern with these tech giants is the collection and selling of personal consumer data by these companies. Conservative members of the Legislature are further concerned about these tech companies’ censorship of conservative media pages and lawmakers, including President Trump. This hearing and the issues surrounding the major technology companies highlight the modern

Government regulation of large companies remains an important power of the federal government. This article discusses the history of antitrust and trade regulation in the United States, the main laws that comprise antitrust law, and the major cases that have shaped the area of business regulation

Historical Development of Antitrust Law

Monopoly and antitrust law generally describe laws aimed at ensuring there is actual, fair competition in the free market among different businesses. These laws prevent anti-competitive business practices to prevent one company or group of companies from completely dominating an industry. This is important for consumers because anti-competitive practices hurt consumers because such practices lead to price fixing and fewer companies competing for consumers’ business.

Antitrust law developed to generally combat unfair business practices of large businesses conglomerates that were called “trusts.” A trust is the organization of multiple businesses in the same industry, which band together in order to control the production and distribution of a product or service. Trusts can lead to monopolies over an entire industry. During the mid-19th Century and early 20th Century, trusts controlled the industries essential to growth in the United States, namely railroads, oil, steel, and sugar.

Trusts operated with no federal regulation. As they grew, they controlled the supply and the price of their products and services. These companies engaged in price fixing, bid rigging, and anti-competitive behavior that suppressed competition. These actions harm the consumer because they have limited choices for services and products at high prices.

One of the first trusts in the United States was formed by John D. Rockefeller. In 1882 called Standard Oil Company. John Rockefeller recognized the high demand for use by both consumers and businesses. He could charge any price he wanted for oil due to his monopoly on the oil market. Outcry from businesses and the public prompted the Legislature and President Benjamin Harrison to pass the Sherman Antitrust Act in 1980.

Railroad companies formed another powerful monopoly that spurred the need for antitrust laws. Railroads were key in the development of the United States due to the growing reliance on the transportation of goods throughout the country. Many railroad companies joined forces to form large conglomerates. Each conglomerate controlled a geographic area and had the power to set prices and control competition in their market. These conglomerates fixed prices and set higher rates for small businesses and farmers compared with larger corporations and that were charged higher rates only for shorter hauls but not long-distance ones.

In response to the railroad monopolies, Congress passed the Interstate Commerce Act of 1887. This Act, passed under Congress’ power to regulate interstate commerce via the Constitution’s Commerce Clause, allowed Congress to regulate the railroad industry. This included the right to limit railroads to reasonable rates.

Key Antitrust Laws

There are three major federal laws that make up antitrust laws: The Sherman Antitrust Act, The Clayton Act, and The Federal Trade Commission Act. Each law builds off the others to give the federal government the authority to regulate monopolies, stop deceptive practices, and dissolve companies that amassed too much power.

The Sherman Antitrust Act

The Sherman Antitrust Act was passed in 1890 in response in order to give Congress the authority to regulate monopolies like those created by the Standard Oil Company. It outlaws all contracts and conspiracies that unreasonably restrain interstate and foreign trade. It also prohibits any company or business from monopolizing interstate commerce. The Sherman Antitrust Act was the first law that gave the federal government the authority to regulate trusts and break them up. This Act made price fixing and rigging bids per se evidence of a violation.

This Act has both a civil and a criminal component. Violators can face civil fines and penalties, and owners can face criminal prosecution, corporate penalties of up to $100 million, and individual penalties of up to $1 million. These penalties can be increased where the conspiring individuals or companies financially gained from the prohibited acts or where consumers lost money.

The Federal Trade Commission Act

The Federal Trade Commission Act is a civil statute passed in 1914 that prohibits unfair business practices in interstate commerce. There is no criminal component to this Act, so a violator can only face civil punishments. The Act makes illegal any “unfair methods of competition” and “unfair or deceptive acts or practices.” The Act also created the Federal Trade Commission, an agency tasked with enforcing antitrust statutes and protecting the public from the anti-competitive behavior of the trusts that ruled the end of the 19th and beginning of the 20th century.

The goals of the Federal Trade Commission are to protect consumers, maintain a competitive market and prevent actions that tend to monopolize or reduce competition. Under this Act, only the Federal Trade Commission can initiate cases against a company.

The Clayton Act

The Clayton Act, passed in 1914 and amended in 1950, is a civil statute that prohibits mergers or acquisitions that reduce competition. It compliments the Sherman Act in that it addresses certain practices that the Sherman Act does not expressly prohibit. The Act authorizes the Federal Trade Commission, which is a five-member bipartisan commission, to analyze mergers and acquisitions before they happen to prevent agreements that may create a monopoly or reduce competition. This Act changed antitrust enforcement because it gave the federal government the ability to look to the future and shape the market, rather than wait for unfair practices to take place and punish them after-the-fact.

Under this Act, the government only needs to find that an acquisition or merger is “substantially” likely to lessen competition. The Commission does not need to have absolutely certainty that a particular merger will lessen competition, but rather reasonable probability. This increases the ability of the federal government to stop uncompetitive business actions before they start. footer logo 4