Antitrust laws, or competition laws, are laws which prohibit anti-competitive behavior and unfair business practices. The laws make illegal certain practices deemed to hurt businesses or consumers or both, or generally to violate standards of ethical behavior. Government agencies known as competition regulators regulate antitrust laws, and may also be responsible for regulating related laws dealing with consumer protection.
The term “antitrust” derives from the U.S. law which was originally formulated to combat “business trusts”, now more commonly known as cartels. Other countries use the term “competition law”. Many countries including most of the Western world have antitrust laws of some form. For example the European Union has its own competition law.
Prohibited anti-competitive behavior
A business with a monopoly over certain products or services may be in violation of antitrust laws if it has abused its dominant position or market power. Although not all anti-competitive behavior which is subject to antitrust laws involve illegal cartels or trusts, the following types of activity are generally prohibited.
- Bid rigging – A form of price fixing and market allocation, and involves an agreement in which one party of a group of bidders will be designated to win the bid
- Predatory pricing – The practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors
- Price fixing – An agreement between business competitors selling the same product or service regarding its pricing
- Tying – The practice of making the sale of one good conditional on the purchase of a second distinctive good
- Vendor lock-in – Is a situation in which a customer is so dependent on a vendor for products and services that he or she cannot move to another vendor without substantial switching costs, real and/or perceived
- Geographic allocation – An agreement between competitors not to compete within each other’s geographic territories.
- Walker Process fraud – Illegal monopolization through the maintenance and enforcement of a patent obtained via fraud on the Patent Office (the term comes from the Supreme Court case Walker Process Equipment, Inc. v. Food Machinery and Chemical Corp., 382 U.S. 172 (1965).