Antitrust law refers to a group of laws that were established for the purpose of regulating business practices, in order to ensure that competition is free and fair in an open market economy so as to benefit the other economic players and the consumers at large. They are also known as competition laws and have evolved along with the market. Every major economy has its own set of antitrust laws to govern the operation of businesses and companies and to protect the consumers from predatory or unfair trade practices. These statutes seek to provide an equal playing ground to similar businesses operating within the same industry, while simultaneously preventing these businesses from gaining too much power and dominating their competitors in the market.

Why were Antitrust Laws Created?

These competition laws were created based on the following rationales:

1. Protecting consumers

The monopoly of any one business could potentially lead to exploitation of the consumers as, without any competitors, the business is free to charge exorbitant prices or to provide sub-standard goods and services.

2. Maintaining competition

In an open market economy, it is necessary to promote and sustain the level of competition as it keeps the prices low, ensures a better quality of goods, provides more variety to the consumers and encourages innovation on part of the designers and manufacturers

3. Freedom of trade

If anti-competitive activities persist in the market, it would act as a barrier against new entrants. Every state’s aim is to increase productivity and employment, which can only occur if there is the freedom to enter the market and new businesses are given a fair opportunity to establish themselves

4. Prevent anti-competitive activities

These laws prevent any particular business from gaining an unjust advantage over others through unfair means such as bid-rigging, market allocation, etc. Such activities have an adverse effect on competition in the market.

Important concepts of antitrust laws

1. Market allocation

This refers to an agreement between two competitors to divide the market among themselves. In this scheme, competing businesses allocate specific geographic territories or specific types of customers or products among themselves. For instance, company A would operate its business in the Northeast and company B would operate in the Southwest. They won’t breach each other’s territory and can refuse to sell to, or charge unfair prices to customers from the other’s region.

2. Bid Rigging

It is an illegal practice that involves collusion between two or more competing businesses as to who will win the contract. The ‘losing’ party would purposely draft bids that would allow the ‘winning’ party to secure the project. This is based on the condition that if company A wins this time, company B and C will win the next two projects respectively, while others lose purposely. In this manner, all companies retain their market shares and prices.  

3. Price Fixing

This refers to the phenomenon where competitors intentionally set prices of products and services after internal discussions to ensure profitability, rather than allowing the market forces of demand and supply to determine it.

4. Monopolies

It refers to the dominance of an entire industry or sector by a single firm or company. In other words, the exclusive control or possession of the supply of a particular good or service by a business is known as a monopoly. It can occur in the form of an exclusive supply agreement, tie-up agreement where customers have to buy two products together, predatory pricing or a clear refusal by the monopoly to conduct business with another entity, thus reducing competition.

5. Mergers & Acquisitions

It refers to a merger (combination of two or more corporate entities) or an acquisition (of one business by another). Antitrust laws are in place to ensure that any such consolidation of companies or assets does not result in market dominance, have an unfair effect on competition or create barriers for new entrants in the industry.

A popular example of the implementation of antitrust laws is:

Microsoft case  

Microsoft was found to be taking advantage of its dominant market position by bundling up its computer operating system with other programs and engaging in unfair license and royalty-related practices. The company was also compelling software developers to sign a contract that would prevent them from developing applications for non-Microsoft platforms while creating applications for it. The European Union ordered the company to pay a hefty $794 million fine and to produce a version of Windows without the Windows media player.

The EEPC alleged that the increase in the steel price in India was much higher compared to the prices across world markets.

Enforcement and administration

Antitrust laws are enforced differently across jurisdictional borders.

1. Enforcement in the U.S.

U.S. antitrust law comprises 3 main pieces of legislation: the Sherman Anti-trust act, 1890 (which aimed to prevent unreasonable contracts, conspiracy or combinations in restraint in trade and monopolization), the Federal Trade Commission Act (which banned unfair methods of competition including deceptive and unfair trade practices and led to the creation of the Federal Trade Commission) and the Clayton anti-trust act (which addresses specific anti-competitive practices that might not be covered by the Sherman act such as dealings between merchants, requiring companies to notify governments of potential mergers, etc.).

2. Enforcement in Europe Union

The European Union’s market competition is kept in check by the Treaty on the Functioning of the European Union, which aims to restrict anti-competitive agreements, abuse of dominant position, reviews mergers and acquisitions and controls state aid. It is enforced by the European Commission and its Commissioner is required to explain the activities and individual decisions of the Commission to the Parliament at regular intervals.

Odeon Advocates, an Interlegal member in Paris, France has a team of dedicated attorneys specialized in antitrust laws putting forward their understanding of the key issues and extensive knowledge in the domains of the law and are responsive in analyzing, handling and managing clients’ legal needs in both an advisory capacity and for litigation matters.

3. Enforcement in the UK

UK has two major laws that share the legal burden of protecting the competition market i.e. The Competition Act 1998 and The Enterprise Act 2002, distributing the civil and criminal aspects of antitrust laws between them.

Where the Competition Act 1998 deals with anti-competitive agreements between businesses fixing prices or terms of trade restricting competition, the Enterprise Act 2002 covers criminal offences of businesses engaging in activities resulting in the creation of business cartels. The above-mentioned Microsoft case is an example of a business cartel. 

Knights Plc, an Interlegal member in the United Kingdom empower its solicitors with extensive high-quality legal expertise and deep sector specialisms in antitrust laws to deliver outstanding advice that enables the clients to achieve their desired goals.

4. Enforcement in Canada

Canada’s Competition Act comprises both civil and criminal provisions that seek to prevent anti-competitive marketplace practices. Its main objective is to encourage competition in Canada to promote the adaptability and efficiency of the Canadian economy. The act is administered and enforced by the Competition Bureau, while the adjudication of cases is done by the Competition Tribunal. 

YULEX, Attorneys and Strategists, LLP, an Interlegal member in Montreal, Canada offers its clients a free-market platform in their start-up and growth phase by providing strategic, pragmatic and accessible legal services in competition laws both locally and internationally.

5. Enforcement in Dubai

Dubai’s Competition laws police the anti-competitive acts of business entities under its jurisdiction. The laws cover anti-competitive practices, restrictive agreements, abuse of dominant position, and economic concentration under its legislative framework and direct the Ministry of Economy and the Competition Regulation Committee to be responsible for administration, adjudication and penalizing. Thus, preventing monopoly or geographically divided dominance in the market. 

BridgePoint Law, an Interlegal member in Dubai, UAE, offers legal services at all stages of the business cycle to its clients guiding them in dealing with their business and legal issues and assisting and advising them on complex transactions and anti-competitive practices.

6. Enforcement in India 

The anti-trust regime of India is mandatory and suspensory. No transaction can be completed unless the competent regulatory authority grants its approval. The relevant legislation is the Competition act of 2002 and the enforcement body is the Competition Commission of India (“CCI”). The statutory duties of the CCI include the elimination of practices that can have an adverse effect on competition, protecting consumers and ensuring freedom of trade. The CCI has the power to give opinions on competition-related issues to the government or any other statutory body. Further, it can undertake competition advocacy for the purpose of generating awareness of anti-trust laws.

India member firm content to be included.

Conclusion 

Anti-trust laws have played a revolutionary role in maximizing consumer welfare, protecting new entrants from barriers to market entry, and protecting business competitors against unfair and deceptive market practices stemming from corporate greed. These laws exist in every major jurisdiction across the world and contain both civil and criminal provisions that aim to prevent anti-competitive acts such as bid-rigging, price-fixing, monopolization, abuse of power and anti-competitive mergers and acquisitions, to name a few, and have played a key role in stabilizing and promoting the economies of countries.

Frequently asked questions 

1. What is competition in the market?

In marketplaces, buyers’ aim is to purchase a commodity that maximizes their benefits while the seller’s aim is to sell that commodity at a price that maximizes their benefits. Healthy competition implies that sellers in a market are striving independently for the buyer’s patronage to reap profits.

2. Why do we need competition in markets?

Competition ensures that sellers are constantly striving to make the best possible products and to provide the best services. It encourages innovation, design, utilization of resources, development of new manufacturing methods to reduce production costs and increase efficiency, and provides variety to the consumers at lower prices.

3. What is meant by unfair competition?

It refers to an activity that unfairly reduces the competition in the market, such as competitors colluding to raise the prices of their products collectively or creating barriers to prevent new businesses from starting their practice.

4. Can governments take advice on anti-trust laws from enforcement agencies?

Yes, governments of many jurisdictions have the right to seek the opinion of the competent regulatory body (such as the Competition Commission in India) on competition policy by making a reference and the regulatory body is required to give a reply within a specified period of time.

5. What kind of combinations are regulated by anti-trust acts?

These laws regulate combinations that have the potential to adversely affect the market competition in excess of the threshold limits laid down in the respective legislations. Businesses are required to take approval from the relevant authority before entering into any new combination (such as merging with another competitor). Companies which violate this rule may be investigated by the enforcement bodies or fined by the adjudicatory bodies.