Anti-trust Laws in the United States- A Way to Ensure Fair Competition

Nisha Dharod, Nipa Dharod, SVKM’s Pravin Gandhi College of Law, Mumbai University

Fair competition and open markets are indispensable for a vibrant economy. Over the years, competition has increased drastically among the developed markets. Increased competition in an open marketplace is highly beneficial for the consumers as they receive the best products at competitive prices. However, when businesses in a bid to dominate the market, adopt practices such as; creation of unlawful monopoly, mergers of rival companies; anti-competitive acquisitions, etc., the very foundation of open marketplace is destroyed. To prevent such an adverse situation, Nation states devise their own Antitrust Laws which suffice the needs of their Nation and protects its consumers from predatory business practices.

This paper attempts at highlighting the various Antitrust Laws enacted by the U.S. Federal Government and the developments associated with it. The US Federal Government enforces the Federal antitrust laws majorly through the following three statutes, namely:

  • The Sherman Antitrust Act of 1890;
  • The Clayton Antitrust Act of 1914;
  • The Federal Trade Commission Act of 1914.

These laws aim at offering an equal playing field for all the businesses operating in a respective industry, thereby restricting them from exercising dominance over the competitors. The Federal Trade Commission’s ‘Competition mission’ sought to enforce the competition or antitrust laws for creating a competitive marketplace and protecting consumers from anti-competitive business practices.


In the 19th Century, different trusts dominated the industrial giants with an intention to malign the competitive spirit present in the market. As a consequence, the Sherman Antitrust Act of 1890 was enacted by the U.S. Government as the pioneer measure to proscribe trusts. As per the Sherman Act, a trust or any other contract, combination or conspiracy in restraint of trade or commerce amongst the states or with the foreign states was declared illegal. Those found forming such combinations, contracts or conspiracies were deemed guilty of felony and sanctioned penalties.[1]

In 1880, Standard Oil Company, a trust dominated the entire petroleum industry as it controlled the oil exploration, crude distribution and retail distribution of refined products throughout the US. Thus, the Supreme Court in US Standard Oil Co. of New Jersey v. United States held the Standard Oil Co. guilty of monopolizing the petroleum industry through anti-competitive conducts such as underpricing, threatening its competitors, etc. Further, the Court broke the monopoly into three dozen separate companies thereby sustaining the competitive culture.[2]

The Sherman Act condemned and penalized monopolization of interstate commerce, especially when competition was being suppressed through anti-competitive conduct.[3] The 1890 Act however does not per se prohibit reasonable activities which restrain trade. As for instance, lawful partnerships and mergers are not prohibited until they appear to be detrimental to the prevailing competition.  

Actions within the act could be taken by individuals and companies who suffered losses along with the Department of Justice. Severe penalties were inflicted on those violating the provisions of Sherman Act. The Federal Courts gradually developed a system of law whereby certain anti-competitive conducts were deemed to be violative of the provisions of the Sherman Act and certain conducts were left to the discretion of the Court.[4] For instance, the Court in the case of United States of America v. Microsoft Corporation, held Microsoft liable for its anti-competitive, monopolizing actions which violated the Sherman Act. Microsoft was convicted on the grounds of forcing its web browsers on computers that installed the Windows Web System, thereby attempting to disrupt competition and injuring competitor browsers.[5]

Nevertheless, the Sherman Act did not include, within its realm, all the anti-competitive unlawful acts. Thus, the Federal government enacted The Clayton Act of 1914 with a view to strengthen the then antitrust laws and thereby attempting to fill the lacuna in the Sherman Act.[6] The Clayton Act declared to be unlawful certain acts such as:

  • Mergers: When two or more companies unite to form a new company, it is termed a ‘Merger’. Mergers of firms with dominant market shares can exert monopolistic and anti-competitive pressure on the residual firms. Also, mergers of rival firms is detrimental for the customers as it eliminates competition and innovation. In 1966, Dean Milk and Bowman Dairy which were amongst the four largest companies in the milk industry agreed to a merger, thereby capturing the 23% market share so as supersede its competitors and gradually destroy competition. The FTC filed a complaint against the anti-competitive merger and was eventually granted the right to obtain preliminary injunctions against mergers that violate the antitrust laws.[7]
  • Exclusive dealings: Quite often, wholesalers and retailers enter into agreements with suppliers whereby they agree to purchase the supplies from a particular supplier. Exclusive dealing agreements are included within the realm of restrictive trade practices.
  • Price-discrimination: It is a selling strategy wherein the suppliers charge different prices for the same thing to different customers after analyzing the highest prices that can be fetched from different customers. Price discrimination places the suppliers in a better position to manipulate and dominate the market.
  • Predatory pricing: It is a strategy where a dominant firm reduces the prices of commodities to such an extent which completely incapacitates the competitors from surviving in the market. Predatory pricing can be beneficial to the customers in the short run. Nevertheless, in the long run, it can effectively wipe out competition and make the markets more vulnerable to monopolies.

The Clayton Act was devised as a measure against corporations intending to dominate the market through predatory pricing, exclusive dealings and anti-competitive mergers, thus preserving competition in the market. The Clayton Act penalized mergers and acquisitions that aimed at decreasing competition or creating monopolies or injuring and destroying competition together with any individual. The Act further prohibited any person engaged in commerce to acquire the whole or part of any stock or share capital or acquire the assets of any other person engaged in commerce with a view to lessen competition or create monopoly.[8] In United States v. Apple Inc., the US Supreme Court declared Apple guilty in a price-fixing conspiracy for fixing the prices of e-books with major e-book publishers. The defendants conspired to fix prices, thus preventing others from competing and then substantially raising the prices. Consequently, Apple was awarded damages of $450 million.[9]

The Clayton Act was further amended by the Robinson-Patman Act of 1936 to penalize unfavorable acts such as discriminatory prices, services and allowances in dealings with merchants.[10] Further in 1976, the Act was amended by the Hart-Scott-Rodino Antitrust Improvements Act thereby requiring large companies to notify the government prior to large mergers and acquisitions.[11] The provisions within the Clayton Antitrust Act are enforced by the Federal Trade Commission and the Antitrust Division of the US Department of Justice. Nevertheless, the Act also empowers private parties to sue for tor triple damages for violations of either of the Sherman or Clayton Acts.

The US Congress in a bid to further strengthen the antitrust laws established the Federal Trade Commission (FTC) in 1914, originally referred to as the ‘Interstate Trade Commission’ to condemn unfair methods of competition. The Federal Trade Commission Act, 1914 penalizes unfair methods of competition and unfair or deceptive acts or practices affecting commerce.[12] The Act empowers the FTC to prevent unfair methods of competition and unfair or deceptive acts and practices such as unlawful cartels, collusions, bid rigging, price fixing, etc. and to seek monetary damages or other relief for unscrupulous acts. The Federal Trade Commission Act further declares dissemination of any false advertisement by any means to induce any person to purchase any foods, drugs, devices, services or cosmetics as unlawful. Such dissemination of false advertisement shall be included within the realm of unfair or deceptive acts or practices. Civil proceedings may be initiated against those indulging in unfair or deceptive acts or practices.[13]

Cases under the Federal Trade Commission Act can be brought only by the FTC. The Commission is also authorized to prescribe rules for unfair or deceptive acts and practices in or affecting commerce. The US Supreme Court held that violations of the Sherman Act can also be prosecuted under the FTC Act. Thus the FTC can deal with violations of the Sherman Act under the Federal Trade Commission Act.[14] In 2000, the FTC held FMC Corporation and Asahi Chemical Industry liable for dividing the market and engaging in a conspiracy to monopolize the global market for microcrystalline cellulose (MCC). FTC banned FMC from supplying MCC to its competitors in US for 10 years.[15]


The prime objective behind the United States Antitrust laws is to create an open marketplace for the American citizens and to ensure that citizens enjoy best goods and services at reasonable prices and that ultimate consumers are not subjected to unlawful business practices. Thus, the Antitrust laws, through their civil and criminal enforcement strive to prohibit anti-competitive activities such as monopolization, bid rigging, price fixing, mergers and acquisitions, etc. which are detrimental to the interests of the consumers. It is however worth deliberating that the US Antitrust laws enacted over a 100 years ago still have the similar objectives of endorsing fair competition in the market; ensuring reasonable prices; improving the quality of products and providing higher incentives to businesses for their efficient operation. Today, when the world is going through unprecedented times owing to the outbreak of the COVID-19 pandemic, the commercial markets worldwide have witnessed certain transactions such as Corona crisis cartel, etc. which necessitate the Federal Anti-Trust Commission to develop and modify its prevailing flaws so as to deal with the perplexing situations.[16] While it is laudable that the US Legislature aims at protecting the interests of its citizens, it is worth pondering that even with the intense technological developments, the idea behind enactment of Antitrust Laws is still primitive and not evolving.

[1] Sherman Anti-Trust Act, Act of July 2, 1890, Title 15 of U. S. C. 

[2] Standard Oil Co. of New Jersey v. United States, 221 U. S. 1 (1911).

[3] Supra at 1.

[4] “Antitrust Laws and You” :: :: last seen at 15 September, 2020.

[5] “U.S. v. Microsoft: Court’s Finding of Fact.” :: :: last seen at 22 September, 2020.

[6] Clayton Antitrust Act of 1914, (Oct. 15, 1914, ch. 323, 38 Stat. 730), Title 15 of U. S. C.

[7] FTC v. Dean Foods Co., 384 U.S. 597 (1966).

[8] Supra at 6.

[9] “Supreme Court Rejects Apple’s Request to Review E-Books Antitrust Conspiracy Findings.” :: :: last seen at 22 September, 2020.

[10] Robinson-Patman Act of 1936, (June 19, 1936, ch. 592, § 4, 49 Stat. 1528.)

[11] Hart-Scott-Rodino Antitrust Improvements Act of 1976, (Sept. 30, 1976, 90 Stat 1383) 15 U. S. C. 1311.

[12] Federal Trade Commission Act, 1914, (38 Stat. 717), Title 15 of U. S. C.

[13] Ibid.

[14] Guide to Antitrust Laws :: :: last seen at 19 September, 2020.  

[15] “FTC Order Settles Charges that FMC Corp. and Japan’s Asahi Chemical Co. Engaged in Illegal Anticompetitive Practices.”:: :: last seen at 21 September, 2020.

[16] “To save competition: Rethinking exceptions to the ban on cartels” :: :: last seen at 27th September, 2020.

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