As a business owner, it’s important to stay up-to-date on Antitrust Law in the United States. The newest information and changes to the law can help you make decisions about your commerce and protect yourself from antitrust lawsuits. This article provides an overview of this law in the U.S, as well as recent updates and changes. It’s essential for sale owners to have a solid understanding of this complex area of law. Keep reading with powerpacplus.org
The definition of antitrust law
Antitrust law protects competition in a free and open market economy, which is the bedrock of any thriving economy. In an open marketplace, healthy competition among sellers provides consumers with lower prices, higher quality products and services, more options, and greater innovation.
Antitrust law in the United States is a collection of mostly federal laws that govern the conduct and organization of business corporations and are generally intended to promote competition and prevent monopolies. The Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914 are the main statutes. These statutes serve three primary purposes.
How is antitrust law practiced in the United States?
In general, antitrust laws prohibit unlawful mergers and commerce practices, leaving it up to courts to determine which ones are illegal based on the facts of each case in the USA. From the days of horse and buggy to the present digital age, courts have applied antitrust laws to changing markets. Yet, for over a century, antitrust laws have had the same basic goal: to protect the process of competition for the benefit of consumers, by ensuring that businesses have strong incentives to operate efficiently, keep prices low, and quality high.
The different types of antitrust violations and their punishments
Three pieces of legislation formed the foundation of U.S antitrust law:
- The Sherman Antitrust Act
Violations of the Sherman Act can result in severe penalties. Although the majority of enforcement actions are civil in nature, the Sherman Act is also a criminal law, and individuals and businesses who violate it may face prosecution by the Department of Justice.
Criminal prosecutions are typically reserved for willful and obvious violations, such as when competitors fix prices or rig bids.
The Sherman imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, as well as prison terms of up to ten years.
If either the amount gained by the conspirators from the illegal acts or the amount lost by the victims of the crime exceeds $100 million, the maximum fine may be increased under federal law to twice that amount.
- The Federal Trade Commission Act
The Federal Trade Commission prohibits “unfair competition methods” and “unfair or deceptive acts or practices.”
According to the Supreme Court, all violations of the Sherman Act also violate the FTC Act. As a result, while the FTC does not technically enforce the Sherman Act, it can bring cases under the FTC Act against the same types of Sherman Act violations.
Other practices that harm competition but do not neatly fit into categories of conduct formally prohibited by the Sherman Act are also covered by the FTC Act. Under the FTC Act, only the FTC can file lawsuits.
- The Clayton Antitrust Act.
The Clayton Act addresses practices that the Sherman Act does not explicitly prohibit, such as mergers and interlocking directorates (that is, the same person making commerce decisions for competing companies).
Section 7 of the Clayton Act prohibits mergers and acquisitions that have the effect of “significantly lessening competition or tending to create a monopoly.”
The Clayton Act, as amended by the Robinson-Patman Act of 1936, also prohibits certain discriminatory prices, services, and allowances in merchant transactions.
The Clayton was amended once more in 1976 by the Hart-Scott-Rodino Antitrust Improvements Act, which required companies planning large mergers or acquisitions to notify the government ahead of time.
The Clayton Act also allows private parties to sue for triple damages if they have been harmed by anticompetitive behavior that violates either the Sherman or Clayton Acts, and to obtain a court order prohibiting the anticompetitive behavior in the future.
How to stay compliant with antitrust laws?
The above department outlines what an antitrust compliance program should look like in its evaluation of corporate compliance programs. It outlines six critical elements:
- Antitrust Risk Assessment
The antitrust compliance program must be capable of determining whether the company’s operations may violate antitrust law. This evaluation must be thorough, covering everything from sale strategy to casual conversations with competitors. The risk assessment must be ongoing and include the effectiveness of existing policies and protocols.
- Antitrust Policies & Procedures
To quote the Department of Justice, “any well-designed compliance program entails policies and procedures that give both content and effect to ethical norms and that address and aim to reduce risks identified by the company as part of its risk assessment process.” In addition to having these policies in place, the antitrust compliance program must be in a near-constant feedback loop with risk assessment to ensure it is comprehensive. Finally, accessibility and integration practices must be implemented, which means that the company must be able to demonstrate that the antitrust compliance program is clearly communicated and reinforced throughout the organization.
- Antitrust Compliance Training & Communications
Compliance training and reinforcement are part of the communication obligation mentioned in point 2. Employees should be informed about and understand the compliance program, according to the company. This includes risk-based training, a clear company position on misconduct, and a method for employees to seek guidance and advice when necessary.
- Confidential Reporting & Investigation Process
A company should have a mechanism in place for reporting and investigating questionable behavior, in addition to written policies and a training program. This reporting system should be anonymous, accessible, and audited for effectiveness on a regular basis.
- Third-Party Management
Third-party management should primarily focus on payments (financial or otherwise) to third parties for antitrust purposes. Simply put, can your organization conduct due diligence on third parties?
- Mergers & Acquisitions
It describes a well-designed compliance program as “comprehending comprehensive due diligence of any acquisition targets, as well as a process for timely and orderly integration of the acquired entity into existing compliance program structures and internal controls.” “Flawed or incomplete pre- or post-acquisition due diligence and integration can allow misconduct to continue at the target company (…) risking civil and criminal liability,” the description continues. In practice, this means that any misbehavior by the acquired party becomes the responsibility of the acquiring party. As a result, such problems must be identified and resolved.
WHAT ARE SOME COMMON VIOLATIONS OF ANTITRUST LAW?
The most common antitrust violations can be divided into two categories:
- Agreements to restrain competition and
- Attempts to acquire a monopoly
In the case of a merger, a combination that would likely significantly reduce market competition would also violate antitrust laws.
Antitrust law is a complex and ever-changing field. This blog post has only scratched the surface of what antitrust law is and how it affects businesses in the USA. If you are interested in learning more about antitrust law, please consult with an attorney who specializes in this area of the law. The attorneys at our firm are experienced in all areas of commercial law, including antitrust law, and would be happy to discuss your specific situation with you.