Set of statutes regulating economic competition by prohibiting anticompetitive agreements, monopolization, attempted monopolization, conspiracies to monopolize, and mergers and acquisitions that may tend to substantially injure competition.
The Sherman Antitrust Act of 1890 was a broad statute prohibiting various forms of attempted and actual monopolies and agreements that restrained trade. The act allowed people who suffered injuries to their business and property to recover three times their actual damages, plus attorney fees and costs. One of the principal purposes of antitrust laws was to give the federal courts jurisdiction to create a federal common law of competition.
In the early 1900’s, the Supreme Court engaged in a longrunning battle to define the scope of the interstate
This 1911 editorial cartoon suggests that tobacco trusts might be next to be censured by the Supreme Court, after the oil industry.
In Standard Oil Co. v. United States
The Court began to define categories of offenses that were per se unreasonable and hence illegal under the ruling reached in Standard Oil. Virtually all price-fixing agreements were unlawful if it could be proved that an agreement between competitors had been reached as to the price of goods or services being bought or sold by those firms. It would be no defense that the firm operated in an industry where competition produced unusual or even harmful results, that the competitors had agreed on a “reasonable” price, or even that the firms lacked the power to raise prices pursuant to their agreement.
This trend condemning price-fixing agreements culminated in United States v. Socony-Vacuum Oil Co.
During this same period, the Court also struggled with the concept of how the Sherman and Clayton Acts applied to mergers and acquisitions. Neither act had proved effective in stemming the tide of mergers that periodically swept the nation. In 1950 Congress passed the Celler-Kefauver Act
The increasing severity of these court-made antitrust rules in the 1950’s, 1960’s, and early 1970’s led to a backlash of scholarly criticism focused on the negative economic effects of the Court’s antitrust jurisprudence. Prominent law and economics scholars such as Richard Posner and Robert H. Bork, each of whom later became influential judges, argued that the Court’s antitrust decisions were inconsistent with what they argued was the principal purpose of the antitrust laws to increase wealth, consumer welfare, and economic efficiency.
The Court quickly proved receptive to this economically oriented style of antitrust analysis. In the area of agreements between competitors, the Court retained the basic per se rule against hard-core price-fixing agreements but showed an increasing willingness to look under the surface of agreements to determine whether the agreement contained any plausible procompetitive justification that merited further inquiry. In a number of cases, including National Society of Professional Engineers v. United States
Other per se rules were modified to require a showing of substantial market power before the practice would be condemned as per se unreasonable. For example, the Court modified the per se rule in both tying cases (Jefferson Parish Hospital Dist. No. 2 v. Hyde, 1984) and group boycotts (Northwest Wholesale Stationers v. Pacific Stationery and Printing Co., 1985) to require the plaintiff to prove that the defendant enjoyed substantial market power before any liability be imposed. It is difficult to characterize such rules as per se liability because they recognize that these arrangements are not inevitably anticompetitive under all circumstances and typically require the proof of the relevant product and geographic market and the defendant’s power within that market, all complicated factual issues that the original per se rule was designed to avoid.
The most significant changes were in vertical restraints dealing with the distribution of products and services. In Continental T.V. v. GTE Sylvania
Although vertical agreements dealing with price were nominally per se unreasonable, they became very difficult to prove. The Court in Business Electronics Corp. v. Sharp Electronics Corp.
After Sylvania, the Court generally restricted antitrust liability by increasing the substantive and procedural hurdles necessary for either the government or private plaintiffs to prevail. Notable decisions include Brooke Group Ltd. v. Brown and Williamson Tobacco Corp.
Although the center of antitrust activity shifted from the courts to the enforcement agencies, the Court remained actively involved in shaping antitrust law and policy. It continued the trend of shrinking the categories of offenses that are per se unlawful in NYNEX Corp. v. Discon
The Court is the final arbiter of the legality of business behavior that affects competition as was intended by Congress in 1890. The precise rules and the tests used by the courts changed over the years in line with the current political and economic thinking. Antitrust law always looked toward economics as a source of wisdom although not as the only factor in deciding the evolution of the legal rules that set the ground rules for the market. The Court uses antitrust law as a flexible instrument determining the bounds between lawful competition and unlawful collusion or exploitation of market power to the detriment of competition and competitors.
A good starting point is Antitrust Law and Economics in a Nutshell, by Ernest Gellhorn, William E. Kovacic, and Stephen Calkins (St. Paul, Minn.: West Publishing, 2004), a handy and authoritative guide to the essentials of antitrust law. For an overview of the history of the antitrust laws see Rudolph J. R. Peritz’s Competition Policy in America, 1888-1992 (New York: Oxford University Press, 1996) and Hans B. Thorelli’s The Federal Antitrust Policy (Baltimore, Md.: Johns Hopkins University Press, 1955). For the leading treatises on antitrust doctrine and the Court decisions discussed in this article, see Philip Areeda and Donald Turner’s Antitrust Law (3 vols., Boston: Little, Brown, 1978) and Antitrust Law Developments (4th ed., 2 vols., Chicago: American Bar Association, 1997). The classic economic analyses of the antitrust laws can be found in Robert H. Bork’s The Antitrust Paradox: A Policy at War with Itself (2d ed., New York: Free Press, 1993) and Richard A. Posner’s Antitrust Law (2d ed. Chicago: University of Chicago Press, 2001). The leading analysis of the application of U.S. antitrust law to international business is Spencer Weber Waller’s James R. Atwood and Kingman Brewster’s Antitrust and American Business Abroad (3d ed., New York: Clark Boardman Callaghan, 1997).
Bork, Robert H.
Debs, In re
Loewe v. Lawlor
Northern Securities Co. v. United States
Sherman Antitrust Act
Standard Oil Co. v. United States
Swift and Co. v. United States