Antitrust

Antitrust is an area of law concerned with preventing companies from using their market power to eliminate the effects of competition in a free market, in order to increase their profits at the expense of the consumer. This area of law is known by different names around the world, being called anti-monopoly law in some places and competition law in others.

Antitrust is premised on the belief that competition has a positive effect on free markets, and should be encouraged. Where many manufacturers provide the same product, each will try to increase its sales by finding ways to make its own product more attractive than those of its competitors. Some manufacturers will try to sell the product at a lower cost, while others will try to improve the quality of the product, or develop innovative new features to attract consumers.

However, if one manufacturer controls the entire market for a product, or if all manufacturers cooperate in controlling such a market, then the incentive to reduce prices and improve quality disappears. Furthermore, a manufacturer or group of manufacturers with sufficient power over the market can prevent new competitors from entering the field, either by acquiring the competitor, or by reducing prices just long enough to drive the competitor out of business.

Most countries have enacted a collection of laws designed to punish anti-competitive conduct conduct, particularly conduct that is seen to burden consumers with artificially high prices, prevent increases in the quality of goods, prevent useful innovations, and artificially induce the failure of competing businesses.

Certain specific behaviors have been identified as evidencing an intent to quell competition. These include monopolizing (attempting to acquire competitors, and thereby become the only player in the market); price fixing (agreements between competitors that set prices in the same way a monopolist would); predatory pricing (reducing prices below the cost of production long enough to drive competitors out of the marketplace, and then recouping those losses with artificially high prices); group boycotts (agreements between competitors to boycott particular suppliers of materials in order to promote a competing supplier); and tying arrangements (allowing consumers to purchase a non-competitive product only if they also agree to purchase a competitive product).

Exceptions exist to the antitrust regimes, most notably regarding patents and copyrights. Each of these doctrines give the owner a legal monopoly over the invention or the work of authorship at issue. Furthermore, because the owner of a patent has the legal right to monopolize the invention to which the patent applies, it may also license the invention to competitors and control the prices that those competitors charge. Another legal form of anticompetitive conduct is state action, as a government may legally choose to monopolize a particular product, or to permit private actors to monopolize that product. Finally, use of the legal system in a way that harms competitors is legal, so long as the legal claims are brought for the legitimate vindication of rights, rather than as a mere tool of harassment.