Key Concepts of Antitrust Laws

Why This Matters

Antitrust law is the backbone of the American free market system, and understanding it means understanding how the government balances economic freedom with consumer protection. You're being tested on more than just statute names and dates—exam questions will ask you to identify which law applies to a specific business practice, distinguish between horizontal and vertical restraints, and explain why certain mergers get blocked while others sail through. These concepts connect directly to broader themes of market structure, government regulation, and business ethics that appear throughout Business Law.

The eight major antitrust statutes you'll encounter didn't appear randomly—each one responded to a specific gap or abuse in the marketplace. The Sherman Act laid the foundation, but Congress kept adding tools as businesses found creative ways around the rules. Don't just memorize what each law prohibits; know why it was needed and what type of anti-competitive behavior it targets. That's what separates a passing answer from an excellent one.

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Foundational Statutes: The Core Framework

These laws established the basic prohibitions against anti-competitive conduct and created the enforcement mechanisms that still operate today. They form the statutory foundation that all other antitrust laws build upon.

Sherman Antitrust Act

• First federal antitrust law (1890)—established that monopolistic practices and restraints of trade are illegal under federal law
• Prohibits contracts, combinations, and conspiracies that restrain trade, covering both horizontal agreements (between competitors) and vertical agreements (between different levels of supply chain)
• Criminal and civil penalties available, including fines and imprisonment—making it one of the few business laws with serious criminal consequences

Clayton Act

• Targets specific practices (1914)—addresses anti-competitive behaviors the Sherman Act was too broad to effectively reach
• Prohibits anti-competitive mergers and acquisitions that may substantially lessen competition—note the forward-looking "may" language
• Private right of action with treble damages—allows injured parties to sue and recover three times their actual damages, creating powerful private enforcement

Federal Trade Commission Act

• Created the FTC (1914)—established an independent agency dedicated to antitrust enforcement and consumer protection
• Prohibits unfair or deceptive practices in commerce, using broader language than the Sherman or Clayton Acts
• Administrative enforcement authority—the FTC can investigate, issue cease-and-desist orders, and bring enforcement actions without going through DOJ

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Merger Control: Preventing Anti-Competitive Combinations

These statutes specifically address how companies combine through mergers and acquisitions. The goal is to stop market concentration before it harms competition, rather than trying to break up monopolies after they form.

Celler-Kefauver Act

• Closed the asset acquisition loophole (1950)—amended the Clayton Act to cover mergers accomplished through buying assets, not just stock
• Broadened merger review to include any acquisition that may substantially lessen competition, regardless of transaction structure
• Strengthened vertical and conglomerate merger scrutiny—allowed challenges to mergers between companies at different supply chain levels or in unrelated markets

Hart-Scott-Rodino Antitrust Improvements Act

• Pre-merger notification requirement (1976)—companies must file with FTC and DOJ before completing large transactions
• Mandatory waiting period allows agencies to review proposed deals and request additional information before closing
• Preventive enforcement mechanism—stops anti-competitive mergers before they happen rather than requiring costly post-merger breakups

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Price Discrimination: Protecting Fair Pricing

Price discrimination laws address situations where sellers charge different buyers different prices for the same goods. The concern is that large buyers could leverage their purchasing power to get preferential pricing that drives smaller competitors out of business.

Robinson-Patman Act

• Targets discriminatory pricing (1936)—prohibits charging different prices to different purchasers for goods of like grade and quality
• Cost justification defense available—price differences are legal if the seller can prove they reflect actual cost differences in serving different customers
• Protects small businesses from being undercut by competitors who secure preferential pricing through sheer buying power

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Export Exemptions: International Trade Carve-Outs

These laws create limited exemptions from antitrust liability for certain export-related activities. The policy rationale is that American companies need to collaborate to compete effectively in international markets against foreign competitors who may not face similar restrictions.

Webb-Pomerene Act

• Export association exemption (1918)—allows U.S. exporters to form associations and collaborate on foreign sales without antitrust liability
• Limited to export activities—the exemption explicitly does not protect anti-competitive conduct affecting domestic markets
• Promotes international competitiveness by letting smaller American companies pool resources to compete with larger foreign rivals

Export Trading Company Act

• Expanded export immunity (1982)—encourages formation of export trading companies with broader antitrust protection than Webb-Pomerene
• Covers pricing, marketing, and distribution collaboration for international sales—activities that would be per se illegal domestically
• Certificate of review process—companies can obtain advance certification from Commerce Department confirming their activities qualify for protection

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Quick Reference Table

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Self-Check Questions

1. Which two statutes both address merger regulation, and how do their approaches differ—one defining what's illegal and one creating procedural requirements?

2. A large retailer demands lower prices from a supplier than the supplier charges to smaller competitors. Which statute most directly addresses this conduct, and what defense might the supplier raise?

3. Compare the Sherman Act and the Clayton Act: why did Congress feel the need to pass the Clayton Act just 24 years after the Sherman Act?

4. Two American electronics manufacturers want to form a joint venture to market their products in Asia. Which statutes might provide them antitrust immunity, and what's the key limitation on that protection?

5. An FRQ describes a company acquiring a competitor by purchasing all of its manufacturing facilities rather than its stock. Which statute specifically addresses this type of transaction, and why was it necessary?