Antitrust Regulation

The goal of antitrust legislation is to create and maintain a competitive market that results in lower prices, higher quality, more choice, and more innovation. The mission of the Federal Trade Commission (FTC) and the U.S. Department of Justice Antitrust Division, is to enforce antitrust laws which support a competitive marketplace. Three pieces of legislation serve as the core of federal antitrust laws.

Sherman Act

The first act regulating competition was the Sherman Antitrust Act, passed in 1890 to prevent large companies from monopolizing, or dominating, an industry and making it hard for smaller firms to compete.^[1] The government pursues businesses that use their substantial market power to engage in anticompetitive behavior.

Clayton Act

Passed by Congress and signed into law in 1914, the Clayton Antitrust Act was designed to clarify and strengthen the Sherman Act. The Clayton Act specifically outlawed:

• Price discrimination. Offering a customer discounts that are not offered to all other purchasers buying on similar terms
• Exclusive dealing. Refusing to let the buyer purchase a competitor’s products for resale
• Tying contracts. Requiring buyers to purchase merchandise they may not want in order to get the products they do want
• Purchase of stock in competing corporations so as to lessen competition. Buying competitors’ stock in such quantity that competition is reduced

In addition, the Clayton Act established the legality of strikes, boycotts and labor unions.^[2]

Federal Trade Commission Act

The Federal Trade Commission Act, also passed in 1914, bans unfair trade practices. This act created the Federal Trade Commission, an independent five-member board with the power to define and monitor unfair methods of competition, such as those prohibited by the Sherman and Clayton Acts. The FTC investigates complaints and can issue rulings called cease-and-desist orders to force companies to stop unfair business practices. Its powers have grown over the years. Today the FTC is one of the most important agencies regulating the competitive practices of business. For example, as of 2022, the FTC is pursuing a case against Facebook alleging that it illegally obtained a monopoly in social networking when it acquired Instagram and WhatsApp.^[3]

In addition to these federal statutes, most states have antitrust laws that are enforced by state attorneys general or private plaintiffs. Many of these statutes are based on the federal antitrust laws.

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