Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated September 30, 2020

What is Antitrust?

Antitrust refers to federal laws disallowing companies from monopolizing markets, engaging in price discrimination or price fixing, or otherwise restraining free trade.

How Does Antitrust Work?

Antitrust laws apply universally to companies seeking profits, whether they're public or privately held. The case against Standard Oil in the late 1800s is one of the oldest and most prominent antitrust cases in the United States, but more recently AT&T, Microsoft, and a long list of other companies have been found guilty of antitrust violations.

In the United States, three primary federal acts govern the antitrust arena, and many states have their own antitrust legislation as well. At the federal level, the Department of Justice and the Federal Trade Commission are responsible for evaluating and prosecuting violations of these acts. The major federal acts are:

The Sherman Antitrust Act of 1890 primarily works to limit the growth of monopolies, anticompetitive practices, and price fixing, especially in interstate markets. Violations of this act are often prosecuted as criminal felonies.

The Clayton Antitrust Act of 1914 extended the U.S. governments power to break up monopolies, price-fixing agreements, and attempts to suppress competition or collude with other companies to fix markets. Violations of the Clayton Act do not carry criminal penalties.

The Hart-Scott-Rodino Act (a portion of the Clayton Act) requires companies considering mergers or acquisitions of a certain size to notify the Antitrust Division of the Department of Justice and the Federal Trade Commission so that these authorities can evaluate whether the transaction violates any parts of the act. Without federal approval, companies can't complete their mergers.

Why Does Antitrust Matter?

Antitrust laws are in place to prevent businesses from depriving consumers of the benefits of competition, which include lower prices and more choices between goods and services.

However, proponents argue that antitrust laws punish businesses for success and reward companies that are too inefficient to compete. In any case, antitrust law is full of grey areas because so much of it is subject to interpretation, how one defines a market, and other factors.

It is important to note that companies need not be successful in their anticompetitive schemes to face prosecution in some cases; the Sherman Act, for example, punishes even attempts to monopolize markets.

Ask an Expert about Antitrust
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Antitrust.
Be the first to ask a question

If you have a question about Antitrust, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Antitrust, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Antitrust

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms