Antitrust Law
Antitrust laws exist to promote competition by preventing monopolies and other efforts to unfairly dominate an industry. The laws govern not only the relationship of one business to other businesses in its industry but also the relationship of a business to its customers if that relationship reduces competition. Antitrust rules are based on a combination of federal and Illinois laws.
Monopolies. The laws do not prohibit a company from completely dominating its industry. In fact, at some level, that's every business's goal. It is unlawful, however, to engage in unfair practices in order to drive others out of business.
Sherman Antitrust Act. The key federal law is the Sherman Antitrust Act, which was enacted in 1890 in response to anti-competitive agreements, called trusts, that were undertaken by certain titans of industry to restrain trade. The law declares that any contract, combination, or conspiracy in restraint of trade or commerce is illegal. Among the activities that it seeks to prevent are cutting prices to drive competitors out of business, buying out competitors, forcing customers to sign long-term contracts, and forcing customers to buy unwanted products in order to get the ones they want (called "tying").
Clayton Antitrust Act. The next important antitrust law was the Clayton Antitrust Act, enacted in 1914. It attempted to forbid activities not addressed by the Sherman Antitrust Act, such as price fixing, agreements to control product supply, and abusing industry power to gain a monopoly. A 1936 amendment to the Clayton Antitrust Act, called the Robinson-Patman Act, forbade suppliers to treat buyers unequally, if that treatment restrained trade.
Federal Trade Commission Act. The final piece of key antitrust legislation, the Federal Trade Commission Act, also enacted in 1914, prohibits companies from making deceptive statements that mislead consumers.
Enforcement. Enforcement of antitrust laws operate a little differently than do the enforcement of many other types of laws because there is no private right of action. Thus, if a person is the victim of a deceptive statement that violates the Federal Trade Commission Act, the person doesn't sue the company. Instead, the U.S. government sues the company, through the Federal Trade Commission. The Antitrust Division of the Department of Justice enforces violations of the Sherman or Clayton acts.
Illinois law. Because the Sherman Antitrust Act is a federal law, it does not reach purely local efforts to monopolize industries. It does apply, however, to businesses and transactions involved in interstate commerce, as well as purely local businesses and transactions that affect interstate commerce.
Purely local efforts to monopolize are prohibited by the Illinois Antitrust Act, which mostly tracks the Sherman Antitrust Act. It also prohibits price fixing, tying, exclusive dealing, and other efforts to gain a monopoly.
Illinois also has a couple of laws that are similar to the Federal Trade Commission Act. The Consumer Fraud and Deceptive Business Practices Act prohibits untrue statements and other deceptive practices. The Uniform Deceptive Trade Practices Act prohibits conduct that creates confusion or misunderstanding.
Price fixing. Price fixing is an agreement between competitors to set the same price for a particular product or service. Price fixing can also occur where a manufacturer sells a product to a distributor and requires that the distributor resell the product for a certain price. While some agreements in restraint of trade are illegal only if their purpose is to gain a monopoly, price fixing is generally illegal per se, which means that it is illegal regardless of its purpose.
Tying. Tying involves a company's effort to force someone to buy one product in order to get a second product they really want. An example is Microsoft's efforts to force computer sellers that wanted their operating system software to place the icon for their Internet product on the desktop screen. Tying agreements are illegal per se if the seller has enough economic power to restrain trade in the market for the product that got tied to the one the buyers wanted.
Exclusive dealings. Exclusive dealings are arrangements in which one company agrees to sell the other company's product exclusively. Not all exclusive dealing arrangements are illegal. For example, if the maker of a toy train enters into an agreement to sell the product exclusively at a high-end toy store, the deal is probably not illegal. If, however, the toy maker requires the seller to stop selling toy trains made by anyone else as a condition to signing the contract, the agreement is probably illegal. The test is whether the agreements reduce competition. If they do, they're illegal.
Price discrimination. Sellers cannot charge buyers different prices without a valid reason. They cannot offer discounts to buyers that they don't offer to all buyers. For example, they are allowed to offer volume discounts to a buyer only if they offer volume discounts to all buyers.
Group boycotts. A collective refusal to deal with another company is a group effort in which several companies agree not to do business with another company. While some agreements in restraint of trade are illegal only if their purpose is to gain a monopoly, group boycotts are illegal per se, which means that they are illegal regardless of their purpose.
Other restraints of trade. Companies can divvy up customers, markets, or products if doing so limits competition. For example, two companies that sell law furniture cannot agree that one will sell only to the eastern half of the U.S. while the other one sells only to the western half, if the effect of that agreement is to limit competition. It might not be illegal if plenty of other companies are selling lawn furniture in both the eastern and western halves.