Guide to Antitrust Laws

Free and open markets are the foundation of a vibrant economy. Aggressive competition
among sellers in an open marketplace gives consumers both individuals and businesses
the benefits of lower prices, higher quality products and services, more choices, and
greater innovation. The FTC's competition mission is to enforce the rules of the competitive
marketplace the antitrust laws. These laws promote vigorous competition and protect
consumers from anticompetitive mergers and business practices. The FTC's Bureau of
Competition, working in tandem with the Bureau of Economics, enforces the antitrust laws
for the benefit of consumers.

The Bureau of Competition has developed a variety of resources to help explain its work.
For an overview of the types of matters investigated by the Bureau, read Competition
Counts. This Guide to the Antitrust Laws contains a more in-depth discussion of competition
issues for those with specific questions about the antitrust laws. From the menu on the left,
you will find Fact Sheets on a variety of competition topics, with examples of cases and
Frequently Asked Questions. Within each topic you will find links to more detailed guidance
materials developed by the FTC and the U.S. Department of Justice.

The Antitrust Laws

The antitrust laws proscribe unlawful mergers and business practices in general terms,
leaving courts to decide which ones are illegal based on the facts of each case. Courts have
applied the antitrust laws to changing markets, from a time of horse and buggies to the
present digital age. Yet for over 100 years, the antitrust laws have had the same basic
objective: to protect the process of competition for the benefit of consumers, making sure
there are strong incentives for businesses to operate efficiently, keep prices down, and keep
quality up.

Here is an overview of the three core federal antitrust laws.

The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade,"
and any "monopolization, attempted monopolization, or conspiracy or combination to
monopolize." Long ago, the Supreme Court decided that the Sherman Act does not
prohibit every restraint of trade, only those that are unreasonable. For instance, in some
sense, an agreement between two individuals to form a partnership restrains trade, but
may not do so unreasonably, and thus may be lawful under the antitrust laws. On the other
hand, certain acts are considered so harmful to competition that they are almost always
illegal. These include plain arrangements among competing individuals or businesses to fix
prices, divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in
other words, no defense or justification is allowed.

The penalties for violating the Sherman Act can be severe. Although most enforcement
actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that
violate it may be prosecuted by the Department of Justice. Criminal prosecutions are
typically limited to intentional and clear violations such as when competitors fix prices or
rig bids. The Sherman Act imposes criminal penalties of up to $100 million for a corporation
and $1 million for an individual, along with up to 10 years in prison. Under federal law, the
maximum fine may be increased to twice the amount the conspirators gained from the
illegal acts or twice the money lost by the victims of the crime, if either of those amounts is
over $100 million.

The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or
deceptive acts or practices." The Supreme Court has said that all violations of the Sherman
Act also violate the FTC Act. Thus, although the FTC does not technically enforce the
Sherman Act, it can bring cases under the FTC Act against the same kinds of activities that
violate the Sherman Act. The FTC Act also reaches other practices that harm competition,
but that may not fit neatly into categories of conduct formally prohibited by the Sherman
Act. Only the FTC brings cases under the FTC Act.

The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit,
such as mergers and interlocking directorates (that is, the same person making business
decisions for competing companies). Section 7 of the Clayton Act prohibits mergers and
acquisitions where the effect "may be substantially to lessen competition, or to tend to
create a monopoly." As amended by the Robinson-Patman Act of 1936, the Clayton Act also
bans certain discriminatory prices, services, and allowances in dealings between merchants.
The Clayton Act was amended again in 1976 by the Hart-Scott-Rodino Antitrust
Improvements Act to require companies planning large mergers or acquisitions to notify
the government of their plans in advance. The Clayton Act also authorizes private parties to
sue for triple damages when they have been harmed by conduct that violates either the
Sherman or Clayton Act and to obtain a court order prohibiting the anticompetitive practice
in the future.

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.