Antitrust laws are a body of laws that are designed to ensure free competition occurs in the United States marketplace by regulating how companies conduct business. These laws prohibit certain practices that suppress free competitions, including:
The Sherman Anti-Trust Act was passed by Congress to prevent unfair competition through trusts, or trade contracts, and monopolies. A monopoly occurs when one business controls the majority of, or all or, a particular market.
A monopoly is harmful to competition because when one agency or firm controls a certain market, the lack of competition adversely affects consumers. For example, a business or firm that has a monopoly is able to charge whatever they want to for their services or goods because no competition exists to drive down the price.
The majority of antitrust laws are found in the Sherman Act. This federal law prohibits “every contract, combination, or conspiracy in restraint of trade” and any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.”
The United States Supreme Court held that the Sherman Act does not prohibit every restraint on trade but only those that are not reasonable. Examples of unreasonable restraints of trade include:
The United States Constitution limits the application of the Sherman Act to any activities that are related to interstate commerce. These activities include local business and transactions that have an effect on interstate commerce.
The Sherman Act is interpreted broadly to protect consumers from activities that are monopolistic.
There are significant penalties for violating the Sherman Act. It is classified as a felony for a corporation or an individual to monopolize any part of interstate trade or commerce.
There are also other activities included, such as attempts to monopolize or conspiring to monopolize trade. If an individual is found guilty, they may face a fine of up to $350,000 and a prison term of up to three years.
A corporation may face a fine of up to $10,000,000. The federal government also has the power to seize any property that was related to the unlawful trade practice.
Antitrust laws are enforced through the people and the government. There are both civil and criminal penalties for violations of antitrust laws.
Individuals who violate antitrust laws may face penalties including civil damages awards, criminal fines, and even prison time. The government encourages private citizens to report violations and take action when they see antitrust violations.
This is why individuals and companies are permitted to bring lawsuits. Additionally, state and federal antitrust laws may provide for treble damages, or triple damages.
There are numerous ways business enterprises may violate antitrust laws. A court will example possible antitrust violations by applying the standard of per se violations.
Under this standard, all that must be shown in court is that the party that is accused of an antitrust violation actually committed one of several per se violations. Neither the intent of the accused party nor the effects of the actions of the accused are relevant.
Examples of common per se violations of antitrust laws include:
Common examples of violations of antitrust laws include:
Antitrust laws related to the healthcare industry have only developed within the past 30 years. Prior to the 1970s, antitrust laws were usually not applied to learned professions such as law and medicine.
Over time, health care expanded from a local professional to a national service. In 1975, the United States Supreme Court held that antitrust laws apply to the practice of medicine as well as other learned professions.
A lockup agreement prohibits company insiders from selling their shares for a specific period of time. This causes the shares to be considered locked up.
Prior to a company making its initial public offering, the company and the backer typically sign a lockup agreement in order to guarantee that the shares that are owned by the insiders are not offered too soon following the initial public offering.
The terms of lockup agreements may vary. However, the standard agreements typically contain a no-sell clause for the first 180 days.
These types of agreements may limit other things, for example, the number of shares that an insider can sell over a specific period of time. The underwriter or backer will generally determine these terms.
There are some states that require companies to have lockup agreements. Federal laws only require that if such an agreement exists within the company, the terms should be disclosed in that company’s registration documents.
There are numerous states that have their own antitrust laws. Generally, they are usually similar to the federal antitrust laws.
State antitrust laws allow private parties to file lawsuits against companies that engage in anti-competitive conduct.
Although federal and state antitrust laws are conceptually similar, the exact provisions in the state codes vary widely by state. For example, there are some state antitrust laws that closely follow the language of the federal laws.
In other states, the laws incorporate some sections of the federal antitrust laws, but not all of them. The state may define specific types of prohibited acts and some may include new areas of content entirely.
In many states, the antitrust laws cover more issues than the federal antitrust laws do in terms of the types of conduct that are prohibited. The interpretation of state antitrust laws by state courts typically, but not always, will follow the interpretation of the federal antitrust laws.
If you have any issues, questions, or concerns related to the Sherman Act or other business issues you may be involved in, it is important to consult with a business lawyer. Antitrust and unfair competition laws are a very voluminous and complex area of law.
Your lawyer can advise you of the laws that may apply to your business, both federal and state. In addition, if you have been accused of violating antitrust laws, your lawyer will represent you in court and ensure your rights are protected.
If you believe you have witnessed a violation of antitrust laws but are unsure of how to report it, your lawyer can help you through the process.
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