Antitrust Law

Antitrust laws are laws that were enacted to guarantee American consumers the right to expect the benefits of free and open competition. Such laws are enforced by the United States Department of Justice's antitrust division (Anonymous, 2010). There are numerous Acts that constitute the Antitrust Laws. These include the Sherman Act, Clayton Act, and the Robinson-Patman. Sherman Act, the primary federal antitrust provision, seeks to promote and protect competition by outlawing any form of combination or conspiracy that restraint interstate commerce.

Antitrust legislations envisaged a situation where competitors would collude and engage in price fixing, bid rigging, market division, or allocation of schemes to the disadvantage of the consumers who may have to buy goods or access services at inflated prices. The customers could also end up getting cheated (Anonymous, 2010). The Antitrust laws were legislated to deter dishonest businessmen from engaging in price fixing activities. Competitors can collude to raise, fix, or maintain the prices of their commodities at a given level.

The competitors must not necessarily agree to charge the same price just like the in put of every competitor may be unnecessary. All that the competitors taking part in price fixing require to do is establish or adhere to price discounts, hold prices firm, eliminate or reduce discounts, come up with a formula for computing prices, maintain a given price differential, and adhere to a minimum price schedule. Worse still, some competitors also fix credit terms. They also never advertise their prices.

Such dishonest businesses also undertake to establish policing mechanisms to compel other competitors to adhere to the agreement (Anonymous, 2010). Legislation of antitrust laws was also informed by the tendency of some competitors to engage in bid rigging. Such competitors do conspire to raise prices in circumstances when federal, state, or local governments are the purchasers. Such institutions normally solicit competing bids. Under normal circumstances, such competitors would agree in advance with respect to who will submit the winning bid.

Bid rigging can either take the form of bid suppression or complementary bidding. With respect to bid suppression, competitors who are expected to bid, or who previously bid would deliberately agree to stay away from the competitive bidding process. Such competitors can alternatively withdraw a bid they had previously submitted so that the pre-meditated "winning" competitor sails through.

Complementary bidding otherwise known as cover or courtesy bidding is characterized by collusion among competitors where some of them submit bids that are either too high to be accepted or contain special terms unacceptable to the buyer with a view to creating an impression that theirs is genuine competitive bidding. Complementary bidding as opposed to bid suppression is the most common form of bid rigging. False competition that is created obscures the unsuspecting general public from seeing secretly inflated prices. Other forms of bid rigging include bid rotation and subcontracting.

In bid rotation, competitors, while colluding, submit bids but take turns being the lowest bidder. In subcontracting competitors who agree not to bid or submit a losing bid are frequently awarded subcontracts or supply contracts from successful low bidder. Some low bidders may even go to an extent of withdrawing their bids in favor of the next low bidders as long as they are guaranteed lucrative subcontracts. The illegally obtained higher price is normally divided between the low bidder and the next low bidder.

All forms of bid rigging espouse some element of conspiracy other than stifling competition. This sets a bad precedent in the economy that has to be hitherto removed (Anonymous, 2010). Legislation of antitrust laws are also informed by competitors desire to divide the market among themselves. Such competitors allocate specific customers, product, or territories among themselves. Competitors may decide to sell to, or bid on contracts let by certain customers. Such competitors will not be expected to sell to, or bid contracts let by customers allocated to other competitors.

Under certain circumstances, competitors can agree to sell only to customers that come from specific geographic locations and deliberately refuse to sell or quote exorbitant prices to customers that come from locations where their conspirator companies are situated (Anonymous, 2010). Decisions that are made before court of law regarding whether a business organization has violated federal antitrust laws, four elements have to be taken into consideration namely: an agreement to concerted action, unreasonable restraint of trade by the agreement, interstate trade restraint, and a show of general intent.

The court has to prove that the competitors actually conspired to unreasonably restraint trade. All that the courts want to establish is that there was some illegal agreement between the competitors to restraint trade. Courts hold competitors liable for having engaged in restraint of trade when they knowingly create monopoly, artificially maintain prices, restrict output, refuse to deal, or interfere with free play of market forces.

The courts rely on three analytical approaches namely "per se" rule, "rule reason," and the intermediate "quick look" to determine whether an activity constitute an unreasonable restraint of trade (Lechter, Posner & Morris, 2002). Intermediate quick look rule is at times abbreviated rule of reason standard. Quick look analysis is only applicable in agreements that are naked restrictions but having pro-competitive justifications. After the courts have established existence of a restriction the onus shifts to the defendant to assert pro-competitive justifications.

After successful rebuttal of the presumption of anti-competitive effects by the defendant, the court then applies the rule of reason analysis to balance the costs of the restraint of trade against its benefits. Quick look analysis just like per se analysis heavily relies on the experience of the court. Courts that try antitrust law violators must have jurisdiction under the Act. Violators can only be charged if their.