Sherman Act Clayton Act

U.S. laws There are a number of different laws that govern fair, balanced and competitive practices. One major category is the antitrust laws. Antitrust laws seeks to create a competitive environment by preventing companies from obtaining the ability to abuse their market positions. Ensuring that each industry and market has a healthy amount of competition has been the work of a series of acts that govern antitrust practices. The most significant piece of antitrust legislation is the Sherman Act, which was passed in 1890 in order to define antitrust activities.

The act was passed in response to monopoly abuses on the part of a number of companies, and the recognition that a successful capitalist economy required at least enough market intervention on the part of government to prevent the formation of unnatural monopolies (FTC, 2014). There have been subsequent laws that have enhanced the Sherman Act, and refined it, largely because the original act left the courts a lot of leeway in interpretation.

The Federal Trade Commission Act was passed in 1914, creating the FTC as an enforcement body to regulate trade in the U.S., and the Clayton Act was also passed in 1914. The Clayton Act enhanced the Sherman Act, by prohibiting mergers and acquisitions that would create an uncompetitive environment, and by prohibiting interlocking directorships that would create a de facto monopoly, if not a de jure one (FTC, 2014).

Clayton Act cases are frequently the subject of antitrust action today, and firms are often forced to divest assets during a merger in order to received approval. Some other laws prescribe the terms of competition for companies. These laws are created to protect consumers. An example of such a law is the Robinson-Patman Act, which prohibits many forms of price discrimination (FTC, 2014, 2).

In particular, price discrimination that is intended to harm competitors is subject to restrictions under this act, so if price discrimination seems to target a specific industry sector where there is a competitor. There are other laws that fit within the scope of providing for fair, balanced and competitive practices, including some under trade laws, and in particular trade agreements. These can be subject to the specifics of a specific law, like NAFTA, but they include concepts like anti-dumping legislation.

The General Agreement on Trade & Tariffs of 1994, for example, prohibits dumping, which is selling in a foreign market below cost (OUSTR, 2014). While many laws such as the Sherman Act are largely domestic in nature, that has necessitated that there are specific laws written into international trade agreements to ensure competitive practices are followed in international trade as well. Such acts work either by providing specific dispute mechanisms or by applying pressure to the host government to curtain the anti-competitive activities of their companies. In general, these laws are effective.

The Department of Justice and the Federal Trade Commission have been empowered to investigate, independently, allegations of unfair trade practice. They are able to initiate their own actions, and will often do this. The threat of such action is often enough to convince companies to steer clear of grey areas. An example of a recent action was with Apple and the e-book industry, where there was alleged collusion between Apple and several major book publishers to fix prices on e-books. Price fixing is generally seen an uncompetitive practice (Tibken, 2014).

The DoJ is often involved in merger and acquisition activity. It publishes merger guidelines that it offers to industry to ensure that mergers are done properly. They are subject to DoJ approval, so understanding the terms and conditions is important (DoJ, 2014). There are, however, not that many examples of a merger being rejected. Normally, the DoJ will instead work with companies to find ways to get the merger through, such as asset divestment. In terms of outputs, however, these laws have clearly been successful.

There are few monopolies in the U.S., and those that do exist tend to be natural monopolies. Trade policy has been oriented even to the breakup of alleged natural monopolies where possible, such as the phone company breakup and deregulation of airlines to reduce oligopoly trading in that industry. But having government agencies out there doing things is only one way to look at effectiveness -- they might well just be making themselves look busy.

So it is important to look at total outputs to determine whether these actions are having the net intended effect. This has made the U.S. one of the freest economies in the world. Consumers have choice in almost every market, something that has allowed for costs to stay down, as companies actively fight for market share. The robust U.S. economy, often.