Antitrust Laws in the United States: History and Scope

Introduction to U.S. Antitrust Law

The United States can be considered unique in its formulation and enforcement of antitrust laws. No other country has an equivalent body of laws dealing specifically with monopolies and restrictive business practices, with the possible exception of Canada, whose equivalent is the Combines Investigation Act. The reason lies in the fact that America has a very dominant, influential, and vibrant business world. The United States occupies a pre-eminent position in global commerce, and it is natural to assume that a connection exists between economic success and this special body of law. As one legal summary notes, "The basic antitrust statutes are few in number: The Sherman Act of 1890; the Clayton Act, first enacted in 1914 and significantly amended in 1936 by the Robinson-Patman Act and in 1950 by the Celler-Kefauver Antimerger Act; and the Federal Trade Commission Act of 1914."

Even the most passionate supporter of America's economic success would hardly claim that these laws alone are the reason for the country's eminent position in economic progress. Yet many well-qualified persons in the United States do believe that the antitrust laws make an important contribution to economic stability and growth. Spokesmen for the United States have frequently encouraged other countries to adopt similar laws in order to fully enjoy the advantages of competition.

Competition between firms is, after all, the most desirable trait of economic activity — it acts as a stimulus to improved methods and provides protection against indifference to the wishes of consumers. It would therefore make no sense to allow firms to crush competition by entering into private agreements or by acquiring private monopoly power. Even if there may be situations in which competition can justifiably be mitigated or restrained, it seems questionable whether the decision about which situations qualify, and what form of restraint to adopt, should be left to those upon whom competition is expected to exercise a salutary influence. External safeguards and stimuli are often irksome, and there are self-interested reasons — not just principled ones — for wanting to be rid of them.

Core Antitrust Statutes and Their Provisions

The substantive provisions of the antitrust laws are few and brief. They are contained in seven sections drawn from three statutes: the Sherman Act of 1890 and the Clayton Act and Federal Trade Commission Act of 1914. The two latter statutes have been amended in important ways by subsequent measures discussed below. There are also some minor laws dealing particularly with restrictive practices in the importation of goods into the United States, but these are not central to the main framework.

The Sherman Act of 1890 contains two main prohibitions:

Section 1: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is hereby declared to be illegal. . . ."

Section 2: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor. . . ."

The Clayton Act of 1914 declares illegal four specified types of restrictive or monopolistic practice:

(a) price discrimination (section 2); (b) exclusive dealing and tying contracts (section 3); (c) acquisitions of competing companies (section 7); and (d) interlocking directorates (section 8).

Enforcement Mechanisms and Jurisdiction

All these sections are qualified by provisos — some more elaborately defined than others — to the general effect that the practice concerned becomes unlawful only when its "effect may be to substantially lessen competition or tend to create a monopoly." The section dealing with price discrimination was revised by the Robinson-Patman Act of 1936, and the section dealing with acquisitions was revised by the Celler-Kefauver Act of 1950.

The Federal Trade Commission Act of 1914 is concerned largely with establishing the Commission and the mechanics of its operation. Section 5 of the Act, however, contains one important substantive provision, which reads (as amended by the Wheeler-Lea Act of 1938): "Unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce are hereby declared illegal."

The prohibitions of the Sherman Act create criminal offenses punishable by fines and even imprisonment. Their enforcement, like that of any other criminal law, is a police function directed by the United States Department of Justice. The Sherman Act also charges the Department of Justice with the duty of instituting proceedings in equity to prevent and restrain violations. The significance of this is that a court of equity may translate the general terms of the Act into a set of detailed injunctions regulating the future conduct of businesses found to be in violation, and may even order the dissolution of such businesses or divest them of subsidiary parts where those measures are necessary to prevent continuing violations. From the standpoint of maintaining competition, these measures of equity relief are often more important to the Department of Justice than criminal penalties. Much of the Sherman Act case law therefore consists of suits in equity; civil and criminal actions are sometimes taken concurrently or in quick succession.

The Department of Justice may also institute civil proceedings under the Clayton Act, but this is a shared responsibility because section 1 of that Act vests in the Federal Trade Commission the authority to enforce compliance with its provisions. The substantive provisions of the Clayton Act do not create criminal offenses, and the Commission has no criminal jurisdiction. It is a quasi-judicial administrative tribunal empowered to conduct hearings regarding suspected violations and, if violations are found, to issue "cease and desist" orders against further infringement. The Commission's "cease and desist" order — subject to review by appellate courts — plays much the same role under the Clayton Act that a trial court's equity decree plays in civil proceedings under the Sherman Act.

The Federal Trade Commission is also charged with securing compliance with the general ban on "unfair methods of competition" in section 5 of the FTC Act. This section does not create criminal offenses, and only the Commission's form of civil proceeding is available to enforce it. Section 5 is nonetheless of great importance, because the courts have ruled that the phrase "unfair methods of competition" covers conduct that would also violate the Sherman Act, and consequently the Commission may exercise jurisdiction over what could equally well be Sherman Act cases. The Supreme Court has even held that the Department of Justice and the Commission may proceed separately against the same offenders. It will thus be found in the case law that many proceedings that are in all but name Sherman Act cases are brought by the Federal Trade Commission. Although it is established in principle that some forms of restrictive conduct may be "unfair methods of competition" without rising to the level of Sherman Act violations, such instances are rare in practice, and section 5 adds comparatively little to substantive antitrust law.