Modern competition law is modelled on the United States' Sherman Act, which aimed to "bust the trusts" that dominated markets in corporate America around the turn of the 20th century. The United States of America —commonly referred to as the The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and

Competition law, known in the United States as antitrust law, has three main elements:

• prohibiting agreements or practices that restrict free trading and competition between business entities. The United States of America —commonly referred to as the This includes in particular the repression of cartels. A cartel is a formal (explicit agreement among firms Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve
• banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others. Predatory pricing (also known as destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the Market Tying is the practice of making the sale of one good (the tying good to the De facto or De jure customer conditional on the purchase of a second distinctive Price gouging is a Pejorative term for a seller pricing much higher than is considered reasonable or fair Refusal to deal is one of several Anti-competitive practices forbidden in countries which have Free market economies
• supervising the mergers and acquisitions of large corporations, including some joint ventures. A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.

The substance and practice of competition law vary from jurisdiction to jurisdiction. Protecting the interests of consumers (consumer welfare) and ensuring that enterpreneurs have an opportunity to compete in the market economy are often treated as important objectives. Welfare economics is a branch of Economics that uses microeconomic techniques to simultaneously determine Allocative efficiency within an economy and the A market economy is a realized Social system based on the Division of labour in which the prices of Goods and Services are determined in a Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatisation of state owned assets and the establishment of independent sector regulators. Privatization is the incidence or process of transferring ownership of business from the Public sector (government to the Private sector (business In recent decades, competition law has been viewed as a way to provide better public services. Public services is a term usually used to mean services provided by Government to its Citizens, either directly (through the Public sector) or ^[1] The history of competition law reaches back further than the Roman Empire. The Roman Empire was the post-Republican phase of the ancient Roman civilization, characterised by an autocratic form of government and large territorial The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. A guild is an association of craftsmen in a particular trade The earliest guilds were formed as confraternities of workers Since the twentieth century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Community competition law. United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. European Community competition law is one of the areas of authority of the European Union. National and regional competition authorities across the world have formed international support and enforcement networks.

Competition law history

Competition law
Basic concepts
History of competition law Monopolization Coercive monopoly Natural monopoly Barriers to entry Market power SSNIP test Relevant market Merger control
Anti-competitive practices
Collusion Formation of cartels Price fixing Product bundling and tying Refusal to deal Group boycott Exclusive dealing Bid rigging Dividing territories Conscious parallelism Predatory pricing Misuse of patents and copyrights
Laws and doctrines
United States Sherman Antitrust Act Clayton Antitrust Act Robinson-Patman Act Federal Trade Commission Act Merger guidelines Essential facilities doctrine Noerr-Pennington doctrine Rule of reason Europe European Community competition law Irish Competition Law Competition Act 1998 (U. Competition law history refers to attempts by governments to regulate Competitive markets for goods and services leading up to the modern competition or Antitrust The term "monopolization" refers to an offense under Section 2 of the American Sherman Antitrust Act, passed in 1890 In Economics and Business ethics, a coercive monopoly is a business concern that prohibits competitors from entering the field with the natural result being that Natural monopoly is a term used in Economics to refer to two different things In Economics and especially in the theory of Competition, barriers to entry are obstacles in the path of a firm which wants to enter a given Market In Economics, market power is the ability of a firm to alter the Market price of a good or service In Competition law, before deciding whether companies have significant Market power which would justify government intervention the test of Small but Significant and Non-transitory In Competition law the Relevant market defines the market in which one or more goods compete Merger control refers to the procedure of reviewing Mergers and acquisitions under Antitrust / competition law Anti-competitive practices are Business or Government practices that prevent and/or reduce Competition in a Market (see Restraint of trade Collusion is an agreement usually secretive which occurs between two or more persons to deceive mislead or defraud others of their legal rights or to obtain an objective forbidden A cartel is a formal (explicit agreement among firms Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve Price fixing is an agreement between business competitors to sell the same product or service at the same price Product bundling is a Marketing strategy that involves offering several products for sale as one combined product Tying is the practice of making the sale of one good (the tying good to the De facto or De jure customer conditional on the purchase of a second distinctive Refusal to deal is one of several Anti-competitive practices forbidden in countries which have Free market economies In Competition law, a group boycott is a type of Secondary boycott in which two or more competitors in a Relevant market refuse to conduct business Exclusive dealing refers to when a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies Bid rigging is an illegal agreement between two or more competitors Dividing territories (also Market division) is an agreement by two companies to stay out of each other's way and reduce competition in the agreed-upon territories Conscious parallelism is a term used in Competition law to describe Price-fixing between competitors in an Oligopoly that occurs without an actual spoken Predatory pricing (also known as destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the Market In United States patent law, patent misuse is an Affirmative defense used in patent litigation when a Defendant has been accused to have Copyright misuse is an equitable defense against Copyright infringement in the United States based on the unreasonable conduct of United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U The Robinson-Patman Act of 1936 (or Anti-Justice League Discrimination Act,) is a United States federal law that prohibits what were considered at the time of passage The Federal Trade Commission Act of 1914 (15 USC §§ 41-58 as amended) established the Federal Trade Commission (FTC a Bipartisan body of five members The Merger guidelines are a set of internal rules promulgated by the Antitrust Division of the United States Department of Justice (USDOJ in conjunction with the The essential facilities doctrine (sometimes also referred to as the essential facility doctrine) is a Legal doctrine which describes a particular type of claim of The Noerr-Pennington doctrine is a doctrine of United States Antitrust law set forth by the United States Supreme Court in a pair of cases which The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. European Community competition law is one of the areas of authority of the European Union. Irish Competition Law is the Irish body of legal rules designed to ensure fairness and freedom in the Marketplace. The Competition Act 1998 is the current major source of competition policy in the UK along with Enterprise Act 2002. K. ) Australia Trade Practices Act 1974
Enforcement authorities and organizations
International Competition Network List of competition regulators
edit box

Laws governing competition law are found in over two millennia of history. The Trade Practices Act 1974 is an act of the Parliament of Australia. The International Competition Network is an informal virtual network that seeks to facilitate cooperation between Competition law authorities globally A competition regulator is a Government agency, typically a statutory authority, sometimes called an economic regulator, which regulates and enforces Roman Emperors and Medieval monarchs alike used tariffs to stabilize prices or support local production. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary The formal study of "competition", began in earnest during the 18th century with such works as Adam Smith's The Wealth of Nations. Competition is a rivalry between individuals groups nations or animals for territory or resources Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. Different terms were used to describe this area of the law, including "restrictive practices", "the law of monopolies", "combination acts" and the "restraint of trade". A term used in Antitrust law that includes such conduct as Price fixing, market sharing, monopolizing, or attempting to monopolize markets The Combination Act of 1799, titled An Act to prevent Unlawful Combinations of Workmen (short title 39 Geo

Roman legislation

See also: Roman law

At a time of high inflation, Diocletian passed tough laws to stop price distortions

An early example of competition law is the Lex Julia de Annona, enacted during the Roman Republic around 50 BC. Roman law is the legal system of Ancient Rome. As used in the West the term commonly refers to legal developments prior to the Roman/Byzantine state's adopting Gaius Aurelius Valerius Diocletianus ( ca. December 22 244 The modern historian Timothy Barnes takes December 22 as his birthdate The Roman Republic was the phase of the ancient Roman civilization characterized by a Republican form of government a period which began with the overthrow of the ^[2] To protect the corn trade, heavy fines were imposed on anyone directly, deliberately and insidiously stopping supply ships. ^[3] Under Diocletian in 301 AD an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday goods. Gaius Aurelius Valerius Diocletianus ( ca. December 22 244 The modern historian Timothy Barnes takes December 22 as his birthdate The Edict on Maximum Prices (also known as the Edict on Prices or the Edict of Diocletian; in Latin Edictum De Pretiis Rerum Venalium ^[4]

More legislation came under the Constitution of Zeno of 483 AD, which can be traced into Florentine Municipal laws of 1322 and 1325. ^[5] This provided for confiscation of property and banishment for any trade combinations or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights. ^[6] Justinian I subsequently introduced legislation to pay officials to manage state monopolies. Flavius Petrus Sabbatius Iustinianus ( Greek: Φλάβιος Πέτρος Σαββάτιος Ιουστινιανός; known in English as Justinian I or ^[7] As Europe slipped into the dark ages, so did the records of law making until the Middle Ages brought greater expansion of trade in the time of lex mercatoria. This article is about the phrase "Dark Age(s" as a characterization of the Early Middle Ages in Western Europe The Law Merchant is a legal system used by merchants in medieval Europe, including England.

Middle ages

See also: Lex Mercatoria and Guilds

Edward III during the Black Death enacted the Statute of Labourers to cap wages, and provide double damages against infringers

Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest. The Law Merchant is a legal system used by merchants in medieval Europe, including England. A guild is an association of craftsmen in a particular trade The earliest guilds were formed as confraternities of workers The Black Death, or the Black Plague, was one of the deadliest Pandemics in human history widely thought to have been caused by a bacterium named Yersinia ^[8] The Domesday Book recorded that "foresteel" (i. The Domesday Book (ˈduːmzdeɪ bʊk also known as Domesday, or Book of Winchester) was the record of the great survey Engrossing, forestalling and regrating were marketing offences in English common law. e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England. Asset forfeiture is a term used to describe the confiscation of Assets, by the State, which are either (a the proceeds of Crime or (b the instrumentalities King Edward the Confessor (c 1003 &ndash 5 January 1066 son of Ethelred the Unready, was the penultimate Anglo-Saxon King of England and the last ^[9] But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 1266^[10] to fix bread and ale prices in correspondence with corn prices laid down by the assizes. The Court of Assize, or Assizes, is a medieval term for Legal codes (such as Assizes of Jerusalem) that continues to be used in modern times Penalties for breach included amercements, pillory and tumbrel. An amercement is a financial penalty in English law, common during the Middle Ages, imposed either by the court or by peers Ducking-stools and cucking-stools are chairs formerly used for Punishment. ^[11] A fourteenth century statute labelled forestallers as "oppressors of the poor and the community at large and enemies of the whole country. "^[12] Under King Edward III the Statute of Labourers of 1349^[13] fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. Edward III (13 November 1312 &ndash 21 June 1377 was one of the most successful English monarchs of the Middle Ages. The Statute of labourers was a law enacted by the English parliament under King Edward III in 1351 in response to a labour shortage On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law. Punitive damages (termed exemplary damages in the United Kingdom) are Damages not awarded in order to compensate the Plaintiff, but in order Treble damages, in Law, is a term that indicates that a Statute permits a Court to triple the amount of the actual/compensatory Damages to be United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. Also under Edward III, the following statutory provision outlawed trade combinations. ^[14]

". . . we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain. "

Examples of legislation in mainland Europe include the constitutiones juris metallici by Wenceslas II of Bohemia between 1283 and 1305, condemning combinations of ore traders increasing prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno's legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed "to prevent losses resulting from monopolies and improper contracts which many merchants and artisans made in the Netherlands. Wenceslaus II Premyslid (Václav II Wacław II Czeski September 27, 1271 &ndash June 21, 1305) was King of Bohemia (1278 - 1305 Bohemia (Čechy; Bohemia Czechy is a historical region in central Europe, occupying the western two-thirds of the traditional Czech Lands, currently the Charles V (24 February 1500 &ndash 21 September 1558 was The Holy Roman Empire ( HRE; German Heiliges Römisches Reich (HRR, Latin Sacrum Romanum Imperium (SRI was a union of territories in " In 1553 King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilise prices, in the face of fluctuations in supply from overseas. Henry VIII (28 June 1491 &ndash 28 January 1547 was King of England and Lord of Ireland, later King of Ireland and claimant to the Kingdom of So the legislation read here that whereas,

"it is very hard and difficult to put certain prices to any such things. . . [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects. "^[15]

Around this time organisations representing various tradesmen and handicraftspeople, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. A guild is an association of craftsmen in a particular trade The earliest guilds were formed as confraternities of workers The privileges conferred were not abolished until the Municipal Corporations Act 1835.

Renaissance developments

See also: Renaissance

Elizabeth I assured monopolies would not be abused in the early era of globalisation

Europe around the 15th century was changing fast. The Renaissance (from French Renaissance, meaning "rebirth" Italian: Rinascimento, from re- "again" and nascere Globalization (or globalisation) in its literal sense is the process of transformation of local or regional phenomena into global ones The new world had just been opened up, overseas trade and plunder was pouring wealth through the international economy and attitudes among businessmen were shifting. The New World is one of the names used for the non-Eurasian/non-African parts of the Earth specifically the Americas and Australia. In 1561 a system of Industrial Monopoly Licences, similar to modern patents had been introduced into England. A patent is a set of Exclusive rights granted by a State to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an But by the reign of Queen Elizabeth I, the system was reputedly much abused and used merely to preserve privileges, encouraging nothing new in the way of innovation or manufacture. ^[16] When a protest was made in the House of Commons and a Bill was introduced, the Queen convinced the protesters to challenge the case in the courts. The House of Commons' is the Lower house of the Parliament of the United Kingdom, which also comprises the Sovereign and the House of Lords This was the catalyst for the Case of Monopolies or Darcy v. Darcy v Allein, 77 Eng Rep 1260 (King's Bench 1603) (often mis-spelled as Darcy v Allin. ^[17] The plaintiff, an officer of the Queen's household, had been granted the sole right of making playing cards and claimed damages for the defendant's infringement of this right. The court found the grant void and that three characteristics of monopoly were (1) price increases (2) quality decrease (3) the tendency to reduce artificers to idleness and beggary. This put a temporary end to complaints about monopoly, until King James I began to grant them again. James VI and I (19 June 1566 – 27 March 1625 was King of Scotland as James VI, and King of England and King of Ireland as James In 1623 Parliament passed the Statute of Monopolies, which for the most part excluded patent rights from its prohibitions, as well as guilds. England 's Statute of Monopolies of 1623 (21 Jac 1 c3 while generally condemning monopolies, provided the true and first Inventor of a given From King Charles I, through the civil war and to King Charles II, monopolies continued, especially useful for raising revenue. Charles I, (19 November 1600 &ndash 30 January 1649 was King of England, Scotland and Ireland from 27 March 1625 until his execution. Charles II (Charles Stuart 29 May 1630 – 6 February 1685 was the King of England, Scotland, and Ireland. ^[18] Then in 1684, in East India Company v. Sandys^[19] it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in the conditions prevailing overseas. In 1710 to deal with high coal prices caused by a Newcastle Coal Monopoly the New Law was passed. ^[20] Its provisions stated that "all and every contract or contracts, Covenants and Agreements, whether the same be in writing or not in writing. . . are hereby declared to be illegal. " When Adam Smith wrote the Wealth of Nations in 1776^[21] he was somewhat cynical of the possibility for change. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith.

"To expect indeed that freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that Oceana or Utopia should ever be established in it. The Commonwealth of Oceana, published 1656 is a composition of political philosophy written by the English politician and essayist James Harrington (1611&ndash1677 Utopia is a name for an ideal community taken from the title of a book written in 1516 by Sir Thomas More describing a fictional Island in the Not only the prejudices of the public, but what is more unconquerable, the private interests of many individuals irresistibly oppose it. The Member of Parliament who supports any proposal for strengthening this Monopoly is seen to acquire not only the reputation for understanding trade, but great popularity and influence with an order of men whose members and wealth render them of great importance. "

Restraint of trade

Main article: Restraint of trade

Judge Coke in the 17th century thought that general restraints on trade were unreasonable

The English law of restraint of trade is the direct predecessor to modern competition law. Restraint of trade is a Common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business Sir Edward Coke (pronounced "Cook" ( 1 February 1552 &ndash 3 September 1634) was an early English colonial Entrepreneur ^[22] Its current use is small, given modern and economically oriented statutes in most common law countries. Its approach was based on the two concepts of prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. The reasonable person standard is often used legal term that originated in the development of the Common law. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade. For example, in Nordenfelt v. Maxim, Nordenfelt Gun Co. ^[23] a Swedish arm inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way. "

To be consider whether or not there is a restraint of trade in the first place, both parties must have provided valuable consideration for their agreement. Consideration is a central concept in the Common law of Contracts and Contract theory: it is value paid for a promise In Dyer's case^[24] a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed,

"per Dieu, if the plaintiff were here, he should go to prison until he had paid a fine to the King. "

The common law has evolved to reflect changing business conditions. So in the 1613 case of Rogers v. Parry^[25] a court held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held that a man cannot bind himself to not use his trade generally by Chief Justice Coke. Sir Edward Coke (pronounced "Cook" ( 1 February 1552 &ndash 3 September 1634) was an early English colonial Entrepreneur This was followed in Broad v. Jolyffe^[26] and Mitchell v. Reynolds^[27] where Lord Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications, commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. Thomas Parker 1st Earl of Macclesfield PC FRS (1666&ndash1732 was an English Whig politician But already in 1880 in Roussillon v. Roussillon^[28] Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promisee's protection. Sir Edward Fry FRS (1827-1918 a judge in the British Court of Appeal (1883-1892 and also an arbitrator on the International Permanent Court of Arbitration. So in the Nordenfelt^[29] case Lord McNaughton ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way. " This approach in England was confirmed by the House of Lords in Mason v. The Provident Supply and Clothing Co. ^[30]

Competition law today

Modern competition law begins with the United States legislation of the Sherman Act of 1890 and the Clayton Act of 1914. The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U While other, particularly European, countries also had some form of regulation on monopolies and cartels, the US codification of the common law position on restraint of trade had a widespread effect on subsequent competition law development. Both after World War II and after the fall of the Berlin wall competition law has gone through phases of renewed attention and legislative updates around the world. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including The Berlin Wall (Berliner Mauer was a physical barrier separating West Berlin from the German Democratic Republic (GDR ( East Germany) including

United States antitrust

Main article: United States antitrust law

Standard Oil was one of the greatest companies to be broken up under United States antitrust laws

The American term anti-trust arose not because the US statutes had anything to do with ordinary trust law, but because the large American corporations used trusts to conceal the nature of their business arrangements. United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. Standard Oil was a predominant American integrated oil producing transporting refining and marketing company A special trust or business trust is business entity formed with intent to monopolize business to restrain trade, or to fix prices. In Common law legal systems a trust is an arrangement whereby Property (including real tangible and intangible is managed by one person (or persons or organizations Big trusts became synonymous with big monopolies, the perceived threat to democracy and the free market these trusts represented led to the Sherman and Clayton Acts. The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U These laws, in part, codified past American and English common law of restraints of trade. Common law refers to law and the corresponding legal system developed through decisions of courts and similar tribunals rather than through legislative statutes or executive Senator Hoar, an author of the Sherman Act said in a debate, "We have affirmed the old doctrine of the common law in regard to all inter-state and international commercial transactions and have clothed the United States courts with authority to enforce that doctrine by injunction. George Frisbie Hoar ( August 29, 1826 &ndash September 30, 1904) was a prominent United States Politician and The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and " Evidence of the common law basis of the Sherman and Clayton acts is found in the Standard Oil case,^[31] where Chief Justice White explicitly linked the Sherman Act with the common law and sixteenth century English statutes on engrossing. Standard Oil Co of New Jersey v United States, 221 US 1 (1911 was a case in which the Supreme Court of the United States found Standard Oil Edward Douglass White Jr (November 3 1845 &ndash May 19 1921 American Politician and Jurist, was a United States senator, Associate ^[32] The Act's wording also reflects common law. The first two sections read as follows,

"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 declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine. . . .

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 felony, and, on conviction thereof, shall be punished by fine. . . . "

The Sherman Act did not have the immediate effects its authors intended, though Republican President Theodore Roosevelt's federal government sued 45 companies, and William Taft used it against 75. Theodore Roosevelt (ˈroʊzəvɛlt October 27 1858 January 6 1919 also known as T William Howard Taft (September 15 1857 – March 8 1930 was an American politician, the twenty-seventh President of the United States, the tenth Chief Justice The Clayton Act of 1914 was passed to supplement the Sherman Act. The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U Specific categories of abusive conduct were listed, including price discrimination(section 2), exclusive dealings (section 3) and mergers which substantially lessen competition (section 7). Price discrimination exists when sales of identical goods or services are transacted at different Prices from the same provider Exclusive dealing refers to when a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies Section 6 exempted trade unions from the law's operation. Both the Sherman and Clayton acts are now codified under Title 15 of the United States Code. Title 15 of the United States Code outlines the role of the commerce and trade in the United States Code. The United States Code ( USC) is a compilation and Codification of the general and permanent federal Law of the United States.

Post war consensus

See also: Competition regulator

The European Commission, established following World War II, was the first Europe wide competition authority

It was after the First World War that countries began to follow the United States' lead in competition policy. A competition regulator is a Government agency, typically a statutory authority, sometimes called an economic regulator, which regulates and enforces The European Commission (formally the Commission of the European Communities) is the executive branch of the European Union. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including World War I (abbreviated WWI; also known as the First World War, the Great War, and the War to End All In 1923 Canada introduced the Combines Investigation Act and in 1926 France reinforced its basic competition provisions from the 1810 Code Napoleon. The Combines Investigation Act was a Canadian Act of Parliament, passed in 1923 by MacKenzie King, which regulated certain corporate business practices After World War II, the Allies, led by the United States, introduced tight regulation of cartels and monopolies in occupied Germany and Japan. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including The United States of America —commonly referred to as the Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. For a topic outline on this subject see List of basic Japan topics. In Germany, despite the existence of laws against unfair competition passed in 1909 (Gesetz gegen den unlauteren Wettbewerb or UWB) it was widely believed that the predominance of large cartels of German industry had made it easier for the Nazis to assume total economic control, simply by bribing or blackmailing the heads of a small number of industrial magnates. Nazism, which was a short name for National Socialism (Nationalsozialismus refers primarily to the Ideology and practices of the National Socialist German Similarly in Japan, where business was organised along family and nepotistic ties, the zaibatsu were easy for the despotic government to manipulate into the war effort. is a Japanese term referring to industrial and financial business conglomerates in the Empire of Japan, whose influence and size allowed for control over significant Following, unconditional surrender tighter controls, replicating American policy were introduced.

Further developments however were considerably overshadowed by the move towards nationalisation and industry wide planning in many countries. Nationalization, also spelled nationalisation, is the act of taking an industry or assets into the Public ownership of a national government Making the economy and industry democratically accountable through direct government action became a priority. Coal industry, railroads, steel, electricity, water, health care and many other sectors were targeted for their special qualities of being natural monopolies. "Railroad" and "Railway" both redirect here For other uses see Railroad (disambiguation. Steel is an Alloy consisting mostly of Iron, with a Carbon content between 0 This article has been tagged &mdash please see the bottom of the page for more information Health care is the prevention treatment and management of illness and the preservation of mental health through the services offered by the medical, Nursing Natural monopoly is a term used in Economics to refer to two different things Commonwealth countries were slow in enacting statutory competition law provisions. The United Kingdom introduced the (considerably less stringent) Restrictive Practices Act in 1956. Australia introduced its current Trade Practices Act in 1974. The Trade Practices Act 1974 is an act of the Parliament of Australia. Recently however there has been a wave of updates, especially in Europe to harmonise legislation with contemporary competition law thinking.

European Union law

Main article: European Community competition law

The signatories to the Treaty of Rome which covers EU competition laws

In 1957 six Western European countries signed the Treaty of the European Community (EC Treaty or Treaty of Rome), which over the last fifty years has grown into a European Union of nearly half a billion citizens. European Community competition law is one of the areas of authority of the European Union. The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in The European Community is the name for the economic and social pillar of EU law, under which competition law falls. The Law of the European Union is the unique legal system which operates alongside the laws of Member States of the European Union (EU Healthy competition is seen as an essential element in the creation of a common market free from restraints on trade. The first provision is Article 81 EC, which deals with cartels and restrictive vertical agreements. Prohibited are. . .

"(1) . . . all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market. . . "

Article 81(1) EC then gives examples of "hard core" restrictive practices such as price fixing or market sharing and 81(2) EC confirms that any agreements are automatically void. However, just like the Statute of Monopolies 1623, Article 81(3) EC creates exemptions, if the collusion is for distributional or technological innovation, gives consumers a "fair share" of the benefit and does not include unreasonable restraints (or disproportionate, in ECJ terminology) that risk eliminating competition anywhere. England 's Statute of Monopolies of 1623 (21 Jac 1 c3 while generally condemning monopolies, provided the true and first Inventor of a given Article 82 EC deals with monopolies, or more precisely firms who have a dominant market share and abuse that position. Unlike U.S. Antitrust, EC law has never been used to punish the existence of dominant firms, but merely imposes a special responsibility to conduct oneself appropriately. United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. Specific categories of abuse listed in Article 82 EC include price discrimination and exclusive dealing, much the same as sections 2 and 3 of the U. S. Clayton Act. Also under Article 82 EC, the European Council was empowered to enact a regulation to control mergers between firms, currently the latest known by the abbreviation of ECMR "Reg. A regulation is a Legislative act of the European Union which becomes immediately enforceable as law in all member states simultaneously 139/2004". The general test is whether a concentration (i. e. merger or acquisition) with a community dimension (i. e. affects a number of EU member states) might significantly impede effective competition. Again, the similarity to the Clayton Act's substantial lessening of competition. The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U Finally, Articles 86 and 87 EC regulate the state's role in the market. Article 86(2) EC states clearly that nothing in the rules can be used to obstruct a member state's right to deliver public services, but that otherwise public enterprises must play by the same rules on collusion and abuse of dominance as everyone else. Article 87 EC, similar to Article 81 EC, lays down a general rule that the state may not aid or subsidise private parties in distortion of free competition, but then grants exceptions for things like charities, natural disasters or regional development.

International enforcement

See also: World Trade Organization and International Competition Network

There is considerable controversy among WTO members, in green, whether competition law should form part of the agreements

Competition law has already been substantially internationalised along the lines of the US model by nation states themselves, however the involvement of international organisations has been growing. The International Competition Network is an informal virtual network that seeks to facilitate cooperation between Competition law authorities globally Increasingly active at all international conferences are the United Nations Conference on Trade and Development (UNCTAD) and the Organisation for Economic Co-operation and Development (OECD), which is prone to making neo-liberal recommendations about the total application of competition law for public and private industries. The United Nations Conference on Trade and Development ( UNCTAD) was established in 1964 as a permanent intergovernmental body ^[33] Chapter 5 of the post war Havana Charter contained an Antitrust code^[34] but this was never incorporated into the WTO's forerunner, the General Agreement on Tariffs and Trade 1947. Havana Charter was the charter of the defunct International Trade Organization (ITO The 'General Agreement on Tariffs and Trade' (typically abbreviated 'GATT' was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO Office of Fair Trading Director and Professor Richard Whish wrote sceptically that it "seems unlikely at the current stage of its development that the WTO will metamorphose into a global competition authority. The Office of Fair Trading ( OFT) is a Non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, "^[35] Despite that, at the ongoing Doha round of trade talks for the World Trade Organisation, discussion includes the prospect of competition law enforcement moving up to a global level. The Doha Development Round is the current trade-negotiation round of the World Trade Organization (WTO which commenced in November 2001 While it is incapable of enforcement itself, the newly established International Competition Network^[36] (ICN) is a way for national authorities to coordinate their own enforcement activities. The International Competition Network is an informal virtual network that seeks to facilitate cooperation between Competition law authorities globally

Competition law theory

Main article: Competition law theory

Classical perspective

See also: Classical economics

John Stuart Mill believed the restraint of trade doctrine was justified to preserve liberty and competition

The classical perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual liberty of tradespeople to carry on their livelihoods. Competition law theory covers the strands of thought relating to Competition law or antitrust policy Classical economics is widely regarded as the first modern school of economic thought. John Stuart Mill (20 May 1806 &ndash 8 May 1873 British Philosopher, political economist, civil servant and Member of Parliament, was an influential Restraint of trade is a Common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business Liberty, the freedom to act or believe without being stopped by unnecessary force Competition is a rivalry between individuals groups nations or animals for territory or resources Liberty, the freedom to act or believe without being stopped by unnecessary force Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances. Hence the courts found specific categories of agreement, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of market power. Earlier theorists like Adam Smith rejected any monopoly power on this basis.

"A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. "^[37]

In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate legal measures to combat them. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy.

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. "^[38]

Smith also rejected the very existence of, not just dominant and abusive corporations, but corporations at all. A corporation is a separate legal entity usually used to conduct business ^[39]

By the latter half of the nineteenth century it had become clear that large firms had become a fact of the market economy. John Stuart Mill's approach was laid down in his treatise On Liberty (1859). John Stuart Mill (20 May 1806 &ndash 8 May 1873 British Philosopher, political economist, civil servant and Member of Parliament, was an influential On Liberty is a philosophical work by 19th century English Philosopher John Stuart Mill, first published in 1859

"Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society. . . both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil. . . "^[40]

Neo-classical synthesis

See also: Neo-classical economics

After Mill, there was a shift in economic theory, which emphasised a more precise and theoretical model of competition. Neoclassical economics is a term variously used for approaches to Economics focusing on the determination of prices outputs and income distributions in markets A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare. "Social welfare" redirects here For other uses see Welfare A social welfare provision refers to any program which seeks to provide This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry. In Economics and especially in the theory of Competition, barriers to entry are obstacles in the path of a firm which wants to enter a given Market By this term economists mean something very specific, that competitive free markets deliver allocative, productive and dynamic efficiency. Allocative efficiency is a situation in which the limited resources of a firm are allocated in accordance with the wishes of Consumers An allocatively efficient economy Productive efficiency occurs when the Economy is operating at its Production possibility frontier (PPF Allocative efficiency is also known as Pareto efficiency after the Italian economist Vilfredo Pareto and means that resources in an economy over the long run will go precisely to those who are willing and able to pay for them. Pareto efficiency, or Pareto optimality, is an important concept in Economics with broad applications in Game theory, Engineering and the Vilfredo Federico Damaso Pareto (vil'fredo pa'reto July 15, 1848 – August 19, 1923) or Fritz Wilfried Pareto, was an Italian In economic models the long-run time frame assumes no fixed Factors of production. Consumerism is the equation of personal Happiness with the purchase of material possessions and consumption. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and Because rational producers will keep producing and selling, and buyers will keep buying up to the last marginal unit of possible output - or alternatively rational producers will be reduce their output to the margin at which buyers will buy the same amount as produced - there is no waste, the greatest number wants of the greatest number of people become satisfied and utility is perfected because resources can no longer be reallocated to make anyone better off without making someone else worse off; society has achieved allocative efficiency. Marginalism is the use of Marginal concepts within Economics. Utilitarianism is the idea that the moral worth of an action is solely determined by its contribution to overall Utility, that is its contribution to happiness Productive efficiency simply means that society is making as much as it can. Free markets are meant to reward those who work hard, and therefore those who will put society's resources towards the frontier of its possible production. The Protestant work ethic, sometimes called the Puritan work ethic, is a sociological theoretical concept In Economics, a production-possibility frontier (PPF or “transformation curve” is a graph that shows the different rates of production of two goods ^[41] Dynamic efficiency refers to the idea that business which constantly competes must research, create and innovate to keep its share of consumers. This traces to Austrian-American political scientist Joseph Schumpeter's notion that a "perennial gale of creative destruction" is ever sweeping through capitalist economies, driving enterprise at the market's mercy. Joseph Alois Schumpeter ( February 8, 1883 &ndash January 8, 1950) was an Economist and Political scientist born in Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where ^[42]

Contrasting with the allocatively, productively and dynamically efficient market model are monopolies, oligopolies, and cartels. When only one or a few firms exist in the market, and there is no credible threat of the entry of competing firms, prices raise above the competitive level, to either a monopolistic or oligopolistic equilibrium price. Production is also decreased, further decreasing social welfare by creating a deadweight loss. "Social welfare" redirects here For other uses see Welfare A social welfare provision refers to any program which seeks to provide In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium Sources of this market power are said to include the existence of externalities, barriers to entry of the market, and the free rider problem. In Economics, an externality is an impact on any party not directly involved in an economic decision In Economics and especially in the theory of Competition, barriers to entry are obstacles in the path of a firm which wants to enter a given Market In Economics, Collective bargaining, Psychology and Political science, "free riders" are those who consume more than their fair share of a resource Markets may fail to be efficient for a variety of reasons, so the exception of competition law's intervention to the rule of laissez faire is justified. Market failure is a concept within economic theory wherein the allocation of goods and services by a Free market is not efficient. Laissez-faire ( pronunciation: French,; English,) is a French phrase literally meaning Let do (“allow to do” Orthodox economists fully acknowledge that perfect competition is seldom observed in the real world, and so aim for what is called "workable competition". In Neoclassical economics and Microeconomics, perfect competition describes a market in which no buyer or seller has Market power. ^[43][44] This follows the theory that if one cannot achieve the ideal, then go for the second best option^[45] by using the law to tame market operation where it can.

Chicago School

See also: Chicago School (economics)

Robert Bork argues that competition law is fundamentally flawed

A group of economists and lawyers, who are largely associated with the University of Chicago, advocate an approach to competition law guided by the proposition that some actions that were originally considered to be anticompetitive could actually promote competition. Robert Heron Bork (born March 1, 1927) is a conservative American legal scholar who advocates the judicial philosophy of Originalism. The University of Chicago is a Private university located principally in the Hyde Park neighborhood of Chicago. The U.S. Supreme Court has used the Chicago School approach in several recent cases ^[46]. The Supreme Court of the United States is the highest judicial body in the United States and leads the federal judiciary. One view of the Chicago School approach to antitrust is found in United States Circuit Court of Appeals Judge Richard Posner's books' Antitrust Law^[47] and Economic Analysis of Law^[48]

Robert Bork was highly critical of court decisions on United States antitrust law in a series of law review articles and his book The Antitrust Paradox. Richard Allen Posner (born January 11 1939 in New York City) is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago Robert Heron Bork (born March 1, 1927) is a conservative American legal scholar who advocates the judicial philosophy of Originalism. The Antitrust Paradox is a 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s ^[49] Bork argued that both the original intention of antitrust laws and economic efficiency was the pursuit only of consumer welfare, the protection of competition rather than competitors. ^[50] Furthermore, only a few acts should be prohibited, namely cartels that fix prices and divide markets, mergers that create monopolies, and dominant firms pricing predatorily, while allowing such practices as vertical agreements and price discrimination on the grounds that it did not harm consumers. ^[51] Running through the different critiques of US antitrust policy is the common theme that government interference in the operation of free markets does more harm than good. ^[52] "The only cure for bad theory", writes Bork, "is better theory". ^[53] The late Harvard Law School Professor Philip Areeda, who favours more aggressive antitrust policy, in at least one Supreme Court case challenged Robert Bork's preference for non-intervention. Harvard Law School (also known as Harvard Law or HLS) is one of the professional Graduate schools of Harvard University. ^[54]

Policy developments

Anti-cartel enforcement is a key focus of competition law enforcement policy. A cartel is a formal (explicit agreement among firms Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve In the US the Antitrust Criminal Penalty Enhancement and Reform Act 2004 raised the maximum imprisonment term for price fixing from three to ten years, and the maximum fine from $10 to $100 million. The United States of America —commonly referred to as the ^[55] In 2007 British Airways and Korean Air pleaded guilty to fixing cargo and passenger flight prices. British Airways plc ( is the national Airline and Flag carrier of the United Kingdom and one of the largest in Europe Korean Air Lines Co Ltd ( Operating as Korean Air, is the national and largest Airline of South Korea; its global headquarters ^[56]

These actions complement the private enforcement which has always been an important feature of United States antitrust law. United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. The United States Supreme Court summarised why Congress allows punitive damages in Hawaii v. The Supreme Court of the United States is the highest judicial body in the United States and leads the federal judiciary. The United States Congress is the bicameral Legislature of the federal government of the United States of America, consisting of two houses Standard Oil^[57].

"Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. "

In the EU, the Modernisation Regulation 1/2003 means that the European Commission is no longer the only body capable of public enforcement of European Community competition law. The European Union ( EU) is a political and economic union of twenty-seven member states, located primarily in The European Commission (formally the Commission of the European Communities) is the executive branch of the European Union. European Community competition law is one of the areas of authority of the European Union. This was done in order to facilitate quicker resolution of competition-related inquiries. In 2005 the Commission issued a Green Paper on Damages actions for the breach of the EC antitrust rules,^[58] which suggested ways of making private damages claims against cartels easier. In Britain other similar Commonwealth jurisdictions (eg Australia and the Republic of Ireland a green paper is a tentative government report of a proposal without any commitment to ^[59]

Competition law practice

Collusion and cartels

Main articles: Collusion and Cartel

Scottish Enlightenment philosopher Adam Smith was an early enemy of cartels

The core of competition policy has, since the 1980s, been the anti-price fixing cartel agenda, despite criticism by economic libertarians. Collusion is an agreement usually secretive which occurs between two or more persons to deceive mislead or defraud others of their legal rights or to obtain an objective forbidden A cartel is a formal (explicit agreement among firms Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve The Scottish Enlightenment was the period in 18th century Scotland characterised by an outpouring of intellectual and scientific accomplishments Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. Price fixing is an agreement between business competitors to sell the same product or service at the same price Economic liberalism is the Economic component of Classical liberalism. ^[60] In The Wealth of Nations (1776) Adam Smith pointed out the cartel problem, but did not advocate legal measures to combat them. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. ^[61] Nowadays a far stricter approach is taken. Under EC law cartels are banned by Article 81 EC, whereas under US law the Sherman Act prohibitions of section 1. The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and To compare, the target of competition law under the Sherman Act 1890 is every "contract, combination in the form of trust or otherwise, or conspiracy", which essentially targets anybody who has some dealing or contact with someone else. In the mean time, Art. 81 EC makes clear who the targets of competition law are in two stages with the term agreement "undertaking". This is used to describe almost anyone "engaged in an economic activity",^[62] but excludes both employees, who are by their "very nature the opposite of the independent exercise of an economic or commercial activity",^[63] and public services based on "solidarity" for a "social purpose". ^[64] Undertakings must then have formed an agreement, developed a "concerted practice", or, within an association, taken a decision. Like US antitrust, this just means all the same thing;^[65] any kind of dealing or contact, or a "meeting of the minds" between parties. Covered therefore is a whole range from a strong handshaken written or verbal agreement to a supplier sending invoices with directions not to export to its retailer who gives "tacit acquiescence" to the conduct. ^[66]

Less of a consensus exists in the field of vertical agreements. A vertical agreement is a term used in Competition law to denote agreements between firms up or down the supply chain from one another These are agreements not between firms at the same level of production, but firms at different levels in the supply chain, for instance a supermarket and a bread producer. A supply chain or logistics network is the system of organizations people technology activities information and resources involved in moving a product or service from Recently, the United States Supreme Court has become more skeptical of antitrust cases predicated on agreements between companies that are not directly in competition with one another, such as a clothing manufacturer and a clothing retailer, while maintaining the strict prohibition against agreements that limit competition between companies at the same level of the supply chain, such as agreements between two retailers or between two distributors. Vertical agreements may still be illegal, but the burden of proving them illegal was raised by a number of recent cases from the per se illegal standard to a more demanding rule of reason standard. The term illegal per se means that the act is inherently illegal The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. ^[67]

Dominance and monopoly

Main article: Dominance and monopoly

The economist's depiction of deadweight loss to efficiency that monopolies cause

When firms hold large market shares, consumers risk paying higher prices and getting lower quality products than compared to competitive markets. In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium However, the existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share firm's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power that a monopoly may confer, for instance through exclusionary practices.

First it is necessary to determine whether a firm is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer. "^[68] Under EU law, very large market shares raise a presumption that a firm is dominant,^[69] which may be rebuttable. ^[70] If a firm has a dominant position, then there is "a special responsibility not to allow its conduct to impair competition on the common market"^[71]. Similarly as with collusive conduct, market shares are determined with reference to the particular market in which the firm and product in question is sold. Then although the lists are seldom closed,^[72] certain categories of abusive conduct are usually prohibited under the country's legislation. For instance, limiting production at a shipping port by refusing to raise expenditure and update technology could be abusive. ^[73] Tying one product into the sale of another can be considered abuse too, being restrictive of consumer choice and depriving competitors of outlets. This was the alleged case in Microsoft v. Commission^[74] leading to an eventual fine of €497 million for including its Windows Media Player with the Microsoft Windows platform. Windows Media Player ( WMP) is a digital media player and media library application developed by Microsoft that is used for playing Microsoft Windows is a series of Software Operating systems and Graphical user interfaces produced by Microsoft. A refusal to supply a facility which is essential for all businesses attempting to compete to use can constitute an abuse. One example was in a case involving a medical company named Commercial Solvents. ^[75] When it set up its own rival in the tuberculosis drugs market, Commercial Solvents were forced to continue supplying a company named Zoja with the raw materials for the drug. Tuberculosis (abbreviated as TB for tubercle bacillus or T u' b' erculosis Bacillus --> is a common Zoja was the only market competitor, so without the court forcing supply, all competition would have been eliminated.

Forms of abuse relating directly to pricing include price exploitation. It is difficult to prove at what point a dominant firm's prices become "exploitative" and this category of abuse is rarely found. In one case however, a French funeral service was found to have demanded exploitative prices, and this was justified on the basis that prices of funeral services outside the region could be compared. ^[76] A more tricky issue is predatory pricing. Predatory pricing (also known as destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the Market This is the practice of dropping prices of a product so much that in order one's smaller competitors cannot cover their costs and fall out of business. The Chicago School (economics) considers predatory pricing to be unlikely. ^[77] However in France Telecom SA v. Commission^[78] a broadband internet company was forced to pay €10. 35 million for dropping its prices below its own production costs. It had "no interest in applying such prices except that of eliminating competitors"^[79] and was being crossed subsidised to capture the lion's share of a booming market. One last category of pricing abuse is price discrimination. Price discrimination exists when sales of identical goods or services are transacted at different Prices from the same provider ^[80] An example of this could be offering rebates to industrial customers who export your company's sugar, but not to Irish customers who are selling their goods in the same market as you are in. ^[81]

Mergers and acquisitions

Main article: Mergers and acquisitions

A merger or acquisition involves, from a competition law perspective, the concentration of economic power in the hands of fewer than before. ^[82] This usually means that one firm buys out the shares of another. The reasons for oversight of economic concentrations by the state are the same as the reasons to restrict firms who abuse a position of dominance, only that regulation of mergers and acquisitions attempts to deal with the problem before it arises, ex ante prevention of creating dominant firms. ^[83] In the United States merger regulation began under the Clayton Act, and in the European Union, under the Merger Regulation 139/2004 (known as the "ECMR"^[84]). Competition law requires that firms proposing to merge gain authorisation from the relevant government authority, or simply go ahead but face the prospect of demerger should the concentration later be found to lessen competition. Demerger is the converse of a merger or acquisition. It describes a form of restructure in which Shareholders or unitholders in the parent company gain direct The theory behind mergers is that transaction costs can be reduced compared to operating on an open market through bilateral contracts. ^[85] Concentrations can increase economies of scale and scope. However often firms take advantage of their increase in market power, their increased market share and decreased number of competitors, which can have a knock on effect on the deal that consumers get. Merger control is about predicting what the market might be like, not knowing and making a judgment. Hence the central provision under EU law asks whether a concentration would if it went ahead "significantly impede effective competition. . . in particular as a result of the creation or strengthening off a dominant position. . . "^[86] and the corresponding provision under US antitrust states similarly,

"No person shall acquire, directly or indirectly, the whole or any part of the stock or other share capital. . . of the assets of one or more persons engaged in commerce or in any activity affecting commerce, where. . . the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly. ^[87]

What amounts to a substantial lessening of, or significant impediment to competition is usually answered through empirical study. The market shares of the merging companies can be assessed and added, although this kind of analysis only gives rise to presumptions, not conclusions. ^[88] Something called the Herfindahl-Hirschman Index is used to calculate the "density" of the market, or what concentration exists. The Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relationship to the Industry and an Aside from the maths, it is important to consider the product in question and the rate of technical innovation in the market. ^[89] A further problem of collective dominance, or oligopoly through "economic links"^[90] can arise, whereby the new market becomes more conducive to collusion. An oligopoly is a Market form in which a Market or Industry is dominated by a small number of sellers (oligopolists Collusion is an agreement usually secretive which occurs between two or more persons to deceive mislead or defraud others of their legal rights or to obtain an objective forbidden It is relevant how transparent a market is, because a more concentrated structure could mean firms can coordinate their behaviour more easily, whether firms can deploy deterrants and whether firms are safe from a reaction by their competitors and consumers. ^[91] The entry of new firms to the market, and any barriers that they might encounter should be considered. ^[92] If firms are shown to be creating an uncompetitive concentration, in the US they can still argue that they create efficiencies enough to outweigh any detriment, and similar reference to "technical and economic progress" is mentioned in Art. 2 of the ECMR. ^[93] Another defence might be that a firm which is being taken over is about to fail or go insolvent, and taking it over leaves a no less competitive state than what would happen anyway. ^[94] Mergers vertically in the market are rarely of concern, although in AOL/Time Warner^[95] the European Commission required that a joint venture with a competitor Bertelsmann be ceased beforehand. The European Commission (formally the Commission of the European Communities) is the executive branch of the European Union. Bertelsmann AG is a transnational media corporation founded in 1835 based in Gütersloh, Germany. The EU authorities have also focussed lately on the effect of conglomerate mergers, where companies acquire a large portfolio of related products, though without necessarily dominant shares in any individual market. A conglomerate merger is whereby two companies or organizations merge which have no common interest and nor competitors or have or could have the same supplier or customers ^[96]

Developing Countries

It is unclear whether competition policy is a sensible role for government in developing, particularly low-income countries. In these countries the markets are usually very small and fragmented so that developing scale sufficient to raise competitiveness and engage in international markets is a major challenge. The bigger problem is however poor governance - in societies with widespread corruption, inadequate public finances,^[97] and weak judiciary and oversight institutions, competition policy may become another tool for capture by vested interests - becoming in itself a barrier to entry. The evidence for this is the many competition authorities around the developing world, that have achieved little impact.

See also

• Competition policy
• Consumer protection
• List of countries' copyright length
• SSNIP
• Relevant market
• European Community competition law
• Irish Competition law
• Resale price maintenance

Notes

References

• Bork, Robert H. (1978) The Antitrust Paradox, New York Free Press ISBN 0465003699
• Bork, Robert H. Robert Heron Bork (born March 1, 1927) is a conservative American legal scholar who advocates the judicial philosophy of Originalism. (1993). The Antitrust Paradox (second edition). New York: Free Press. ISBN 0-02-904456-1.
• Friedman, Milton (1999) The Business Community's Suicidal Impulse
• Galbraith Kenneth (1967) The New Industrial State
• Mill, John Stuart (1859) On Liberty online at the Library of Economics and Liberty
• Posner, Richard (2001) Antitrust Law, 2nd ed. Milton Friedman (July 31 1912 November 16 2006 was an American Nobel Laureate Economist and Public intellectual. John Stuart Mill (20 May 1806 &ndash 8 May 1873 British Philosopher, political economist, civil servant and Member of Parliament, was an influential On Liberty is a philosophical work by 19th century English Philosopher John Stuart Mill, first published in 1859 Richard Allen Posner (born January 11 1939 in New York City) is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago , ISBN 9780226675763
• Posner, Richard (2007) Economic Analysis of Law 7th ed. Richard Allen Posner (born January 11 1939 in New York City) is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago , ISBN 9780735563544
• Prosser, Tony (2005) The Limits of Competition Law, ch. 1
• Schumpeter, Joseph (1942) The Process of Creative Destruction
• Smith, Adam (1776) An Enquiry into the Nature and Causes of the Wealth of Nations online from the Adam Smith Institute
• Wilberforce, Richard, Alan Campbell and Neil Elles (1966) The Law of Restrictive Practices and Monopolies, 2nd edition, London: Sweet and Maxwell LCCN 66-070116
• Whish, Richard (2003) Competition Law, 5th Ed. Joseph Alois Schumpeter ( February 8, 1883 &ndash January 8, 1950) was an Economist and Political scientist born in Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. Richard Orme Wilberforce Baron Wilberforce, PC ( 11 March 1907 &ndash 15 February 2003) was a Lord of Appeal in Ordinary The Library of Congress Control Number or LCCN is a serially based system of numbering cataloging records in the Library of Congress in the United Lexis Nexis Butterworths

Further reading

• Chalmers, Damien; Hadjiemmanuil, Christos; Monti, Giorgio; Tomkins, Adam (2006) European Union Law, ISBN 9780521527415
• Elhauge, Einer; Geradin, Damien (2007) Global Competition Law and Economics, ISBN 1841134651
• Faull, Jonathan; Nikpay, Ali (eds) (2007) "Faull & Nikpay : The EC Law of Competition"; ISBN-13: 978-0199269297
• Georg Erber and Stefan Kooths, Windows Vista: Securing Itself against Competition?, in: DIW Weekly Report, 2/2007, Vol. 3, 7-14.
• Keith N. Hylton et al. , Antitrust World Reports, available at http://www.antitrustworldwiki.com
• Competition Policy International (various issues), ISSN 1554-6853, available at http://www.globalcompetitionpolicy.org

External links

• Brookings Institute official web page
• Global Competition Policy
• OECD Competition Home Page
• World Bank article detailing competition policy

Criticism

• Antitrust Policy As Corporate Welfare
• The Truth About The Robber Barons
• Antitrust Laws Harm Consumers and Stifle Competition
• Regulation and Monopolies