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Antitrust laws reflect the economic harm caused by a [[monopoly]]. Antitrust laws aim to stop abuses of market power by big companies and, sometimes, to prevent corporate mergers and acquisitions that would create or strengthen a monopolist. There have been big differences in antitrust policies both among countries and within the same country over time. This has reflected different ideas about what constitutes a monopoly and, where there is one, what sorts of behavior are abusive.
Antitrust laws reflect the economic harm caused by a [[monopoly]]. Antitrust laws aim to stop abuses of market power by big companies and, sometimes, to prevent corporate mergers and acquisitions that would create or strengthen a monopolist. There have been big differences in antitrust policies both among countries and within the same country over time. This has reflected different ideas about what constitutes a monopoly and, where there is one, what sorts of behavior are abusive.
[[Image:Atrust1911.jpg|thumb|350px|Attorney General Wickersham attacks the trusts in 1911, ''Puck'' cartoon Oct 18, 1911]]
[[Image:Atrust1911.jpg|thumb|350px|Attorney General Wickersham attacks the trusts in 1911, ''Puck'' cartoon Oct 18, 1911]]
==Theoretical Groundings of Competition Policy ==
Competition policy is premised on the belief that [[competition]] has a positive effect on free markets, and should be encouraged, and that monopoly has corrupting political effects that must be avoided.
Where many manufacturers provide the same product, each will try to increase its sales by finding ways to make its own product more attractive than those of its competitors. Some manufacturers will try to sell the product at a lower cost, while others will try to improve the quality of the product, or develop innovative new features to attract consumers.
However, if one manufacturer controls the entire market for a product, or if all manufacturers cooperate in controlling such a market, then the incentive to reduce prices and improve quality disappears. Furthermore, a manufacturer or group of manufacturers with sufficient power over the market can prevent new competitors from entering the field, either by acquiring the competitor, or by reducing prices just long enough to drive the competitor out of business.
Historically, American antitrust law was premised on the fear that the temptation for a corporation to seek and use government power to protect its monopoly profits (called "rents") would corrupt and injure the political process. Economist [[George Stigler]] and the [[Chicago School]] specificially pointed to the dangers of "rent seeking" as a corruption to be vigilantly opposed.
==The History of Antitrust law==
===English law===
One of the earliest significant antitrust cases was that of ''Darcy v. Allein'' [The Case of Monopolies], 77 Eng. Rep. 1260 (K.B. 1603), in which a court of England voided a grant by [[Queen Elizabeth]] purporting to give the appellant a monopoly over the importation and sale of playing cards throughout England. The ''Darcy'' court found the grant to be against public policy for reasons including the likelihood that the monopolist would be inclined to rest on a shoddy product, and that others in the business of making playing cards would be unfairly rendered unemployed. An earlier case reports an action by Parliament resulting in the brief imprisonment John Pecche for the purported abuse of "a patent giving him the exclusive right to sell sweet wines at retail in London." 50 Edw. III, No. 33 (1376).
The ''Darcy'' court referenced even earlier prohibitions against monopolization, writing:
in Darcy seems to suggest that such regulations go back thousands of years, stating (in Latin, as translated by Edward Coke):
:For we read in [[Justinian I|Justinian]] that monopolies are not to be meddled with, because they do not conduce to the benefit of the common weal but to its ruin and damage. The civil Laws forbid monopolies: in the chapter of monopolies, one and the same Law. The [[Emperor Zeno]] ordained that those practicing monopolies should be deprived of all their goods. Zeno added that even imperial [p]rescripts were not to be accepted if they granted monopolies to anyone.
England enacted a statutory prohibition on monopolies in 1624<ref> "An Act Concerning Monopolies and Dispensations of Penal Laws and the Forfeitures Thereof" "Statute of Monopolies", 1624, 21 Jam., ch. 3 (Eng.)</ref> American states enacted individual prohibitions against monopolies as early as 1641, with the Massachusetts Bay Colony stating that "there shall be no monopolies granted or allowed among us but of such new inventions as are profitable to the country, and that for a short time".<ref>Victor Selden Clark, ''History of Manufactures in the United States ...: 1607-1860'' (1916) [http://books.google.com/books?id=x-EMAAAAIAAJ&pg=PA47&dq=%22allowed+among+us+but+of+such+new+inventions+as+are+profitable+to+%22&lr=&as_drrb_is=q&as_minm_is=0&as_miny_is=&as_maxm_is=0&as_maxy_is=&num=30&as_brr=0#v=onepage&q=%22allowed%20among%20us%20but%20of%20such%20new%20inventions%20as%20are%20profitable%20to%20%22&f=false vol 1 p 47 online] </ref>
==Antitrust Policy in the United States==
The main purpose of antitrust laws is to reinforce and protect the core [[Republicanism, U.S.|republican values]] regarding free enterprise in America. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing or retailing company of the sort that suddenly emerged in great numbers in the 1880s and 1890s. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) Republicanism required free competition, and the opportunity for Americans to pursue their own business without being crushed by an economic collossus. As Senator John Sherman put it, "If we will not endure a king as a political power we should not endure a
king over the production, transportation, and sale of any of the necessaries of life." The Sherman Antitrust Act passed Congress almost unanimously in 1890. and remains the core of antitrust policy. The Act makes it illegal to try to restrain trade, or to form a monopoly. It gives the Justice Department the mandate to go to federal court for orders to stop the illegal behavior or to impose remedies. Presidents [[Theodore Roosevelt]] and [[William Howard Taft]] sued scores of companies under the Sherman Act. In the first major episode, the government stopped the formation of the "Northern Securities Company," which threatened to monopolize transportaion in the northwest. The most notorious of the trusts was the [[Standard Oil Company]]; [[John D. Rockefeller]] in the 1870s and 1880s had used economic threats against competitors and
secret rebate deals with railroads to build a monopoly in the oil business. A federal criminal lawsuit alleged the illegal rebates continued after 1900. In 1911 the Supreme Court upheld the court decision against Standard Oil and broke the monopoly into three dozen separate companies that eventually competed with one another, including Standard Oil of New Jersey (later known as Exxon and Exxon-Mobil), Standard Oil of Indiana (Amoco), of New York (Mobil), of California (Chevron), and so on.
In approving the breakup of Standard Oil the Supreme Court added the "rule of reason": not all big companies, and not all monopolies, are evil. They had to somehow damage the economic environment of their competitors. Roosevelt for his part distinguished between "good trusts"--which built the world's greatest economy--and bad ones which preyed on smaller fry. Thus U.S. Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 because it provedin court that it was well behaved. Labor unions, whose use of boycotts and strikes was banned by courts as a restraint of trade, hated the original Sherman Act; they were given relief in the Clayton Act of 1914.
The biggest problem under Sherman was that businessmen did not know what was allowed and what was not. Therefore in 1914 Congress set up the Federal Trade Commission (FTC), which defined anti-competitive behavior, and provided an alternative mechanism to police anti-trust.
America adjusted to bigness after 1910. [[Henry Ford]] dominated auto manufacturing, but he built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted efficiency. Ford became as much of a popular hero as Rockefeller had been a villain; talk of trust busting aded away. In the 1920s and 1930s the threat to the free enterprise system seemed to come from unrestricted cutthroat competition, which drove down prices and profits and made for inefficiency. Under the leadership of [[Herbert Hoover]], the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of respectable business. The New Deal likewise tried
to stop cutthroat competition. The [[NRA]] (1933-35) was a short-lived program in 1933-35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. The Robinson-Patman Act of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business the New Deal preferred federal and state regulation-- controlling the rates and telephone services provided by ATT for example--and by building up countervailing power in the form of labor unions.
By the 1970s fears of "cutthroat" competition had been displaced by confidence that a fully competitive marketplace produced fair returns to everyone. As unions faded in strength, the government paid much more attention to the damages that unfair competition could cause to consumers, especially in terms of higher prices, poorer service, and restricted choice. In 1983 the Reagan adminstration used the Sherman Act to break up [[ATT]], a nationwide telephone monopoly, into one long-distance company and six regional local service companies, arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. In 1999 a coalition of 19 states and the federal Justice Department sued Microsoft. A highly publicized trial demonstrated that [[Bill Gates]]--the new Rockefeller--had strong-armed many companies to squelch the competitive threat posed by the Netscape browser. In 2000 the trial court ordered Microsoft split in two to punish it, and prevent it from future misbehavior. Gates argued that Microsoft always worked on behalf of the consumer, and that splitting the company would diminish
efficiency and slow down the torrid pace of software development.
== Antitrust law in the U.S ==
== Antitrust law in the U.S ==