Antitrust laws and the legal actions the government pursues to enforce those laws are designed to prevent unfair business practices, specifically the formation of monopolies. The goal is to promote free enterprise in a way that encourages competition among businesses, which ultimately benefits consumers through better goods and services at lower prices.
Suppressive Business Activities
The government will investigate any instance of price fixing or price discrimination, but focuses mainly on activities related to:
• The formation of monopolies
• Collusion between competitors
In the big picture, most activities subject to antitrust litigation concern monopolies. The reason collusion is illegal and mergers are carefully scrutinized is because the result of each shrinks the number of businesses in a specific sector. Investigation of monopoly formation looks at:
• Agreements between (among) competitors
• Agreements between buyers and sellers to set a price
The most obvious example of collusion is an agreement between competitors to set a price in an effort to drive others out of business, but it is also illegal for competitors to agree not to compete in an identified market (e.g. geographical area.) A primary purpose of antitrust laws is to force businesses to make independent decisions.
Mergers and acquisitions are an increasingly common business practice. When two large, formerly competing companies merge, the government will look at how that will impact the market for the goods or services those companies provide. The government may block the merger all together, alter the terms or order a divestment of some assets to allow the merger to proceed.