1. What Do The Antitrust Laws Do For The Consumer?
Antitrust laws protect competition. Free and open competition benefits
consumers by ensuring lower prices and new and better products. In a
freely competitive market, each competing business generally will try to
attract consumers by cutting its prices and increasing the quality of
its product or services. Competition and the profit opportunities it
brings also stimulate businesses to find new, innovative and more
efficient methods of production.
Consumers benefit from competition through lower prices, better products
and services. Inefficient firms or companies that fail to understand or
react to consumer needs may soon find themselves losing out in the
When competitors agree to fix prices, rig bids, or allocate customers,
consumers lose the benefits of competition. The prices that result when
competitors agree in these ways are artificially high; such prices do
not accurately reflect cost and therefore distort the allocation of
society's resources. The result is a loss not only to U.S. consumers and
taxpayers, but also the U.S. economy.
When the competitive system is operating effectively, there is no need
for government intrusion. The law recognizes that certain arrangements
between firms--such as competitors cooperating to perform joint research
and development projects --may benefit consumers by allowing the firms
that have reached the agreement to compete more effectively against
other firms. The government therefore does not prosecute all agreements
between companies, but only those that threaten to raise prices to
consumers or to deprive them of new and better products.
But when competing firms get together to fix prices, to limit output, to
divide business between them, or to make other anticompetitive
arrangements that provide no benefits to consumers, the government will
act promptly to protect the interest of American consumers and
2. What Are The Federal Antitrust Laws, And What Do They Prohibit?
There are three major federal antitrust laws: The Sherman Antitrust Act,
the Clayton Act and the Federal Trade Commission Act.
The Sherman Antitrust Act has stood since 1890 as the principal law
expressing our national commitment to a free market economy in which
competition free from private and governmental restraints leads to the
best results for the consumers. Congress felt so strongly about this
commitment that there was only one dissenting vote to the Act.
The Sherman Act outlaws all contracts, combinations, and conspiracies
that unreasonably restrain interstate trade. This includes agreements
among competitors to fix prices, rig bids and allocate consumers. The
Sherman Act also makes it a crime to monopolize any part of interstate
commerce. An unlawful monopoly exists when only one firm provides a
product or service, and it has become the only supplier not because its
product or service is superior to others, but by suppressing competition
with anticompetitive conduct. The Act is not violated simply when one
firm's vigorous competition and lower prices take sales from its less
efficient competitors; rather, that is competition working properly.
Sherman Act violations are punished as criminal felonies. The Department
of Justice alone is empowered to bring criminal prosecutions under the
Sherman Act. Individual violators can be fined up to $350,000 and
sentenced to up to 3 years in federal prison for each offense;
corporations can be fined up to $10 million for each offense. Under some
circumstances, the fines can go even higher.
The Clayton Act is a civil statute (it carries no criminal penalties)
that was passed in 1914 and significantly amended in 1950. The Clayton
Act prohibits mergers or acquisitions that are likely to lessen
competition. Under the Act, the government challenges those mergers that
a careful economic analysis shows are likely to increase prices to
consumers. All persons considering a merger or acquisition above a
certain size must notify both the Antitrust Division and the Federal
Trade Commission. The Act also prohibits certain other business
practices that under certain circumstances may harm competition.
The Federal Trade Commission Act prohibits unfair methods of competition
in interstate commerce, but carries no criminal penalties. It also
created the Federal Trade Commission to police violations of the Act.
The Department of Justice also often uses other laws to fight illegal
activities, including laws that prohibit false statements to federal
agencies, perjury, obstruction of justice, conspiracies to defraud the
United States and mail and wire fraud. Each of these crimes carries its
own fines and imprisonment terms which may be added to the fines and
imprisonment terms for antitrust law violations.
3. How Are Antitrust Laws Enforced?
There are three main ways in which the federal antitrust laws are
enforced: criminal and civil enforcement actions brought by the
Antitrust Division of the Department of Justice, civil enforcement
actions brought by the Federal Trade Commission and lawsuits brought by
private parties asserting damage claims.
The Department of Justice uses a number of tools in investigating and
prosecuting criminal antitrust violations. Department of Justice
attorneys often work with agents of the Federal Bureau of Investigation
(FBI) or other investigative agencies to obtain evidence. In some cases,
the Department may use court-authorized searches of business, consensual
monitoring of phone calls and informants equipped with secret listening
devices. The Department may grant immunity to individuals or
corporations who provide timely information that is needed to prosecute
antitrust violations, such as bid-rigging or price fixing.
A provision in the Clayton Act also permits private parties injured by
an antitrust violation to sue in federal court for three times their
actual damages plus court costs and attorneys' fees. State attorneys
general may bring civil suits under the Clayton Act on behalf of injured
consumers in their states, and groups of consumers often bring suits on
their own. Such follow-on civil suits to criminal enforcement actions
can be a very effective additional deterrent to criminal activity.
Most states also have antitrust laws closely parallelling the federal
antitrust laws. The state laws generally apply to violations that occur
wholly in one state. These state laws are enforced similarly to federal
laws through the offices of state attorneys general.
4. How Do Antitrust Violators Cheat The Consumer?
The worst antitrust offenses are price-fixing and bid-rigging. Price-
fixing occurs when two or more sellers agree that they will increase
prices a certain amount, or that they won't sell below a certain price.
Bid-rigging most commonly occurs when two or more firms agree not to bid
against each other to supply products or services to local, state or
federal government agencies, or when they agree on the level of their
individual bids. Such price-fixing and bid-rigging agreements, unlike
joint research agreements for example, provide no plausible offsetting
benefits to consumers. Also, these agreements are generally secret, and
the participants mislead and defraud customers by continuing to hold
themselves out as competitors despite their agreement not to compete.
There can be no doubt that price-fixing and bid-rigging harms consumers
and taxpayers by causing them to pay more for products and services and
by depriving them of other byproducts of true competition. Nor is there
usually any question in the minds of violators that their conduct is
unlawful. It has been estimated that such practices can raise the price
of a product or service by more than 10 percent, and that American
consumers and taxpayers pour billions of dollars each year into the
pockets of price-fixers and bid-riggers. People who take consumer and
taxpayer money this way are thieves.
5. What Kinds Of Cases Has The Justice Department Brought?
Because of the harm that bid-rigging and price-fixing cause, the Justice
Department's number one antitrust priority is criminal prosecution of
those activities. The Department already has obtained price-fixing and
bid-rigging convictions in the soft drink, motion picture, trash-
hauling, road-building, electrical contracting and dozens of other
industries involving tens of millions of dollars in commerce. And in
recent years, grand juries throughout the country have been
investigating possible violations with respect to retail gasoline,
industrial laundries, school buses, concrete pipe, automobile engines,
steel drums, industrial diamonds, treasury securities, steel woold,
scouring padsand many more products and services. The Department also
has recently been investigating and prosecuting bid-rigging in
connection with Defense Department and other government procurement. In
addition, the Department has initiated a program to use the antitrust
laws against organized crime when it attempts to infiltrate legitimate
Consider one important example of successful antitrust enforcement-the
Antitrust Division's criminal cases against milk and dairy products
suppliers. The Division has uncovered evidence that dairy companies
have been conspiring since at least the early 1980's to rig bids to
supply milk and other dairy products to public school districts and
other public institutions in several states. The Florida Attorney
General's Office first noticed suspicious-looking bid patterns by milk
suppliers, and brought this information to the attention of the
Antitrust Division's Atlanta field office in 1986. The Division began a
grand jury investigation, which uncovered a state-wide conspiracy to rig
bids to public school districts in Florida, and evidence of similar
conspiracies in other states. Since May 3, 1988, the Division has filed
109 milk bid-rigging cases, involving 61 corporations and 68
individuals. Criminal fines totalling more than $53.7 million have been
imposed on corporations and individuals, and 26 individuals have been
sentenced to jail. The Division has reached civil damage settlements
with defendants in excess of $8 million.
The scope of the Antitrust Division's investigation of bid rigging by
dairy firms has expanded beyond public schools to include bid rigging to
the military and other public institutions (such as jails), as well as
possible bid rigging on wholesale prices, affecting all consumers. The
Division's investigations of this industry are continuing, as 27 grand
juries are currently pending.
6. What Can You Do For Antitrust Enforcement And For Yourself?
Because they are by their nature secret, price-fixing and bid-rigging
conspiracies are difficult to detect and prove. For that reason law
enforcement officials rely on complaints and information from consumers
and competitors. A very large percentage of all federal antitrust
investigations result from complaints received from consumers or
businessmen by phone, mail or in person.
On the federal level, you can contact the Antitrust Division at its
Washington office or any of its field offices, which were established in
major metropolitan areas to encourage people with complaints to come
forward. You can also reach the Antitrust Division through any of the
offices of the United States Attorney, which are found in most cities
throughout the United States.
The Federal Trade Commission also has a Washington office, as well as
On the state level, you can contact your state attorney general or your
7. How Can You Know If The Antitrust Laws Are Being Violated?
If any person knows or suspects that competitors, suppliers or even an
employer are violating the antitrust laws, that person should alert the
antitrust agencies so that they can determine whether to investigate. If
you suspect your own company, remember that antitrust violations can be
a federal felony; if you know about a violation and you say nothing, in
certain circumstances you yourself could later be held criminally
responsible and, in addition to losing your job and your reputation in
your community, you could be subject to substantial fines and even
Price-fixing and bid-rigging conspiracies are most likely to occur where
there are relatively few sellers that have to get together to agree. The
larger the group of sellers, the more difficult it is to come to an
agreement and enforce it.
Keep an eye out for tell-tale signs. For example:
-- generally, any evidence that two sellers of similar products have
agreed to price their products a certain way, to sell only a certain
amount of their product, or to sell only in certain areas or to certain
-- large price changes involving more than one seller of very similar
products of different brands, particularly if the price changes are of
equal amount and occur at the same time;
-- a seller's statement that "We can't sell to you; according to our
agreement, so-and-so (the seller's competitor) is the only firm that can
sell to you;"
-- fewer competitors than normal submit bids on a project;
-- competitors submit identical bids;
-- the same company repeatedly has been the low bidder who has been
awarded contracts for a certain service or in a particular area
-- bidders seem to win bids on a fixed rotation;
-- there is an unusual and unexplainable large dollar difference between
the winning bid and all other bids;
-- the same bidder bids substantially higher on some bids than on
others, and there is no logical cost reason to explain the difference.
These signs are by no means conclusive evidence of antitrust violations.
More investigation by trained lawyers and economists would be required
to determine that. But they may be indications, and the people who
enforce the antitrust laws want to hear about them.
8. What Is The Public's Role In Antitrust Enforcement?
Effective antitrust enforcement requires public support. Public
ignorance and apathy can weaken antitrust enforcement more than anything
else. Whether you are a business person or a consumer, if you encounter
business behavior that seems to violate the antitrust laws, do not
hesitate to inform the enforcement agencies of your suspicions. That is
often the only way violations can be uncovered, and failing to uncover
and punish antitrust violations not only penalizes consumers and
taxpayers but also penalizes the vast majority of honest businesspeople
who scrupulously observe the antitrust laws.
If you detect an antitrust violation, you can perform a triple public
service: (1) you can help put an end to unlawful conduct that is costing
consumers millions or even billions of dollars; (2) you can put money in
the form of criminal penalties into the federal treasury; and (3) you
can help recover other unlawful charges, because the government or
affected consumers may bring an antitrust action to collect damages.
You can write or call the Antitrust Division of the Department of
10th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20530
You can write or call the Federal Trade Commission at:
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
excerpted from from U.S. Department of Justice material
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