Guide to Antitrust Laws (Primer)
FEDERAL TRADE COMMISSION
An Antitrust Primer
The antitrust laws describe unlawful practices in general terms, leaving it to the courts to decide what specific practices are illegal based on the facts and circumstances of each case.
Some cases are easier than others. The courts decided many years ago that certain practices, such as price fixing, are so inherently harmful to consumers that a detailed examination isnt necessary to determine whether they are reasonable. The law presumes that they are violations (antitrust lawyers call these per se violations) and condemns them almost automatically.
Other practices demand closer scrutiny based on principles that the courts and antitrust agencies have developed. These cases are examined under a "rule of reason" analysis. A practice is illegal if it restricts competition in some significant way and has no overriding business justification. Practices that meet both characteristics are likely to harm consumers -- by increasing prices, reducing availability of goods or services, lowering quality or service, or significantly stifling innovation.
The antitrust laws are further complicated by the fact that many business practices can have a reasonable business justification even if they limit competition in some way. Consider an agreement among manufacturers to adopt specifications that require fire-resistant materials for certain products. The set of specifications may be called a standard. The agreement to adopt the standard is restrictive: the manufacturers have limited their own ability to use other materials, and they have limited consumer choice. But the agreement to adopt the standard may benefit consumers in that it provides assurances of safety.
What if manufacturers did not use a uniform standard for electrical outlets and plugs? The likely result would be incompatibilities between parts produced by different manufacturers. But because of the standard, parts manufactured by different companies become interchangeable; competition for the parts increases, and prices go down.
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