SEM V Competition Law – Unit II Class Notes

SEM V Competition Law – Unit II Class Notes

Sherman Antitrust Act, 1890

• Overview:
  • The Sherman Antitrust Act is a landmark U.S. law designed to promote competition and prevent monopolistic practices. It was the first federal legislation aimed at curbing anticompetitive practices.
• Key Provisions:
  • Section 1: Prohibits “every contract, combination, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations.” This section targets agreements that unreasonably restrain trade.
    • Example: A cartel agreement between companies to fix prices would be a violation.
  • Section 2: Outlaws monopolization, attempts to monopolize, or conspiracies to monopolize any part of trade or commerce.
    • Example: A company that engages in predatory pricing with the intention of driving competitors out of the market and then raising prices once it has achieved monopoly power.
• Enforcement:
  • Enforced by the Department of Justice (DOJ) and private parties who can bring lawsuits for violations.

Clayton Act, 1914

• Overview:
  • The Clayton Act supplements the Sherman Act by addressing specific practices that the Sherman Act does not cover. It aims to prevent anticompetitive practices that may lead to monopolies.
• Key Provisions:
  • Section 2: Prohibits price discrimination that harms competition by allowing a seller to favor certain buyers over others, provided it has a substantial effect on competition.
    • Example: A company offering lower prices to large buyers while charging higher prices to smaller competitors, potentially harming the latter.
  • Section 3: Addresses exclusive dealing and tying arrangements, where a seller conditions the sale of one product on the buyer’s agreement to purchase another product.
    • Example: A manufacturer requiring retailers to buy a full line of products as a condition to sell a popular item.
  • Section 7: Regulates mergers and acquisitions that may lessen competition or tend to create a monopoly.
    • Example: The merger of two large companies that significantly reduces competition in the market.
  • Section 8: Prohibits interlocking directorates, where individuals serve on the boards of competing companies, potentially leading to collusion.
    • Example: Two competing companies having overlapping board members who might share sensitive competitive information.
• Enforcement:
  • Enforced by the Federal Trade Commission (FTC) and DOJ. It also allows private parties to seek treble damages for injuries suffered due to violations.

Federal Trade Commission Act

• Overview:
  • The Federal Trade Commission Act established the Federal Trade Commission (FTC) to enforce antitrust laws and protect consumers from unfair trade practices.
• Key Provisions:
  • Section 5: Prohibits “unfair methods of competition” and “unfair or deceptive acts or practices in or affecting commerce.” This provision is broad and allows the FTC to address practices that may not be explicitly covered by other antitrust laws.
    • Example: False advertising or deceptive practices that harm consumers.
  • Section 6: Empowers the FTC to gather and publish information about commercial practices and investigate violations of the Act.
    • Example: The FTC can conduct studies and issue reports on practices affecting competition or consumer protection.
• Enforcement:
  • The FTC can issue cease-and-desist orders, enforce compliance through administrative proceedings, and seek injunctive relief.

U.K. Competition Act, 1998

• Overview:
  • The U.K. Competition Act 1998 establishes the framework for competition law in the UK, aiming to promote competition and protect consumer interests.
• Key Provisions:
  • Part 1: Prohibits anti-competitive agreements and practices that prevent, restrict, or distort competition in the UK. This includes cartels, price-fixing, and market-sharing agreements.
    • Example: Agreements between businesses to set prices or divide markets.
  • Part 2: Addresses abuse of market power by firms with significant market share, prohibiting conduct that exploits consumers or prevents competition.
    • Example: A dominant company imposing unfair trading conditions or engaging in predatory pricing.
  • Part 3: Provides the framework for merger control, requiring certain mergers and acquisitions to be reviewed to prevent anti-competitive effects.
    • Example: The merger of two major firms in the same market that could substantially reduce competition.
  • Enforcement:
    • The Competition and Markets Authority (CMA) is responsible for enforcing the Act. It can investigate and take action against anti-competitive behavior and oversee mergers and acquisitions.
• Salient Features:
  • The Act aligns with EU competition law principles, reflecting the UK’s commitment to maintaining competitive markets.
  • It provides for fines and other penalties for non-compliance and allows for private actions for damages resulting from breaches.