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Antitrust Violations - Exploding Monopolies

Oct 12, 2007
Antitrust policies are laws that prohibit anticompetitive tactics in corporate America. In fact, other countries call such policies competition laws. Pro-competitive legislation outlaws business practices considered harmful to consumers and other businesses or which violate ethical standards.

Violators are meted out a full range of penalties, from fines to years of incarceration. According to the US Sentencing Commission, the average jail sentence for antitrust violators is 12.7 months.

No Plaintiff Required

Unlike most crimes, antitrust violations don't need a particular plaintiff. The Justice Department (which has a very busy Antitrust Division) is mandated by law to stop antitrust offenses, go to court, and mete out legal remedies. This mandate has been in place in the US for over a hundred years.

The Sherman Antitrust Act, this country's cornerstone antitrust legislation, was passed by the US Congress in 1890. The Sherman Act basically outlaws practices that try to form monopolies or hold back free trade.

Over the last century, Congress has enacted several laws (often in reaction to new issues) to deal with antitrust violators and guide corporate America as regards what constitutes FAIR trade.

What Is Fair Trade?

Corporate America indefatigably comes up with new ways to get around antitrust policies. So Congress simply has to legislate fast enough to cover new loopholes.

One of the most outstanding features of our country's antitrust policy is its focus on wiping out hardcore practices that go against fair trade, such as:

1. Horizontal or Geographic Market Allocation Pacts - Arrangements between competing interests NOT to compete inside one another's territories.

2. Price Fixing - Concurrence on pricing between competing interests that sell the same product/service.

3. Bid Rigging - A combination of Market Allocation and Price Fixing where various competitors agree that one of them will win a bid.

There are three areas of business that are exempt from US antitrust policies: professional baseball, labor unions, and agricultural cooperatives. The insurance industry is exempted from some antitrust laws, which exemptions are detailed in the McCarran-Ferguson Act.

Prominent Antitrust Violators

In the past few years alone, the Department of Justice's Antitrust Division has successfully exposed AND prosecuted international cartels involved in, among others, marine construction services, animal feed, vitamins, graphite electrodes, and even fax paper.

But the US has more than a century's worth of antitrust criminals to choose from. Three of the most prominent are:

1. Standard Oil Company (1911)
Violations began in the 1870s when founder John D. Rockefeller used secret deals and economic threats to build a monopoly. But after the Sherman Act became a law, the Supreme Court ordered the company to break its monopoly. The oil giant splintered into dozens of smaller companies that came to be known by names like Mobil, Exxon, Chevron and Amoco.

2. AT&T (1982)
The Reagan government used the Sherman Act over 90 years after it was signed into law to break up the telephone titan into a smaller long-distance phone company and seven "Baby Bells."

3. Microsoft (2000)
A huge alliance of 19 US states led by the US Department of Justice sued the computer giant. Microsoft was discovered to have bullied several companies to stifle competition from the browser, Netscape. The court's Solomonic punishment: Divide Microsoft in two. But its chief, Bill Gates, argued his company had always been pro-consumer and the split would only jeopardize efficiency and software development.
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