Antitrust Laws Are Designed To Promote Fair Competition
Antitrust Laws Are Designed To Promote Fair Competition
Antitrust laws are how competition in the business world is regulated. These laws are often misunderstood and commonly used as part of strategic planning by large corporations. Using antitrust laws as part of a design for business growth has gotten little interest from researchers in business strategies. A business needs to prepare for its rival’s antitrust strategy. The government also files a number of antitrust lawsuits against companies. The exploitation of antitrust law is happening more often in the corporate business environment.
There are two main antitrust laws that are often used as the basis for lawsuits. The Sherman Act of 1890 was designed to make attempting to monopolize an industry a felony. If a company is found guilty, they can receive fines as well as criminal penalties. The Clayton Act of 1914 designates a variety of behaviors considered anticompetitive to be illegal. Those found violating the Clayton act will not face criminal charges. They can still face a civil trial. If found guilty, the plaintiff can be awarded treble damages. This means they can receive triple the amount of the compensatory or actual damages awarded.
One firm may attack their competition as part of a strategy to utilize antitrust litigation to receive a large financial settlement. If an antitrust suit filed by the federal government is successful, it will attract a number of private plaintiffs. In 2002, Microsoft was engaged in an antitrust settlement with the the Justice Department and a number of states. AOL filed an antitrust lawsuit against Microsoft. Its strategy was to extort a settlement with Microsoft that was financially beneficial. Over a year after the lawsuit was filed by AOL, a settlement was offered by Microsoft. It awarded AOL over $700 million dollars.
Alter Contract Terms
If one company wants to change their current contract with a service provider, and the service provider refuses, this could lead to a strategic antitrust lawsuit. This has happened when when a new client doesn’t like the terms of the contract they are offered by a company. In one case, a group of beer retail operations did not like being required to pay independent wholesalers only with cash. The beer retail group filed a lawsuit against the wholesalers. They claimed the goal of the wholesalers was to do away with all short term trade credits. The goal of the retailers was to change the terms of the payment method they have agreed to previously. The Supreme Court in 1980 ruled the actions of the wholesalers were governed by the antitrust law that made price fixing illegal and was subsequently unlawful.
Penalty For Non-Cooperation
The need for legal cooperation in the business world is commonly defined by contracts. These types of contracts are not enforced by the courts. An illegal agreement or one that is difficult to determine can contain punishment for a failure to perform as agreed. In some cases, antitrust laws are used to penalize a behavior that is considered not cooperative. In one situation, a trucking group from outside California was being stopped from providing their service in the California carrier market A group of California trucking firms were able to stop a number of the other trucking groups efforts. The California trucking group provided a successful lobbying operation to state and federal lawmakers. The California group claimed the outside trucking firm operating in California would create antitrust illegalities. An antitrust lawsuit was filed against the California trucking firms in 1971. An appeals court ruled the California trucking firm had a right to administrative agencies and courts to defeat new applications from new competitors. The California trucking firms were successful at using antitrust laws to penalize a firm for not being cooperative.
Challenge Existing Lawsuit
There are companies who have utilized antitrust law to eliminate the negative effects of a lawsuit from a competitor. Lexmark is a company that filed a lawsuit against Static Control Components. In the suit, Lexmark alleged the plaintiff copied computer chips used in Lexmark’s printers. Lexmark obtained a favorable ruling from a District Court. Static Control Components then filed an antitrust lawsuit against Lexmark. They claimed in their lawsuit that Lexmark was attempting to monopolize the ink cartridge market. During 2014, the Supreme Court ruled that Static Control Components did have the right to sue on these grounds.
Stop Hostile Takeover of A Company
Service Corporation International (SCI) owned thousands of funeral homes and cemeteries. It attempted a friendly takeover of its biggest competitor The Loewen Group Inc. (Loewen). SCI offered a hostile takeover bid to the shareholders of the Loewen. Prior to this, SCI filed a suit in federal court to obtain a declaratory judgment so that Loewen would not have a legal basis for filing an antitrust suit against SCI. Loewen’s board still filed an antitrust lawsuit to prevent being acquired by SCI. The hostile takeover was prevented when a court ruled that Loewen could pursue antitrust litigation.
In a important case, a group of railroad firms were experiencing more competition from the trucking industry than they liked. The railroad firms and their trade associations paid a public relations firm to provide a negative public image of the trucking industry. The railroad firms also tried to lobby lawmakers to get legislation that hurt the trucking industry. The railroad’s public relations campaign provided wrong information and led the public to believe that paid actors were just regular people. Antitrust litigation was brought against the railroad firms and trade groups. The Supreme Court eventually ruled the actions of the railroad did not violate the Sherman Act of 1890.
Discourage Pricing Dominance
In Utah, three pie companies worked together to increase their share of the market by undercutting the prices for a local bakery. The bakery filed an antitrust lawsuit against the three pie companies claiming the pie companies had violated sections of the Clayton and Sherman Acts. The lawsuit went all the way to the Supreme Court. It ruled in favor of the bakery. The ruling stated that price competition is not forbidden. It is not permitted when it results in the erosion of competition. This ruling helped a smaller firm remain competitive when larger firms used their financial assets eliminate competition.