What is antitrust law?

Antitrust laws are a combination of federal and state laws that seek to promote competition among businesses (both large and small). Competition among businesses benefits consumers, as businesses compete by providing better or more goods and services at lower prices. In pursuit of growth and efficiency, business competitors often attempt to share some activities or join together in the performance of business functions. Many types of concerted efforts among competitors are perfectly legal, while others are prohibited by law and can lead to the severe sanctions. Concerted activities, such as sharing of resources and information, are often beneficial to society even though they reduce competition. The question or legality focuses on whether consumers suffer a detriment from the activity.

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Why is it called antitrust law?

This area of law gained the name antitrust based upon historical practices by businesses employing trusts to monopolize industries and thwart competition. Basically, individuals or companies would set up trusts that they controlled to hold a controlling ownership interest in multiple industry competitors. In this way, a single individual or group of individuals could effectively exercise control over an entire industry and thereby diminish competition. The federal and state governments began passing laws to break up these holding trusts. As such, the name of such laws became antitrust laws.

Related Topics

• What is Antitrust Law?
• What are the Major Antitrust Laws?
• What government agency enforces antitrust law?
• What Sanctions are available under antitrust law?