How to Navigate U.S. Antitrust Laws for Business Owners

The Sherman Antitrust Act of 1890 was the first antitrust law adopted in the United States. The Sherman Act, perhaps the most important of the federal antitrust laws, was enacted in the late nineteenth century to battle the "business trusts" that dominated the American economy, and it continues to form the foundation of antitrust enforcement in the United States. The Sherman Act outlaws two broad types of activity.

First of all, it proclaims illegal "[e]very contract, combination

in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." In addition, it outlaws efforts to "monopolize, . . . attempt[s] to monopolize, or . . . conspir[acies] … to monopolize any part of the trade or commerce among the several States, or with foreign nations." While the Sherman Act is broadly drafted to apply to all barriers of commerce, the United States Supreme Court has understood it to apply only to excessive restraints of trade. The penalties for breaching the Sherman Act might be civil or criminal in nature. Only the United States Department of Justice has the jurisdiction to prosecute persons who violate the Sherman Act. Furthermore, some states have criminal jurisdiction under their own state antitrust statutes. In 1914, Congress passed two new antitrust statutes. First, Congress passed the Federal Trade Commission Act, which established the Federal Trade Commission and granted it the ability to enforce US antitrust laws. Second, Congress passed the Clayton Antitrust Act, which aimed to augment and improve enforcement of antitrust laws. It included additional types of forbidden activity, such as "mergers and acquisitions where the effect may substantially reduce competition," and empowered state attorneys general to enforce federal antitrust laws. The Clayton Act has been amended several times over the years, first by the Robinson-Pitman Act of 1936, which prohibited certain forums for discriminatory business conduct, and then again by the Hart-Scott-Rodin Act of 1976, which required companies intending to merge to notify the federal government before consummating the transaction so that enforcement agencies could review the merger's competitive effects.

State Antitrust Laws.m Most states, including Washington, have passed their own antitrust laws to prevent anticompetitive behavior that affects commerce inside their borders and to supplement enforcement of federal antitrust statutes. While state and federal antitrust laws are fundamentally identical, the implementation of state antitrust legislation varies greatly by state. For example, some state antitrust laws, such as those in Washington, closely follow the language of their federal counterparts, whereas others just integrate specific sections of federal antitrust laws, specify specific sorts of forbidden activities, or include totally new areas of substance. In many circumstances, state antitrust laws are more broad than federal antitrust statutes in terms of the types and quantity of banned conduct. State antitrust laws may be interpreted similarly to federal antitrust statutes, but this is not always the case. Unless otherwise specified, all references to "state antitrust law" in this handbook refer to the antitrust laws of Washington state.

Who enforces antitrust laws?

Antitrust rules are enforced by both government and private entities.

Government Enforcement. The United States Department of Justice Antitrust Division ("DOJ") and the Federal Trade Commission ("FTC") are jointly responsible for investigating and litigating Sherman Act cases, as well as reviewing potentially anticompetitive mergers under the Clayton Act. While there is no official mechanism for dividing enforcement responsibilities between the DOJ and the FTC, the agencies often focus resources to industries in which they have previously investigated or battled. For example, the DOJ frequently reviews mergers in the transportation and telecommunications industries. The FTC often concentrates its enforcement efforts in the oil and gas, pharmaceutical, and health care industries. State attorneys general have the jurisdiction to enforce federal and state antitrust statutes. Typically, states investigating a subject under federal antitrust statutes will work together with either the DOJ or the FTC, or they may undertake their own investigation. Individuals and firms who violate Washington's antitrust laws face civil penalties of up to $100,000 per violation for individuals and $500,000 per violation for corporations. Furthermore, state attorneys general have the right to seek reparations on behalf of residents in their jurisdictions who have been affected as a result of violations of federal or state antitrust statutes. Our state's antitrust statute was recently updated to allow the Attorney General to seek reparations on behalf of persons who have been indirectly damaged by a breach of state antitrust laws. The Attorney General of Washington, through its Antitrust Division, is the chief enforcement of our state's antitrust laws. As part of that role, the Attorney General's Office conducts regular outreach to consumers, businesses, and trade associations to explain how antitrust laws are implemented and emphasize their significance.

Private Enforcement. Antitrust laws are also enforced by private individuals. Under both federal and state antitrust law, any anyone who is "injured in his business or property" as a result of an antitrust violation has the right to file a lawsuit. A victorious plaintiff is entitled to treble damages, court expenses, and attorneys' fees. Private parties are also permitted to seek injunctive action to avoid threatened losses or damages. The majority of antitrust lawsuits are filed by private parties seeking damages for violations of federal and state antitrust statutes. Because these antitrust proceedings are frequently directed at business activities that affect interstate trade, private antitrust cases frequently take the form of a class action seeking damages and restitution on behalf of consumers nationwide.

What do antitrust laws prohibit?

If you read through the Sherman Act, you will notice that it is not at all clear about what conduct is prohibited. The Clayton Act is a little more clear regarding what constitutes criminal activity, but only if it substantially reduces competition or seeks to create a monopoly in any line of business, neither of which is described in the statute. Because our state antitrust legislation closely resembles federal antitrust regulations, interpretation challenges emerge under both statutes. It turns out that when Congress passed the Sherman Act, it left it to the courts to develop the substance of the Act and finally decide what should or should not be considered criminal. As a result, while the Sherman Act is short, it contains nearly a century's worth of interpretation from judges, antitrust enforcers, economists, and policymakers, making it a very rich area of law. What follows is a simple outline of the forms of action that are now widely recognized as potentially raising antitrust concerns. As you go through these pages, keep in mind that one of the fundamental principles of antitrust law is to safeguard competition rather than competitors. In market economies, rivalry among enterprises always results in winners and losers. The fact that a company competed strongly on the merits and forced another firm to go out of business does not constitute a violation of antitrust rules; this could simply be the competitive process working exactly as it should.