Antitrust laws, adopted by the U.S. Congress and the various state legislatures, are intended to protect the public from interference with the free play of market forces by prohibiting behavior that restricts competition or trade. The objective is to allow consumers to benefit from lower prices, better products, and more efficient production. The laws are purposefully broad, and the repercussions for violations are gargantuan.

If you own, operate, or work in a business setting, your actions are being scrutinized on a daily basis not only by governmental agents, but also by competitors, customers, and others. It is therefore imperative that all officers, directors, and employees understand the risks and maintain the highest standards in their daily activities so as to avoid even the appearance of anticompetitive behavior or unfair business practices. If a violation is found, the result will likely be catastrophic for both the company and the individuals involved -- fines, penalties, debarment and/or jail time.

Summary of Applicable Laws

The U.S. antitrust laws can be enforced by both the federal government and private individuals. Violations can give rise to injunctive relief, substantial fines, treble monetary damages, and criminal sanctions, i.e., time in prison. The antitrust laws apply to corporations and other business entities and also to officers, directors, and employees, who may be sued individually or criminally indicted for acts performed by them on behalf of their employer.

A. The Sherman Act

The Sherman Act is the oldest U.S. antitrust law. It declares illegal every contract, combination, or conspiracy in restraint of trade or commerce and also declares illegal any monopoly, attempt to monopolize, or combination or conspiracy to monopolize any part of trade or commerce. A violation of the Sherman Act is a felony punishable by a fine not exceeding $10,000,000.00 for corporations and $350,000.00 for other persons. In addition to or in lieu of a fine, a violator may be imprisoned for up to three years. These penalties can be for each separate violation.

B. The Clayton Act

The Clayton Act prohibits practices outside the reach of the Sherman Act but which interfere with competition. In general, the Clayton Act forbids practices such as exclusive dealing arrangements, tying arrangements, and requirements contracts if their practical effect may be to substantially lessen competition or tend to create a monopoly in any line of commerce. A "tying arrangement" is the sale of one item or service on the condition that the buyer also purchase a different product or service from the same source or at least refrain from buying that product or service from any other supplier. Requirements contracts, or exclusive supply arrangements, exist when a party agrees to obtain all it requires of a product from one supplier. The Clayton Act also prohibits mergers, acquisitions, and joint ventures that may have adverse competitive effects and precludes directors from serving on the boards of competing corporations. The Clayton Act is punishable by civil penalties.

C. The Robinson-Patman Act

The Robinson-Patman Act prohibits direct or indirect discrimination in price between different purchasers of commodities of like grade and quality where the effect of such discrimination may be to lessen competition or to tend to create a monopoly. Purchasers also can be held liable under this Act if they induce a price which violates the law. The Robinson-Patman Act is punishable by civil penalties.

D. The Federal Trade Commission Act

The Federal Trade Commission Act prohibits "unfair methods of competition" and "unfair or deceptive acts or practices." This Act provides broad and flexible authority to regulate a wide variety of harmful business practices, including, among others, withholding material information and making unsubstantiated advertising claims. Acts or practices are considered deceptive if there is a representation, omission, or practice likely to mislead and a consumer relies on such representation, omission, or practice to his detriment. Violations result in civil liability punishable by substantial fines.

E. Other Violations

In today's world, wire fraud, mail fraud, RICO violations, and, potentially, Bank Secrecy Act (money laundering) violations often are tied to an indictment under one or more of the primary antitrust acts. This allows for additional fines and extended prison sentences.

"Per SE" Antitrust Violations

Certain conduct is conclusively presumed to violate the antitrust laws with very little or no concern as to the precise harm it has caused or the business excuse for its use. These violations are called "per se" violations. Activities such as price-fixing agreements, bid-rigging, tying arrangements, and agreements among competitors to divide markets or to allocate customers are per se antitrust violations and are always illegal. Any involvement in such activities, whether direct or indirect, formal or informal, should be absolutely avoided at all times.

The establishment of uniform prices by an "agreement" between or among two or more persons is not the only type of price-fixing prohibited by the antitrust laws. Any interference with the setting of prices by free market forces is unlawful. Stabilizing prices as well as raising or lowering them is within the scope of the antitrust laws. Any combination formed for the purpose of maintaining, raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate commerce is illegal per se.

Enforcement

The Antitrust Division of the U.S. Department of Justice may initiate an antitrust investigation on its own or upon a civilian complaint and can proceed either civilly or criminally. In collecting information for a criminal indictment, the Department of Justice has many tools including teleT taps, subpoenas, and the power to force immunity on selected witnesses and require them, under threat of contempt of court, to testify before the grand jury. The Federal Trade Commission also has extensive investigative powers and may initiate investigations on its own or upon a complaint. The Clayton Act allows any person who is injured in his business or property by reason of anything forbidden in the antitrust laws to institute a lawsuit and allows such person to recover treble damages and the cost of suit, including reasonable attorneys' fees. State and local agencies also may bring antitrust actions. Often criminal actions lead to debarment and civil treble damage suits.

Conclusion

The antitrust laws should not be taken lightly. Many activities you might not consider an antitrust violation are prohibited by the laws, and the mere prospect of a violation can result in substantial time, effort, and expense. If a violation is found, criminal (prison time) and monetary sanctions may be imposed on both individuals and the companies that employ them. The best way to prevent an antitrust violation is to educate people and avoid potentially harmful behavior before it occurs.

To learn more about the antitrust laws, contact Jenna F. Butler, E. Bradley Evans, or David L. Ward, Jr.