Antitrust law prevents unfair practices that inhibit competition and the development of monopolies. It protects consumers from unreasonable profit-making measures and prohibits predatory pricing. Cartels are also regulated to prevent market control. The concept dates back to ancient Rome, with US law based on the Sherman and Clayton Acts, and Europe governed by the Treaty of Rome. Microsoft’s antitrust lawsuit in 1998 is a recent example of its enforcement.
Antitrust law refers to the regulation of unfair commercial practices that inhibit free trade and healthy competition between companies occupying the same industrial market sector. This is a broad definition which basically translates into preventing the development of monopolies. However, there are additional goals for enforcing antitrust laws. First, consumers are protected from being burdened by unreasonable profit-making measures, such as raising prices. The regulations also prohibit predatory pricing, which is the practice of reducing the price of goods or services so much that existing market competitors may be forced to fold and new entrants are barred from entering the market altogether.
Another area of regulation concerns the identification and dissolution of cartels created so that the market price, production and distribution can be controlled by its members, who represent various commercial entities producing the same type of product. Typically, cartels consist of a relatively small number of sellers as this makes it easier to monitor the market share of each of its members. However, sooner or later, a cartel member usually breaks the protocol in terms of price fixing to exploit the market and make a quick profit. This event not only tends to prevent the cartel from operating effectively but also makes the organization more detectable.
The concept of antitrust law or competition law dates back to the early Romans who issued the Lex Julia de Annona, which stated that any attempt to prevent ships from delivering grain would result in severe penalties. Similar laws have been imposed throughout history in different parts of the world. Today, US antitrust law is based on the Sherman Act of 1890 and the Clayton Act of 1914. In most of Europe, the European Union (EU) serves as an antitrust commission. In fact, European competition law is outlined and governed by the legislation adopted by all EU members called the Treaty of the European Community, also known as the Treaty of Rome.
A recent example of antitrust law in US history is Microsoft’s antitrust lawsuit filed in 1998, which alleged that the company had violated competition laws by integrating its operating system with its own browser brand. In effect, this automatically positioned the company as a monopoly in the browser market simply due to the fact that every consumer who bought a purchased personal computer also owned the browser software. In April 2000, a federal judge ruled that the company exploited the browser market with these actions, thereby inhibiting competition from other vendors. Interestingly, just a year later an antitrust film, aptly titled Antitrust, made its debut depicting a giant software company headed by a CEO played by actor Tim Robbins. Both critics and fans of the film consider the software company and the film’s main character to be very similar to Microsoft and its founder, Bill Gates.
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