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What Is Antitrust Regulation?

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  • Written By: Brenda Scott
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 November 2014
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Antitrust regulation is legislation designed to disband or prevent the formation of monopolies. Its purpose is to protect small businesses from being destroyed by unfair tactics, and to protect the public by ensuring better prices through competition. Rules designed to prevent or limit monopolies, also known as cartels, exist in most countries throughout the world.

In the United States, the first antitrust regulation was a result of a phenomenon which occurred in the late nineteenth century. Large companies joined together to form trusts by signing a trust agreement. Representatives from the companies appointed trustees who were given the power to set prices and maximize profit by eliminating competition. The effect was the creation of large monopolies that would use below-cost pricing and other unfair practices to drive the competition out of business, and then sell their products at the highest price they could command. This resulted in a few large monopolies controlling a significant portion of the consumer market.

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The Sherman Antitrust Act, passed in 1890, became the first American antitrust legislation. It forbade all trust agreements and any actions which would result in a restraint of trade. In 1914, the Clayton Act amended the Sherman Act and banned discrimination in pricing between customers, requiring customers to buy additional unwanted merchandise to acquire their desired products, and made it illegal for one company to acquire the stock in another company for the purpose of creating a monopoly. The Federal Trade Commission (FTC) was also established at this time for the primary purpose of monitoring businesses and enforcing antitrust regulation.

In Canada, antitrust regulation is enforced through the Competition Bureau, the law enforcement agency charged with investigating complaints about cartels, or monopolies, and monitoring businesses to ensure that fair business practices are being employed. Like the US, UK, Australia, New Zealand, and most other countries, Canadian law forbids companies from entering into an arrangement to limit competition, such as fixing prices or bids, mutually allocating customers or markets, limiting supplies, or using boycotts to eliminate competition. The Bureau also reviews proposed business mergers and makes approval recommendations to the Minister of Finance, who has the final approval authority for mergers.

The Office of Fair Trading is a non-ministerial government department established in 1973 to enforce antitrust regulation in the UK. This department reviews proposed mergers, conducts market studies and enforces laws under the Competition Act. It also monitors consumer credit practices through licensing regulations and makes recommendations to the legislature regarding antitrust compliance issues related to European Community regulations.

The treaty which formed the European Community expressly addressed antitrust regulation and enforcement. In addition to overseeing mergers of companies within European Union (EU) member nations, it also regulates the amount of direct or indirect aid member governments give to national companies. The purpose of this oversight is to protect the open border markets created by the EU.

The Competition and Consumer Commission of Australia is the independent Commonwealth authority established to enforce antitrust regulation and fair business practices in Australia. While its primary responsibility is to ensure that individuals and businesses operate fairly, it also regulates the national infrastructure services. Australia is a member of the Organization for Economic Cooperation and Development (OECD), comprised of representatives of 30 democracies across the world, which serves as an international forum for resolving many issues of globalism, including business and fair trade practices.

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