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What is Competition Law?

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  • Written By: C. K. Lanz
  • Edited By: Melissa Wiley
  • Last Modified Date: 31 October 2016
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Competition law, also known as antitrust law, consists of laws that regulate anti-competitive conduct and thus attempt to promote market competition. European Union competition law and United States antitrust law are the most influential systems of this type of regulation. Governments have always sought to control the practices of companies and other businesses at the national level, but by the 20h century competition law had become international. In response to a global economy, support and enforcement networks have formed regionally across borders.

There are three main elements in most competition law systems. The first prohibits any agreement or practice that restricts competition between businesses and free trade. Cartels or firms working in collusion that repress free trade are often the focus of this aspect of competition law. Preventing a cartel from forming is not always possible as firms rarely put such agreements to paper, but this type of law works to identify and dismantle them.

Preventing a company from establishing a monopoly is another important facet of this type of law. Competitive law seeks to restrict anti-competitive practices that might lead to a monopoly and to regulate dominant businesses from abusing their positions. Such practices can include price gouging and predatory pricing.

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A third aspect of competitive law is the supervision of mergers and acquisitions. A merger or acquisition that may threaten a competitive market can be prevented outright. In most cases, a merger involving large companies will be approved only if part of the business is then divested or if other measures that ensure continued competition within the market are implemented.

One of the most influential systems of competition law is the antitrust law of the United States. At one time, large corporations were using trusts to hide the details of their business dealings, and as a result trusts became associated with monopolies. In response to this threat to the nation's free market economy, the federal government passed the Sherman and Clayton Acts. These stringent antitrust laws were weakened starting in the mid-1980s but remain an important tool against cartels and monopolies.

Another important competitive law system is that of the European Union. Maintaining a market without many restraints on trade is seen as dependent on strong competition between companies and countries. This system is described in a series of articles dealing with monopolies, price fixing, and mergers. Sanctions, pecuniary penalties, and jail sentences are all possible punishments for violations of the union’s competition law.

International organizations have become increasingly involved in competition law as a global economy has developed. The United Nations Conference on Trade and Development was founded in 1964 and remains a dominant international force with regard to trade and investment issues facing member nations. The World Trade Organization is another organization that attempts to supervise international trade and has more than 150 members. International agreements form the core of international competition law.

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