Antitrust law is the set of legal rules used to help promote competition in the economy. Antitrust law in the United States is a very distinct subject reflecting American economic history and perspectives. It has been borrowed, with variations, by many other countries around the world. Most U.S. antitrust litigation involves private actions taken for punitive remedies with treble damages. Thus, unlike other nations in the world, the United States does not rely principally upon public law enforcement in the area of antitrust.
One impact of U.S. antitrust law is its influence on business practices and the terms of business agreements. Most sales representatives’ agreements and distributorships are drafted to minimize the risk of antitrust action and treble damages. This is often done by creating “areas of primary sales responsibility,” a technique allowing control of an area but approved by the U.S. Supreme Court. Clauses in many distributorship agreements governing exclusive dealing, full-line coverage, purchase agreements, covenants not to compete, resale prices, and termination are written with careful consideration of avoiding antitrust actions. Similarly, joint ventures and licensing agreements are scrutinized for antitrust compliance, and many U.S. companies conduct “compliance reviews” of any business proposal.
The earliest antitrust statutes were created by states in the 1880s, and most adopted antitrust laws in the early 1900s. State antitrust laws typically prohibit trusts (combinations in restraint of trade). The antitrust law of each state applies to activities affecting that state’s commerce, including interstate or foreign activities.
Three major statutes govern federal antitrust law: the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914, and the Federal Trade Commission Act of 1914. Federal and state antitrust laws are both applicable to most U.S. trade and commerce. Under recent antitrust law, there is very little subject matter covered exclusively by either state or federal law. This means businesses are subject to both state and federal interpretations in antitrust jurisdiction.
Interpretation of federal antitrust laws has varied over time. The Sherman Act initiated antitrust policy, but enforcement was minimal. Using the “rule of reason” standard, the anticompetitive effects of an action must be demonstrated to prove illegality. Just being a monopoly or attempting to monopolize was not in itself illegal. The Clayton Act changed the basis of antitrust law to the “rule per se,” where actions that could be considered anticompetitive were considered intrinsically illegal. Under the rule per se, activities attempting to monopolize markets were sufficient to be prosecuted. From 1914 until the Reagan Administration (1980–88), rule per se antitrust enforcement was used. The Clinton Administration (1992–2000) tightened antitrust enforcement.