General Overview of United States Antitrust Law
General Overview of
United States Antitrust Law
Updated November 17, 2005
Janice E. Rubin
Legislative Attorney
American Law Division
General Overview of United States Antitrust Law
Summary
This Report briefly summarizes (1) the primary United States antitrust statutes,
and (2) some of the activities which are generally considered to be violations of those
laws. There is also some reference to the prohibition against unfair competition and
the “unfairness” jurisdiction of the Federal Trade Commission (FTC). The laws
discussed do not constitute all of the statutes which may be applicable to, or
implicated in antitrust issues, but rather, are those which are most often utilized.
Contents
In troduction ......................................................1
The Primary Laws.................................................2
Sherman Act (15 U.S.C. §§ 1-7)..................................2
SECTION 1 (15 U.S.C. § 1)...................................2
SECTION 2 (15 U.S.C. § 2)...................................2
Clayton Act (15 U.S.C. §§ 12-27) ................................3
SECTION 4 (15 U.S.C. § 15)..................................3
SECTION 7 (15 U.S.C. § 18)..................................3
Section 7A (15 U.S.C. § 18a)................................4
Robinson-Patman Act (15 U.S.C. §§ 13, 21a, 13a, 13b)................4
Federal Trade Commission Act (15 U.S.C. §§ 41 et seq.)...............5
Other Applicable Laws.............................................6
National Cooperative Research Act of 1984 (15 U.S.C. §§ 4301-05)......6
Export Trading Company Act (15 U.S.C. §§ 4001-21).................6
McCarran-Ferguson Act (15 U.S.C. §§1011-15)......................6
Soft Drink Interbrand Competition Act (15 U.S.C. §§3591-03)..........6
Local Government Antitrust Act of 1984 (15 U.S.C. §§34, 35)..........7
Characterization of Antitrust Offenses.................................7
Per Se.......................................................7
Rule of Reason................................................7
General Overview of
United States Antitrust Law
Introduction
There are two basic antitrust laws in the United States — the Sherman Act and
the Clayton Act; both are enforceable either by the Antitrust Division of the
Department of Justice, the Federal Trade Commission or private persons alleging
economic injury caused by violation of either of them. In addition, the Federal Trade
Commission (FTC) Act and the Robinson-Patman Act may also be utilized by the
Commission1 and private persons (only the Commission, however — i.e., neither the
Antitrust Division nor private persons — may enforce the FTC Act). Together, they
spell out the conduct and activities prohibited in economic, market transactions.
There are also some statutes directed to specific industries or types of transactions
which indicate the likely antitrust consequences for economic conduct in those areas.
This Report briefly summarizes (1) the primary United States antitrust statutes,
and (2) some of the activities which are generally considered to be violations of those
laws. There is also some reference to the prohibition against unfair competition and
the “unfairness” jurisdiction of the Federal Trade Commission (FTC). There is not,
however, any discussion of the extraterritorial reach of the United States antitrust laws
(save the cursory material in footnote 4), a subject which is beyond the scope of this
brief Report. Further, the laws whose descriptions follow do not constitute all of the
statutes which may be applicable to, or implicated in antitrust issues, but rather, are
those which are most often utilized. In reading the information presented, readers
should bear in mind that the antitrust laws are concerned with the functioning of the
marketplace — i.e. competition and not the protection of any individual competitor.
1In theory, the Robinson-Patman Act may be enforced by either the Antitrust Division or the
FTC. In practice, the Division has never enforced the statute, which it believes is “based
on questionable economic assumptions prevalent in the 1930s” and likely fosters
anticompetitive behavior. REPORT ON THE ROBINSON-PATMAN ACT, United States
Department of Justice, 1977, at 149.
The Primary Laws
Sherman Act (15 U.S.C. §§ 1-7)
SECTION 1 (15 U.S.C. § 1). Prohibits contracts or conspiracies in restraint of
trade, which phrase has been, since at least 1911, judicially interpreted as meaning2
unreasonable restraints of trade.
SECTION 2 (15 U.S.C. § 2). Prohibits monopolization or attempted
monopolization; it is sometimes used in conjunction with section 7 of the Clayton Act
(15 U.S.C. §18), which prohibits mergers or acquisitions which may tend to lessen3
competition.
Violation of either provision is a felony subject to fines of up to $1 million for
individuals and $100 million for corporations; or imprisonment of up to 10 years; or4
both.
2Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 60 (1911): “And as the
contracts or acts embraced in the provision were not expressly defined, since the
enumeration addressed itself simply to classes of acts, those classes being broad enough to
embrace every conceivable contract or combination which would be made concerning trade
or commerce or the subjects of such commerce, and thus caused any act done by any of the
enumerated methods anywhere in the whole field of human activity to be illegal if in
restraint of trade, it inevitably follows that the provision necessarily called for the exercise
of judgment which required that some standard should be resorted to for the purpose of
determining whether the prohibitions contained in the statute had or had not in any given
case been violated. Thus ... it follows that it was intended that the standard of reason ... was
intended to be the measure used for the purpose of determining whether in a given case a
particular act had or had not brought about the wrong against which the statute provided.”
Board of Trade of the City of Chicago v. United States, 246 U.S. 231, 238 (1918): “But the
legality of an agreement cannot be determined by so simple a test as whether it restrains
competition. Every agreement concerning trade, every regulation of trade, restrains. To
bind, to restrain, is of their very essence. The true test of legality is whether the restraint
imposed is such as merely regulates and perhaps thereby promotes competition or whether
it is such as may suppress of even destroy competition.” See also, Appalachian Coals, Inc.
v. United States, 288 U.S. 344, 359-60 (1933); The Sugar Institute, Inc. v. United States, 297
U.S. 553, 597-98; White Motor Co. v. United States, 372 U.S. 253 (1963); GTE Sylvania,
Inc. v. Continental T.V., Inc., 433 U.S. 36 (1977).
3See CRS Report RS20241, Monopoly and Monopolization — Two Fundamental But
Separate Concepts in U.S. Antitrust Law, by Janice E. Rubin, for a more detailed treatment
of monopoly law.
4The Foreign Trade Antitrust Improvements Act of 1982 (FTAIA,15 U.S.C. § 6a)) mandates
that the Sherman Act “shall not apply to conduct involving foreign trade or commerce with
foreign nations (other than import ... commerce)” except to the extent that such commerce
“has a direct, substantial, and reasonably foreseeable effect [on the U.S. market, U.S. import
trade or commerce, or U.S. exporters] and such effect gives rise to a claim under [the
Sherman Act].” In F. Hoffman-LaRoche, Ltd. v. Empagran, S.A., the Supreme Court
resolved a split among the federal circuits concerning the interpretation of the FTAIA
language, ruling that U.S. courts are not available to foreign antitrust plaintiffs when the
(continued...)
Clayton Act (15 U.S.C. §§ 12-27)
SECTION 4 (15 U.S.C. § 15). Contains the damage provisions of the antitrust
laws. 15 U.S.C. §15(a) permits “any person ... injured in his business or property by
reason of anything forbidden in the antitrust laws [to] sue therefor [and to] recover
threefold the damages by him sustained, and the cost of suit, including a reasonable
attorney’s fee.” After the Supreme Court interpreted the words “any person” to5
include foreign governments, the provision was amended in 1982 to restrict foreign
states’ recovery of monetary antitrust damages to “actual damages sustained” plus
costs and reasonable attorneys’ fees (15 U.S.C. §15(b)). The limitation to actual
damages was also applicable, until late 1990, to monetary injuries sustained by the
United States (15 U.S.C. §15a)); that limitation was removed by the 101st Congress
in H.R. 29 (P.L. 101-588), following much hearing testimony to the effect that the
damage limitation made the federal government the “antitrust victim of choice.”
Treble-damage recovery is now available to the United States, as it is to private
antitrust plaintiffs pursuant to 15 U.S.C. §15.
SECTION 7 (15 U.S.C. § 18). Is probably the most prominent, substantive
provision of the Clayton Act. Whereas the Sherman Act was enacted to prohibit
concerted activity which actually restrains trade, this provision is directed at
preventing activity in its incipiency which may tend to restrain trade. The Merger
Guidelines issued by the Department of Justice offer an indication of the ways in
which mergers and acquisitions will be analyzed by the Antitrust Division and the6
FTC; although they are not binding upon the courts, they are considered to be
persuasive.
4 (...continued)
harm they suffer is independent of the harmful effect on U.S. commerce — even if a U.S.
plaintiff might have brought an antitrust claim (542 U.S. 155 (2004)). For more detailed
discussion of FTAIA and the Empagran case, see CRS Report RS21877, FTAIA Limits
Availability of U.S. Courts to Foreign Antitrust Plaintiffs: F. Hoffman-LaRoche, Ltd. v.
Empagran, S.A., by Janice E. Rubin.
5Pfizer, Inc. v. Government of India, 434 U.S. 308 (1978).
6The Guidelines were first issued in 1962, and revised in 1982, 1984, 1992, and 1997. The
1984 version indicated that the Department will consider foreign as well as domestic
competition in determining the geographic market for the products or services of a potential
merger (section 2.34). The 1992 version, enacted jointly with the FTC, states that the
“unifying theme of the Guidelines is that mergers should not be permitted to create or
enhance market power or to facilitate its exercise” (section 0.1). The 1997 revision dealt
only with the Agencies’ treatment of the so-called “efficiency defense” often put forth in
support of a merger: although “[e]fficiencies generated through merger can enhance the
merged firm’s ability and incentive to compete, which may result in lower prices, improved
quality, enhanced service, or new products,” mergers that are, on balance, anticompetitive
will not likely be approved (section 4). Efficiencies “almost never justify a planned merger
to monopoly or near-monopoly.” FTC Chairman Robert Pitofsky, quoted at 72 ANTITRUST
& TRADE REGULATION REPORT 348 (4-10-97).
SECTION 7A (15 U.S.C. § 18a). Contains the “premerger notification”
provisions, added to the Clayton Act in 19767 to allow the antitrust enforcement
agencies the opportunity to examine potential mergers/acquisitions prior to their
consummation. It is enforced by both the Department of Justice and the FTC. As
originally enacted, the provision required notification, with certain, enumerated
exceptions, of all merger or acquisition transactions by persons in or affecting
commerce in which either party had nets sales or assets of $10 million and the other
party had net sales or assets of $100 million (15 U.S.C. §18a(a)). The reviewing
agency had 30 days from the time of notification (15 days in the case of tender offers)
to review the proposed transaction, which could not be consummated during that time
unless the reviewing agency granted an early termination of the waiting period (15
U.S.C.§18a(b)). Prior to the conclusion of that time, the reviewing agency was
authorized to seek a second round of information, which extended the original waiting
period by 20 days (10 days in the case of a tender offer) (15 U.S.C. §18a(e)).8 The
focus of the current premerger notification provision is more clearly directed at the
consequences of a merger/acquisition transaction: notification must occur when the
transaction will result in the acquiring party’s holding assets or voting securities (1) in
excess of $200 million, or (2) between $50 million and $200 million plus the assets or
voting securities of the acquired party (either a $10 million or $100 million entity being
acquired, respectively, by a $100 million or $10 million entity). The current provision
also extends, for merger transactions, the period for review of material submitted in
response to a second request for information — from 20 to 30 days; and establishes,
based on the size of the proposed transaction, a sliding scale of fees required in order
for premerger review to begin (the fee previously was $45,000 irrespective of the size9
of the transaction; the new scale begins at $45,000). The penalty for failure to comply
with the premerger notification statute remains at $10,000 “for each day during which10
[a person required to report] is in violation of” the provision.
Robinson-Patman Act (15 U.S.C. §§ 13, 21a, 13a, 13b)
Broadly, the Robinson-Patman Act (which is not, “technically,” considered an
antitrust statute, although its provisions amended the Clayton Act) prohibits price
discrimination: it mandates that two or more purchasers of a commodity from the same
seller must be charged identical prices. There are exceptions to the mandate, however,
such that the act may be seen to prohibit only unjustified price differentiation. There
are also jurisdictional limits to the act, the courts having interpreted it so that all the
sales in question must be in interstate commerce.11 Robinson-Patman applies only to
sales of “commodities of like grade and quality” (15 U.S.C. §13(a)) and not to services;
7In Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (P.L. 95-435).
8Often, the second request for information is perceived by the parties as an indication of the
fact that the reviewing agency has “problems” with the transaction, and either the entire
proposal will be withdrawn, or it will be restructured so as to meet the objections.
9Section 630 of P.L. 106-553 (eff. 2/1/2001).
1015 U.S.C. §18a (g).
11Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186 (1974). The Sherman Act, the
Federal Trade Commission Act, and most portions of the Clayton Act , for example, require
only that transactions be in or affecting interstate commerce.
and only to goods “sold for use, consumption, or resale within the United States” (15
U.S.C. §13(a)), but not to goods destined for export.12
Nonprofit institutions (e.g., schools, colleges, libraries, churches, hospitals) are
not subject to the prohibitions of the Robinson-Patman Act to the extent that their
purchases are made for “their own use” (15 U.S.C. §13c).13
Federal Trade Commission Act (15 U.S.C. §§ 41 et seq.)
SECTION 5 (15 U.S.C. §45) is the operative, substantive provision of the FTC Act.
It prohibits “unfair methods of competition” and “unfair or deceptive acts” in
commerce (15 U.S.C. §45(a)(1)).14 The provision applies to “unfair methods of
competition involving commerce with foreign nations (other than import commerce),”
however, only to the extent that such “unfair” conduct has a “direct, substantial, and
reasonably foreseeable effect” on the foreign commerce in question (15 U.S.C.
§45(a)(3)). 15
12Fimex Corp. v. Barmatic Products Co., 429 F.Supp. 978 (E.D.N.Y. 1977), aff’d without
published opinion, No. 7235 (2d Cir. 1977); Raymond v. Avon Products, Inc., 1978 WL
13The leading case interpreting the Nonprofit Institutions Act, which created 15 U.S.C. § 15c
in 1938, is Abbott Laboratories v. Portland Retail Druggists Assn., Inc., 425 U.S. 1 (1976),
which interpreted “for their own use” to include pharmaceutical purchases by a hospital for
dispensing to inpatients, outpatients treated at the hospital (i.e., prescriptions refilled by the
hospital pharmacy in competition with retail druggists not permitted) and in an emergency
room; and to staff physicians, medical and nursing students and their dependents. The Court
extended its “for their own use” interpretation in 1983, in Jefferson County Pharmaceutical
Assn., Inc. v. Abbott Laboratories, when it ruled that Government purchases — just as
those of non-governmental, “nonprofit” entities — may not be used to compete in retail
market (460 U.S. 150). DeModena v. Kaiser Foundation Health Plan, Inc., (743 F.2d 1388th
(9 Cir. 1984), cert. denied, 469 U.S. 1229 (1985)) held HMO’s to be “eligible institutions”
included in the Nonprofit Institutions Act.
14“Unfairness” has been defined by the courts as encompassing more than just conduct
which would violate the Sherman Act or other antitrust statutes; conduct which runs counter
to established public policy may also be deemed “unfair.” See, e.g., Federal Trade
Commission v. Sperry & Hutchinson Co., 405 U.S. 233, 244 (1972): unfair practices may
extend to “public values beyond simply those enshrined in the letter or encompassed in theth
spirit of the antitrust laws”; Spiegel, Inc. v. Federal Trade Commission, 540 F. 2d 287 (7
Cir. 1976); Federal Trade Commission v. Indiana Federation of Dentists, 476 U.S. 447
(1986). Moreover, “puffing,” although it allows for (over)statements of opinion, does not
include misrepresentations of fact, F.T.C. v. US Sales Corp., 785 F.Supp. 787 (N.D. Ill.
15See note 4, supra.
Other Applicable Laws
National Cooperative Research Act of 1984 (15 U.S.C. §§ 4301-
This legislation was enacted in 1984 to meet the perceived problem of a lack of
joint research and development projects (believed to adversely impact the United
States’ international competitiveness) by business, which was said to fear (1)
government prosecution of joint ventures which could be viewed as anticompetitive,
and (2) private antitrust treble-damage actions. 15 U.S.C. §4302 states clearly that
research and development joint ventures will be examined individually and analyzed
under a “reasonableness” standard; moreover, provided that a joint venture has notified
the Department of Justice and the FTC as to its intended existence and activities,
litigants claiming antitrust injury by reason of the venture’s “notified” conduct may
recover only actual damages (15 U.S.C. §4303(a)), despite the general antitrust damage
provisions (15 U.S.C. §15, supra, pp. 2-3). The statute was amended in 1993 (P.L.
Export Trading Company Act (15 U.S.C. §§ 4001-21)
Export certificates of review are available to persons wishing to act collectively
for the purpose of exporting goods or services from the United States. If the Secretary
of Commerce, “with the concurrence of the Attorney General,” determines that the
association will not likely result in a “substantial lessening of competition or restraint
of trade within the United States nor a substantial restraint of the export trade of any
competitor of the applicant,” and issues a certificate, the recipient of the certificate is
immune to any civil or criminal antitrust action based on the conduct covered by the
certificate (15 U.S.C. §§4013, 4016).
McCarran-Ferguson Act (15 U.S.C. §§1011-15)
Pursuant to the act, the “business of insurance” is exempt from the prohibitions16
of the antitrust laws to the extent such business is regulated by state laws. The
Supreme Court has indicated on several occasions that “the business of insurance” is17
not synonymous with “the business of insurers.”
Soft Drink Interbrand Competition Act (15 U.S.C. §§3591-03)
Enacted in 1980 to permit the owners of trademarked soft drinks to grant
exclusive territorial franchises to, e.g., bottlers or distributors of those products, the act
renders contracts or agreements containing the exclusive rights not subject to the
16See, CRS Report RL33683, Courts Narrow McCarran-Ferguson Exemption for “Business
of Insurance”: Viability of “State Action” Doctrine as an Alternative, by Janice E. Rubin.
17Group Health & Life Insurance Co. v. Royal Drug Co., 440 U.S. 205 (1979); Union Labor
Life Insurance Co. v. Pireno, 458 U.S. 119 (1982); Metropolitan Life Insurance Co. v.
Massachusetts, 471 U.S. 724 (1985); Federal Trade Commission v. Ticor Title Insurance
Co., 504 U.S. 621 (1992).
antitrust laws provided that the “product is in substantial and effective competition
with other products of the same general class” (15 U.S.C. §3501). Outright price-
fixing agreements or other horizontal restraints of trade and group boycotts remain
subject to the antitrust laws (15 U.S.C. §3502).
Local Government Antitrust Act of 1984 (15 U.S.C. §§34, 35)
The statute prohibits the recovery of monetary damages (injunctive relief is
permitted) from “any local government, or official or employee thereof acting in an
official capacity” by anyone who challenges the antitrust legality of a local
government’s conduct.
Characterization of Antitrust Offenses
Per Se
Per se offenses are those for which there is no justification. As the Supreme
Court has expressed it:
... there are certain agreements or practices which because of their
pernicious effect on competition and lack of any redeeming virtue are
conclusively presumed to be unreasonable and therefore illegal without
elaborate inquiry as to the precise harm they have caused or the18
business excuse for their use.
The kinds of activities which are most generally found to be per se antitrust
offenses, and are most likely to be criminally prosecuted, include:
1.Horizontal price fixing
2.Vertical price fixing (sometimes referred to as “resale price
m ai n t enance”)
3.Bid rigging
All of the per se offenses, as concerted activity in restraint of trade, are violations
of section 1 of the Sherman Act.
Rule of Reason
Any antitrust-violative conduct which does not consist of a per se offense is
judged by the reasonableness of the activity. Even when an otherwise unlawful action
18Northern Pacific Railroad Co. v. United States, 356 U.S. 1, 5 (1957). See also, White
Motor Co. v. United States, 372 U.S. 253, 263 (1963); United States v. Topco Associates,
441 U.S. 1, 9-10 (1979); Arizona v. Maricopa County Medical Society, 457 U.S. 332, 344
(1982).
is found, if it is also determined that the action is ancillary to some lawful activity, and
that its procompetitive consequences outweigh its anticompetitive effects, the action
may well be found to be a not unreasonable violation of the antitrust laws. In other
words, the rule of reason involves a balancing test.
There is not, for example, any per se rule against monopolization, or attempted
monopolization. There is no “no fault” monopolization, i.e., no situation exists in
which there is some “magic” number beyond which a firm may not increase its size or
market share; the determining factors will include the means by which those numbers
were reached — in other words, the reasonableness of the actions which produced the
final entity.
Most rule of reason offenses involve a single entity, and do not usually violate
section 1 of the Sherman Act.19
19Mergers and acquisitions — which, by definition, involve more than one entity — are the
exceptions which are most apparent (see supra, page 1). But even those transactions are
most concerned with the antitrust lawfulness and the competitiveness of the resulting entity.