The Benefits of Antitrust Law

Michael Sennett
Chair, Antitrust and Trade Regulation
Bell, Boyd & Lloyd LLC

The Basics of Antitrust Law

Antitrust law is a set of business laws designed to promote competition and reward synergies, efficiencies and technological advances. At their source, the antitrust laws in the U.S. advance consumer welfare by preserving the benefits of the process of competition for customers specifically and the economy more generally . These laws are not intended to protect individual competitors or the weak or inefficient. Competition is paramount and if there is cheating, if a business or businesses working together adopt practices that keep prices artificially high or restrict customer options in the marketplace , the antitrust laws will step in to prohibit the anticompetitive practice and return the market to a fully functioning free market.

In preserving the rule of competition, the antitrust laws ensure that our precious and scarce resources are allocated effectively and efficiently . Waste is eliminated and unearned wealth transfers based on restraints are eliminated. If a business is not performing well “ if it is inefficient, if it has lazy managers, if it is being mismanaged, or if it uses old technologies “ our antitrust laws will protect the process of competition which will ensure that underutilized resources are redeployed and more efficiently used and allocated. Thus, antitrust law is designed to reward and promote innovation, new products and services and more efficient processes.

It is the economic underpinnings of antitrust that control much of the thinking in the courts today. Given that the process of competition should produce better products and higher quality at a lower cost, all to the benefit of the customer, courts focus increasingly upon the consumer return from vigorous antitrust enforcement and are less concerned with insulating competitors from the ravages of ruinous competition. As a general operating principle, if a company truly is in business to serve customers, and genuinely puts its customers first, that company will rarely, if ever, have antitrust issues arise from its strategies and practices. If what a company does genuinely enhances customer welfare, its actions will ordinarily be defensible under the antitrust laws.

Of course, although a company may be successful in developing a product or services on its own merits “ it is truly superior to its competitors “ such company does have responsibilities under the antitrust not to abuse that market power, or dominant position, as it is called in Europe to acquire or maintain a monopoly. If company willfully uses its market power to stifle competition, innovation or technology advances to the long- term injury of U.S. commerce, the antitrust laws will step in to protect customers against such conduct and level the competitive playing field.

The role of the antitrust lawyer in the U.S. is to understand these principles thoroughly and to assist clients in developing business strategies consistent with them. Being too conservative, or denying clients market opportunities because of an unschooled fear or risk aversion under the antitrust laws, can be as or more damaging to consumer welfare than letting a close question strategy play out in the market. The evaluation of strategy opportunities, business plans, venture proposals, marketing programs and mergers and proposed demand of the antitrust lawyer, complex risk assessments and judgments without easy rules to follow. Much of antitrust law falls within the subtleties of a gray zone, and the skills antitrust lawyers bring to bear are designed to educate clients in risk assessment and to develop in them sensitivity to nuances of competition principles. At bottom, our task is to guide clients toward successful implementation of strategies that are consistent both with their business plans and with the antitrust laws. We act as strategists first and foremost, and then as prosecutors or defenders following implementation of strategies in the marketplace.

There are several different areas within the practice of antitrust law. Antitrust lawyers can counsel (and defend the practices of) clients in mergers, acquisitions and joint ventures and in licensing, marketing, distribution, pricing and the patent and technology antitrust interface. Antitrust lawyers represent clients before regulatory agencies and the antitrust enforcement agencies, as before grand juries for criminal antitrust matters and in court for civil and criminal antitrust matters.