Practical Aspects of Antitrust Law - What Every Business Executive Should Know

James J. Calder
Partner
Katten Muchin Zavis Rosenman New York

Antitrust Law “ What It is and Why It Matters

It is an article of faith in the United States that we have a free market economy. Unlike socialist states that intensely regulate their economies, the United States tries to let the forces of supply and demand regulate its markets. This belief, that the magic of the market does a far better job of allocating resources than government regulation, is a cornerstone of American economic policy. Indeed, the American reliance on free markets instead of government regulation is frequently viewed as one of the primary reasons for the great resilience and strength of the American economy since the end of World War II.

Antitrust law is the vehicle used to protect American markets and ensure that the free market economy on which American prosperity is based is in fact free. Antitrust law does this by forbidding certain conduct “ such as price-fixing , bid-rigging and market allocation “ that defeats the competitive process. It also seeks to protect markets by regulating the merger process to ensure that, after a merger, a sufficient number of firms remains in the affected markets to provide meaningful competition. By protecting the competitive process and the competitiveness of American markets, the antitrust laws help ensure that purchasers of American products and services (both consumers and businesses) enjoy the benefits of low prices, high quality, constant innovation and rapid response to the changing demands and requirements of the buying public. The role of antitrust is so important in protecting the U.S. economy that the United States Supreme Court has referred to the Sherman Act ^[39] , the primary antitrust law, as the Magna Carta of free enterprise. ^[40]

For the business executive, the antitrust laws present a code of conduct that must be respected and followed. That code is so important that hard- core violations are prosecuted as felonies with individual violators regularly being sent to prison and corporate violators paying fines in the hundreds of millions of dollars. ^[41] While these are serious obligations imposed on every enterprise that does business in the United States, the antitrust laws also provide real and vital protections for the business community. For example, just as the Sherman Act forbids a business from conspiring with its rivals to fix prices, that same law protects that same business from price-fixing by its suppliers. Thus, the antitrust laws prohibit firms from subverting the competitive process while simultaneously protecting them from injury resulting from the subversion of that process by others.

It is sometimes perceived in the business community, and in some business publications , that aggressive antitrust enforcement is regulation run amok. ^[42] In fact it is just the opposite . In the United States, antitrust is the antithesis of government regulation. The theory of antitrust is that the economy works best when markets are free “ when they are open and not restricted by anticompetitive activities or anticompetitive strictures . When markets are open and competitive, the need for economic regulation is minimized. Confusing antitrust enforcement with government regulation is thus a serious mistake. In the absence of aggressive antitrust enforcement, the norm would likely be more government regulation, not less.

^[39] 15 U.S.C. § 1 et seq .

^[40] United States v. Topco Assocs., Inc., 405 U.S. 596, 610 (1972).

^[41] See R. Hewitt Pate, Testimony Before the Committee on the Judiciary, U.S. House of Representatives, Concerning Antitrust Enforcement Oversight, July 24, 2003, available at http://www. usdoj .gov/atr/public/testimony/201190.htm (discussing multi-million-dollar criminal fines and prison terms imposed against executives of such companies as Sotheby's auction house, Hoechst A.G., Akzo Nobel Chemicals B.V., Elf Atochem, and Arteva Specialties S.a.r.l.).

^[42] See, e.g., Holman W. Jenkins, Jr., FTC Screams for Antitrust , WALL STREET JOURNAL, March 11, 2003.