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What Is Antitrust Litigation?

Standard Oil, which was broken up into several companies by the federal government, was one of the first targets of anti-trust litigation.
Antitrust litigation can be carried out within a business or franchise network, as when a boat manufacturer is sued for favoring some dealers over others.
Antitrust litigation involves legal action to ensure competition in the marketplace continues.
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  • Last Modified Date: 16 July 2014
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Antitrust litigation is legal action related to antitrust proceedings, which are designed to identify and break down monopolies and unfair business practices in the interest of encouraging competition and ensuring that everyone in the market has an equal opportunity. Many companies prefer to avoid such litigation, if possible, because it can be very costly and the consequences can include fines or mandates to divest their holdings.

The advent of antitrust legislation came about in the early 20th century, as lawmakers and others began to recognize the threat posed by monopolies. Some companies effectively controlled entire industries, and it was not uncommon to have vertical monopolies, in which every step of the supply chain was controlled, allowing a company to completely dominate an industry. In response, several governments began working to break up monopolies that they felt were unfair, and a number of laws were put in place around the world to prohibit monopolies and put policies in place to allow governments to take action against companies engaging in questionable practices.

A government can initiate antitrust litigation by indicating that it thinks a company has a monopoly or is engaging in price fixing, price discrimination, or other activities that are considered suppressive to competition. When brought to court, companies usually retain lawyers who specialize in antitrust actions to defend themselves. In some cases, a company may agree to divest or diversify holdings before going to court to avoid a costly and potentially reputation-damaging trial.

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Antitrust laws also cover issues like unfair pricing to dealers. If, for example, a company gives one dealer a 30% discount and another dealer a 15% discount, this can be prosecuted under antitrust laws. This practice is viewed as unfair because it gives one dealer an unreasonable advantage and suppresses competition between dealerships. Litigation can cover these kinds of situations as well.

Governments embark on antitrust litigation to protect consumers and to protect the integrity of the market. If a company behaves in a way that violates antitrust laws, it can have a ripple effect, causing damages to consumers and a wide variety of other companies. Forced divestiture of holdings leads to more diversity and price variation in the market, allowing consumers more opportunities. In some cases, it can be highly beneficial for the companies separated from a parent company, as they may have more room to thrive and grow once they are out of the control of a parent company with other interests in mind.

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allenJo
Post 5

@nathanG - I worked in the telecommunications industry for quite some time. The breakup of AT&T and other big telecoms was always looked upon as a joke. Many of the smaller, independent companies simply couldn’t survive in their new marketplace. The reason was simple. Telecommunications is all about making connections, literally.

If you have your own telecom company, you may own some assets for your network, but at some point you have to hand off a call to AT&T to complete a long distance call. That means you need an agreement with them about how much you’re willing to pay to complete that call.

The bigger telecoms always held the upper hand in setting prices. Sure there were some laws set in place to govern that, but they never could keep up with changes in the marketplace, and that’s why the smaller companies eventually fell by the wayside, unprofitable.

NathanG
Post 4

@David09 - I think the so-called breakup of Microsoft was more symbolic than anything else. Microsoft still owns the software world, because by the time the case was brought to trial, Microsoft products had already reached critical mass.

Many, many products are developed for the Windows operating system, more so than are developed for Apple or Linux. I work for a software company and we develop exclusively for Microsoft operating systems.

Nothing else really matters. I believe it will take decades before that trend is ever reversed, or there is at least parity of some sort.

David09
Post 3

One of the biggest commercial litigation cases involving antitrust laws had to be the government versus Microsoft.

Microsoft had a monopoly for the following reasons. Their operating system, Windows, was pretty much standard on all computers. Granted, the alternatives like Linux had not exactly been widely accepted, but that’s a circular argument. The reason it never got wide acceptance is that it was never installed, by default, on all computers like Windows was.

Also, Internet Explorer was the default browser on all new computers, giving itself an unfair competitive advantage against Mozilla, Safari, Opera and other browsers. Microsoft Office was standard as well, giving it an advantage over Open Office from Sun Microsystems.

The outcome of the case was that now you have to insist on these packages when you buy your new computer, or choose the alternatives. Microsoft products can no longer be installed by default.

mutsy
Post 2

@Subway11 - I understand the theory behind antitrust litigation because we want to make the market bear a fair pricing structure that allows for maximum competition, but with AT&T some of the split off companies merged back which does not make sense to me.

My mother- in- law used to work for one of the broken up companies, Bellsouth, that later became AT&T again. She said that when they merged back it was stressful as the company was looking to cut jobs and everyone was really worried. I don’t know how effective the antitrust case was against AT&T but my mother in law was happier when she worked for Bellsouth.

subway11
Post 1

I wanted to add that the AT&T antitrust case was probably the most famous of all antitrust cases. I think that the fact that they were forced to dissolve into seven companies and up until recently four of those seven merged back and are still a part of AT&T makes people wonder how effective antitrust litigation really is.

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