To understand what "antitrust" law is, it helps to start with what is meant by a "trust." In the late 1800s, the famous businessman John D. Rockefeller put a number of far-reaching companies he owned under the control of the same group of "trustees" to organize the disparate businesses and gain more centralized control. Many large companies adopted this "trust" system in the late 19th and early 20th centuries, and the term "trust" came to be used to refer to these large companies or groups of companies. Among the various advantages of this type of business organization, the companies often controlled the market for a particular product all the way from manufacturing to distribution and ultimate purchase by the consumer. This market dominance allowed these companies to drive competitors out of business and raise prices for consumers when there was no one left to compete with them. There were famous trusts in the oil, steel, and tobacco industries, to name a few.
Designed to alleviate the economic hardships imposed on consumers when these trusts misused their market power, "antitrust" laws were created to prevent business practices used to decrease competition in the economic marketplace. By preserving competition, antitrust law is designed to help consumers by encouraging companies to compete for our business with better products and lower prices. Today, state and federal laws continue to help ensure a competitive economy and prevent unfair trade practices.
Common violations include Bid Rigging, Price-Fixing, Monopolization, and Resale Price Maintenance.
Bid Rigging occurs when competitors enter into an agreement that will result in a pre-determined winner when bidding for a contract is taking place. Competitors may agree to bid at a certain price so that the other competitor will win, or a contract may be tailored so that a certain company is pre-determined to win a future bid. Both activities are illegal.
Price-fixing is one of the most common ways people and businesses violate antitrust laws. Price-fixing occurs when competitors agree on how much they will charge for a product or service. Just because many competitors seem to be charging the same price for a product or service does not necessarily mean they are illegally fixing prices. Prices are often based on market conditions, and even though a competitor may raise or lower a price based on what someone else is charging, that does not mean the two competitors agreed to charge a certain price. This happens a lot among competing gasoline stations, for example, as the stations may raise or lower their price because they saw the station across the street do the same. Unless the two stations entered into an agreement to charge the same price for gasoline, this practice is not illegal.
A "monopoly" is a large company that has control over most, if not all, of a product or service in a particular industry or geographical area. "Monopolization" is the process by which a monopoly is created or maintained. With this power the competitor may completely control a market price and exclude any competitors, which usually results in an increase in price to consumers. It is not necessarily illegal to be monopoly -- sometimes, monopolies are economically efficient and do not harm consumers. It is also not necessarily illegal to become a monopoly -- a company can build a unique product that dominates a market just because it is a better product, and not because the company took any illegal steps to become a monopoly. However, companies sometimes take steps to obtain or maintain a monopoly that are illegal.
Resale Price Maintenance is a term used to describe an arrangement in which a manufacturer may require a store to sell their product at a specific price. If the store sells the product at a price below that required by the manufacturer, the manufacturer may decide that store will not be allowed to sell their product anymore. Arrangements like this used to be illegal per se -- that is, if a manufacturer put such a restriction on a store, it was automatically illegal. However, recent decisions from the U.S. Supreme Court indicate that these types of arrangements should be examined on a case by case basis, to determine if the arrangement will harm consumers.
Even though it seems like mergers just allow big companies to get bigger and charge consumers more, mergers can often be good for consumers and the economy. This is because the merged company often becomes more efficient, which allows the merged company to offer services to consumers at a lower price than if the two companies remain separate. In addition, sometimes companies have a hard time operating independently, but if two companies merge, the bigger company may become stronger.
Other times, mergers can make markets less competitive, and this harms consumers by reducing choice and increasing prices. When a merger is announced, federal and state authorities "review" the merger very carefully to make sure competition is not reduced. For example, federal and state authorities may look at how much of a market the merged company will control, and if the merged company will result in less competition nationally, within a specific state, or even within a specific city. If federal or state authorities think a merger may reduce competition and harm consumers, they may ask the merged company to sell parts of the company to a competitor (just to keep the market competitive). Sometimes, federal or state authorities can sue to stop or reverse a merger.
The Attorney General's role is to protect the citizens of the State of Michigan by enforcing state and federal antitrust laws. The Attorney General investigates possible violations, fights unlawful business practices, and encourages compliance with consumer protection and antitrust laws. The Attorney General often works with Attorneys General of other states and with the federal government to investigate and prosecute violations of state and federal antitrust laws. Sometimes, the Attorney General also works with other states and the federal government to make sure that mergers will not reduce competition and harm Michigan consumers (please see the answer to Question #3, above).
Federal government officials enforce federal antitrust laws. The U.S. Department of Justice and the Federal Trade Commission both conduct investigations and bring enforcement actions if they think there may be a violation of federal antitrust law. Both organizations review mergers to make sure they are not anti-competitive, investigate possible antitrust violations, and bring civil actions against companies or individuals that violate antitrust laws. The Department of Justice also brings criminal cases against individuals or companies for "serious and willful" violations of antitrust laws.