Avoid Antitrust Violations

Risk Management

The word "antitrust" sounds ominous, but in fact it simply refers to ’competition.’ Antitrust laws are designed to ensure that competition between businesses is fair, and that consumers are not disadvantaged by unfair business practices.

Antitrust laws:

  • Prohibit the restriction of free trading and healthy competition among businesses
  • Prohibit a firm from dominating a market or from engaging in abusive practices that lead to a dominant position (including predatory pricing, price gouging and refusing to deal)
  • Ensure that mergers and acquisitions do not threaten the ability of other companies to compete fairly in the marketplace

If you own a small business, antitrust laws may not seem like a concern, but it can be.

Businesses often benefit by collaborating with competitors – for example, a business owner gains valuable insights and education by belonging to a trade association. Businesses and their customers may also benefit from such things as mergers and exclusive distributorship agreements. But sometimes, these business arrangements harm competitors and become antitrust violations.

First let's look at the major legislation governing antitrust activities.

  • Sherman Act. The Sherman Act outlaws monopolies and conduct that restrains free trade, including such things as price fixing and bid rigging. In essence, the Sherman Act seeks to ensure that customers can receive the best products or services at the lowest possible cost.
  • Clayton Act. The Clayton Act prohibits specific practices that are not clearly prohibited by the Sherman Act. These include such things as certain mergers and having the same person making business decisions for competing companies. The Clayton Act also allows private parties to recover triple damages for violations of either the Clayton or Sherman Acts and to obtain a court order prohibiting a company from engaging in the anticompetitive practice in the future.
  • Federal Trade Commission Act. The Federal Trade Commission Act bans unfair competition and unfair or deceptive practices and acts. All violations of the Sherman Act also violate the FTC Act. The Federal Trade Commission brings cases against people or companies that violate the FTC Act.

What is the bottom line? Violate antitrust laws and you could be fined and imprisoned.

How do you avoid violating antitrust laws?

  • Never discuss pricing or pricing issues with any competitor. If you attend a trade show, for example, and other competitors are discussing pricing, walk away immediately. You have nothing to gain and everything to lose.
  • Never discuss allocating customers or markets to competitors in exchange for receiving ’protected’ customers or territories. ’Divide and conquer’ can be a violation of antitrust laws.
  • Be careful with "exclusive" contracts that prohibit your suppliers from selling to anyone else, or that require your dealers to only sell your product. These contracts can create antitrust violations if they make it harder for new businesses to break into the marketplace.
  • Never make a sale contingent on a customer purchasing a second product from you. These tie-in purchases can violate antitrust laws if they restrict competition for the second item.
  • Never charge different prices to customers who are in competition with each other; for example, do not charge Customer A higher prices than Customer B in an attempt to help Customer A be more competitive.
  • Never make claims about a competitor's products or services unless you can prove those claims.
  • Never participate in a trade organization that does not seek to benefit the entire industry; otherwise your participation in that organization may be considered a form of collusion.

For more information, ask your attorney for guidance relative to your industry and your specific business.

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