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How Competition Benefits Consumers COMPETITION COUNTS HOW CONSUMERS W I N Wh EN BUSINESSES COMPETE FEDERAL TRADE COMMISSION THE FTC’S BUREAU OF prices. The camera shop may work. By enforcing antitrust laws, and losers – you, as the consumer, COMPETITION: PROTECTING have no reason to offer a range of the Federal Trade Commission helps do that. Rather, our job is to make FREE ENTERPRISE AND choices. The car dealer may have to ensure that our markets are sure that businesses are competing AMERICAN CONSUMERS no motivation to offer a variety open and free. The FTC promotes fairly within a set of rules. What if there were only one grocery of car models and services. healthy competition and challenges Through its Bureaus of store in your community? What if you Competition in America is about anticompetitive business practices Competition and Economics, the could buy a camera from only one price, selection, and service. It to make sure that consumers FTC puts its antitrust resources to supplier? What if only one dealer in benefits consumers by keeping have access to quality goods and work, especially where consumer your area sold cars? prices low and the quality and services, and that businesses can interest and consumer spending Without competition, the grocer choice of goods and services high. compete on the merits of their work. are high: in matters affecting may have no incentive to lower Competition makes our economy The FTC does not choose winners energy, real estate, health care, food, pharmaceuticals, professional at protecting competition have business practices, review potential restrictive agreements between services, cable TV, computer long been labeled “antitrust.” Fast mergers, and challenge them when manufacturers and product dealers, technology, video programming, forward to the 21st century: you hear appropriate to ensure that the and monopolies. The FTC reviews and broadband Internet access. “antitrust” in news stories about market works according to consumer these and other practices, looking competitors merging or companies preferences, not illegal practices. at the likely effects on consumers WHAT IS ANTITRUST? conspiring to reduce competition. What kinds of business and competition: Would they lead The word “antitrust” dates from The FTC enforces antitrust laws by practices interest the Bureau of to higher prices, inferior service, or the late 1800s, when powerful challenging business practices that Competition? In short, the very fewer choices for consumers? Would companies dominated industries, could hurt consumers by resulting practices that affect consumers they make it more difficult for other working together as “trusts” to in higher prices, lower quality, or the most: company mergers, companies to enter the market? stifle competition.T hus, laws aimed fewer goods or services. We monitor agreements among competitors, Here are some business practices the the market. In one FTC case, a the products are virtually identical, permit a drug manufacturer to FTC monitors: group of auto dealers threatened and the prices that farmers charge require its drug store customers to to stop advertising in a newspaper all rise and fall together without buy a patient monitoring system Mergers Many mergers benefit if it printed money-saving tips for any agreement among them. If a they don’t want along with the consumers by allowing firms to car shoppers. The FTC’s Bureau of drought causes the supply of wheat prescription drugs they do want. operate more efficiently.O ther Competition challenged the dealers to decline, the price to all affected mergers, however, may result in Monopoly A monopoly exists when because it is illegal for businesses to farmers will increase. Uniformly higher prices, fewer choices, or one company controls a product or act together in ways that can deprive high prices for a product in limited lesser quality. The challenge for the service in a market. If it’s because consumers of important information. supply also can result from an FTC is to analyze the likely effects they offer consumers a better Agreements among businesses increase in consumer demand: of a merger on consumers and product at a better price, that’s not about price or price-related matters Just ask any shopper hunting for competition – a process that can take against the law. But a company that like credit terms are among the a “must have” children’s toy. thousands of hours of investigation creates or maintains a monopoly most serious business practices and economic analysis. In one FTC Agreements Between by unreasonably excluding other the FTC considers. That’s because case, a major national office supply Manufacturers and Product companies, or by impairing other price is usually the principal basis for retailer wanted to buy its closest Dealers Many “package deals” companies’ ability to compete against competition and consumer choice. competitor. Based on evidence that create efficiencies that are beneficial them, raises antitrust concerns. Price fixing – companies getting the merger would lead to higher prices to consumers: for example, For example, a newspaper with a together to set prices – is illegal. for consumers, the FTC went to court automobile dealers who sell tires monopoly in a small town could not But that does not mean that all and successfully blocked the deal. with their cars. You might prefer a refuse to run advertisements from price similarities, or price changes different kind of tire, but shipping and businesses that also advertised Agreements Among that occur about the same time, selling cars without tires would be on a local television station. Competitors It’s illegal for are always the result of price fixing. silly. On the other hand, some “tie-in” businesses to act together in On the contrary, they often result Other Anticompetitive Conduct agreements are illegal because they ways that can limit competition, from normal market conditions. For Business strategies that reduce restrict competition without providing lead to higher prices, or hinder example, prices of commodities such competition may be illegal if they lack benefits to consumers. For example, other businesses from entering as wheat are often identical because a reasonable business justification. the antitrust laws likely would not For example, a pharmaceutical which resulted in a $100 million court you. As an informed shopper, you With few exceptions, FTC company’s exclusive contracts with settlement for injured consumers. are in the best position to detect investigations are not public, and suppliers of a key ingredient kept KEEPING MARKETS an absence of competition for no any information you provide or generic drug makers from getting COMPETITIVE apparent reason. If you suspect complaint you make will be kept that ingredient. Without competition By challenging anticompetitive illegal behavior, please notify federal confidential.I f you ask us about from generics, the pharmaceutical business practices, the FTC helps and state antitrust agencies. an investigation, you may be told company was able to raise prices to ensure that consumers have that we cannot discuss it, or even CONFIDENTIALITY 3,000 percent: a $5 prescription choices in price, selection, and confirm or deny its existence. But The FTC cannot act on behalf of an would have cost consumers $150. service. To learn about competition we can receive your information and individual consumer or business, The FTC, 32 states, and the District of problems, the FTC often receives make sure it gets to appropriate FTC but the information you provide Columbia challenged the contracts, information from consumers like staff.I n some cases, a staff person can help expose illegal behavior. may wish to use the information staff will seek your cooperation E-mail Telephone in court. In that event, you may before making such disclosures. [email protected] 1–877–FTC–HELP be asked to provide an affidavit (1–877–382–4357) or other statement under oath, or HOW YOU CAN HELP If you wish to submit confidential appear as a witness at the trial. If you have an antitrust problem or information, send it by mail These situations are relatively complaint, or if you wish to provide and mark it “Confidential.” rare, but if those circumstances information that may be helpful in an arise, your identity will have investigation, contact the FTC. Mail to be disclosed to the lawyers Federal Trade Commission representing the companies or Bureau of Competition-H374, persons under investigation. FTC Washington, D.C. 20580 FEDERAL TRADE COMMISSION Bureau of Competition Washington, D.C. 20580 www. ftc.gov.
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