Many consumers have never heard of antitrust , but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most States have antitrust laws, and so does the Federal Government. Essentially, these laws prohibit business practices that unreasonably deprive

consumers of the benefits of , U.S. Department of Justice resulting in higher for inferior Washington, DC 20530 products and services. This pamphlet was prepared to alert consumers to the existence and importance of antitrust laws and to explain what you can do for antitrust enforcement and for yourself.

1. What Do the Antitrust Laws Do for the Consumer? Antitrust Antitrust laws protect competition. Free and open competition benefits consumers Enforcement by ensuring lower prices and new and and the better products. In a freely competitive market, each competing business generally Consumer will try to attract consumers by cutting its prices and increasing the quality of its products or services. Competition and the opportunities it brings also stimulate businesses to find new, innovative, and more efficient methods of production. Consumers benefit from competition through lower prices and better products and services. Companies that fail to understand or react to consumer needs may soon find themselves losing out in the competitive battle. When competitors agree to fix prices, rig bids, or allocate (divide up) customers, consumers lose the benefits of competition. The prices that result when competitors agree in these ways are artificially high; such prices do not accurately reflect cost and therefore distort the allocation of society’s resources. The result is a loss not only to U.S. consumers and taxpayers, but competitors to fix prices, rig bids, and also the U.S. economy. allocate customers. The Sherman Act also makes it a crime to monopolize any part of When the competitive system is operating interstate commerce. An unlawful effectively, there is no need for government exists when only one firm intrusion. The recognizes that certain controls the market for a product or service, arrangements between firms—such as and it has obtained that , not competitors cooperating to perform joint because its product or service is superior to research and development projects—may others, but by suppressing competition with benefit consumers by allowing the firms anticompetitive conduct. The Act is not that have reached the agreement to violated simply when one firm’s vigorous compete more effectively against other competition and lower prices take sales firms. The law does not condemn all from its less efficient competitors—that is agreements between companies, only those competition working properly. that threaten to raise prices to consumers or to deprive them of new and better Sherman Act violations involving products. agreements between competitors usually are punished as criminal felonies. The But when competing firms get together to Department of Justice alone is empowered fix prices, to rig bids, to divide business to bring criminal prosecutions under the between them, or to make other Sherman Act. Individual violators can be anticompetitive arrangements that provide fined up to $1 million and sentenced to up no benefits to consumers, the Government to 10 years in Federal prison for each will act promptly to protect the interests of offense, and corporations can be fined up American consumers. to $100 million for each offense. Under 2. What Are the Federal Antitrust some circumstances, the maximum fines Laws, and What Do They Prohibit? can go even higher than the Sherman Act maximums to twice the gain or loss There are three major Federal antitrust involved. laws: • The Sherman Antitrust Act The Clayton Act • The Clayton Act The Clayton Act is a civil statute (carrying no • The Act criminal penalties) that was passed in 1914 and significantly amended in 1950. The The Sherman Antitrust Act Clayton Act prohibits mergers or acquisitions that are likely to lessen The Sherman Antitrust Act has stood since competition. Under the Act, the 1890 as the principal law expressing our Government challenges those mergers that national commitment to a a careful economic analysis shows are likely economy in which competition free from to increase prices to consumers. All persons private and governmental restraints leads considering a merger or acquisition above a to the best results for consumers. Congress certain size must notify both the Antitrust felt so strongly about this commitment that Division and the Federal Trade Commission. there was only one vote against the Act. The Act also prohibits other business The Sherman Act outlaws all contracts, practices that under certain circumstances combinations, and conspiracies that may harm competition. unreasonably restrain interstate and foreign trade. This includes agreements among The Federal Trade Commission Act A provision in the Clayton Act also permits private parties injured by an antitrust The Federal Trade Commission Act prohibits violation to sue in Federal court for three unfair methods of competition in interstate times their actual damages plus court costs commerce, but carries no criminal and attorneys’ fees. State attorneys general penalties. It also created the Federal Trade may bring civil suits under the Clayton Act Commission to police violations of the Act. on behalf of injured consumers in their The Department of Justice also often uses States, and groups of consumers often bring other laws to fight illegal activities, suits on their own. Such civil suits following including laws that prohibit false criminal enforcement actions can be a very statements to Federal agencies, perjury, effective additional deterrent to criminal obstruction of justice, conspiracies to activity. defraud the , and mail and Most States also have antitrust laws closely wire . Each of these crimes carries its paralleling the Federal antitrust laws. The own fines and imprisonment terms which State laws generally apply to violations that may be added to the fines and occur wholly in one State. These laws imprisonment terms for antitrust law typically are enforced through the offices of violations. State attorneys general. 3. How Are Antitrust Laws Enforced? 4. How Do Antitrust Violators Cheat the Consumer? There are three main ways in which the The worst antitrust offenses are Federal antitrust laws are enforced: violations, such as: • Criminal and civil enforcement actions • fixing: occurs when brought by the Antitrust Division of the two or more competing sellers agree on Department of Justice. what prices to charge, such as by • Civil enforcement actions brought by agreeing that they will increase prices a the Federal Trade Commission. certain amount or that they won’t sell • Lawsuits brought by private parties below a certain price. asserting damage claims. • : Bid rigging most commonly The Department of Justice uses a number of occurs when two or more firms agree to tools in investigating and prosecuting bid in such a way that a designated firm criminal antitrust violations. Department of submits the winning bid, typically for Justice attorneys often work with agents of local, State, or Federal Government the Federal Bureau of Investigation (FBI) or contracts. other investigative agencies to obtain • Customer allocation: Customer- evidence. In some cases, the Department allocation agreements involve some may use court authorized searches of arrangement between competitors to businesses and secret recordings by split up customers, such as by informants of telephone calls and meetings. geographic area, to reduce or eliminate The Department may grant immunity from competition. prosecution to individuals or corporations Such price-fixing, bid-rigging, and customer- who provide timely information that is allocation agreements, unlike joint research needed to prosecute others for antitrust agreements for example, provide no violations, such as bid rigging or price fixing. plausible offsetting benefits to consumers. Also, these agreements are generally secret, and the participants mislead and defraud showed that the cartel members had customers by continuing to hold themselves reached agreements on everything from out as competitors despite their agreement how much product each company would not to compete. produce, to how much they would charge, There can be no doubt that price fixing, bid to which customers they would supply. The rigging, and customer allocation harm victims who purchased directly from the consumers and taxpayers by causing them cartel members included companies with to pay more for products and services and household names such as General Mills, by depriving them of other byproducts of Kellogg, Coca-Cola, , and true competition. Nor is there usually any Procter & Gamble. However, these question in the minds of violators that their companies were just the first to feel the conduct is unlawful. It has been estimated effects of this . In the end, for that such practices can raise the price of a nearly a decade, every American product or service by more than 10 percent, consumer—anyone who took a vitamin, sometimes much more, and that American drank a glass of milk, or had a bowl of consumers and taxpayers pour billions of cereal—ended up paying more so that the dollars each year into the pockets of cartel conspirators could reap hundreds of members. People who take consumer and millions of dollars in additional revenues. taxpayer money this way are thieves. The vitamins investigation led to the conviction of U.S., Swiss, German, 5. What Kinds of Cases Has the Canadian, and Japanese firms, among Justice Department Brought? others, and a number of top executives Because of the harm that cartel violations went to jail. In fiscal year 1999 alone, over cause, the Justice Department’s number $850 million in fines was imposed on one antitrust priority is criminal prosecution members of the vitamins cartel, including a of those activities. The Department has record $500 million fine imposed on F. obtained price-fixing, bid-rigging, or Hoffmann-La Roche, Ltd. and a $225 million customer-allocation convictions in the soft fine imposed on BASF AG. drink, vitamins, trash hauling, road building, The imposition of unprecedented fines and electrical contracting industries, among against foreign firms and jail sentences others, involving billions of dollars in against foreign nationals residing outside of commerce. And in recent years, grand juries this country sends a powerful deterrent throughout the country have investigated message that the United States is possible violations with respect to fax committed to vigorous antitrust paper, display materials, explosives, enforcement against that impact plumbing supplies, doors, aluminum U.S. commerce, no matter where the extrusions, carpet, bread, and many more participants may be found. products and services. The Department also investigates and prosecutes bid rigging in 6. What Can You Do for Antitrust connection with government procurement. Enforcement and for Yourself? Consider one important example of Because they are by their nature secret, successful antitrust enforcement—the price-fixing, bid-rigging, and customer- Antitrust Division’s criminal cases against allocation conspiracies are difficult to vitamins producers. The Division began an detect and prove. For that reason, law investigation in the late 1990's into a enforcement officials rely on complaints worldwide vitamins cartel affecting over $5 and information from consumers and billion in U.S. commerce. The evidence competitors. A large percentage of all Federal antitrust investigations results from • Suspicious statements from a seller complaints received from consumers or suggesting that only one firm can sell to people in business by phone or mail or in a particular customer or type of person. customer. On the Federal level, you can contact the • Fewer competitors than normal submit Antitrust Division at its Washington offices bids on a project. or any of its offices in Chicago, , • Competitors submit identical bids. and San Francisco (addresses and telephone • The same company repeatedly has numbers are provided at the end of this been the low bidder on contracts for a pamphlet). The Antitrust Division’s certain product or service or in a headquarters offices are in the Main Justice particular area. Building at 10th Street and Pennsylvania • Avenue, NW in Washington, D.C. You can Bidders seem to win bids on a fixed also reach the Antitrust Division through rotation. any of the offices of the United States • There is an unusual and unexplainable Attorneys, which are found in most large large dollar difference between the cities throughout the United States. winning bid and all other bids. • The same bidder bids substantially 7. How Can You Know If the higher on some bids than on others, Antitrust Laws Are Being and there is no logical cost reason to Violated? explain the difference. If any person knows or suspects that These signs are by no means conclusive competitors, suppliers, or even an employer evidence of antitrust violations. More are violating the antitrust laws, that person investigation by trained lawyers and should alert the antitrust authorities so that investigators would be required to they can determine whether to investigate. determine that. But they may be an Price-fixing, bid-rigging, and customer- indication of , and the people who allocation conspiracies are most likely to enforce the antitrust laws want to hear occur where there are relatively few sellers about them. who have to get together to agree. The larger the group of sellers, the more 8. What Is the Public’s Role in difficult it is to come to an agreement and Antitrust Enforcement? enforce it. Effective antitrust enforcement requires Keep an eye out for telltale signs, including, public support. Public ignorance and apathy for example: can weaken antitrust enforcement more than anything else. Whether you are a • Any evidence that two or more businessperson or a consumer, if you competing sellers of similar products encounter business behavior that appears have agreed to price their products a to violate the antitrust laws, do not hesitate certain way, to sell only a certain to inform the enforcement authorities of amount of their product or to sell only your suspicions. That is often the only way in certain areas or to certain customers. violations can be uncovered, and failing to • Large price changes involving more than uncover and punish antitrust violations not one seller of very similar products of only penalizes consumers and taxpayers but different brands, particularly if the price also the vast majority of honest changes are of an equal amount and occur at about the same time. businesspeople who scrupulously observe Federal treasury; and (3) you can help the antitrust laws. recover other unlawful charges, because the Government or affected consumers If you detect an antitrust violation, you can may bring an antitrust action to collect perform a triple public service: (1) you can damages. help put an end to unlawful conduct that may be costing consumers millions or even You can write or call the Antitrust Division billions of dollars; (2) you can put money in of the Department of Justice at any of the the form of criminal penalties into the following locations.

Washington, D.C. Chicago Office of Deputy Assistant Attorney Antitrust Division, U.S. Dept. of Justice General for Operations Rookery Building Antitrust Division, U.S. Dept. of Justice 209 South LaSalle Street, Suite 600 950 Pennsylvania Avenue NW, Suite 3218 Chicago, IL 60604-1204 Washington, DC 20530 312-984-7200 202-514-3543 New York Citizen Complaint Center Antitrust Division, U.S. Dept. of Justice Antitrust Division, U.S. Dept. of Justice 950 Pennsylvania Avenue NW, Suite 3322 26 Federal Plaza, Room 3630 Washington, DC 20530 New York, NY 10278-0140 1-888-647-3258 (toll free in U.S. and 212-335-8000 Canada) 202-307-2040 San Francisco Antitrust Division, U.S. Dept. of Justice Washington Criminal I Section 450 Golden Gate Avenue, Room 10-0101 Antitrust Division, U.S. Dept. of Justice Box 36046 450 Fifth Street NW, 11th Floor San Francisco, CA 94102-3478 Washington, DC 20530 415-934-5300 202-307-6694 Washington Criminal II Section Liberty Square Building 450 Fifth Street NW, 11th Floor Washington, DC 20530 202-616-5949