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Antitrust Laws: a Brief History

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FTC Fact Sheet: Antitrust Laws: A Brief History nce upon a time, way back in the 1800s, limit competition. So, for example, Othere were several giant businesses known they can’t agree to set a price for a as “trusts.” They controlled whole sections product—that’d be price fixing. The Act of the economy, like railroads, oil, steel, and also makes it illegal for a business to be a sugar. Two of the most famous trusts were monopoly if that company is cheating or U.S. Steel and Standard Oil; they were not competing fairly. Corporate executives monopolies that controlled the supply of who conduct their business that way could their product—as well as the price. With one wind up paying huge fines—and even go company controlling an entire industry, there to jail! was no competition, and smaller businesses • The Clayton Act was passed in 1914. With and people had no choices about from whom the Sherman Act in place, and trusts being to buy. Prices went through the roof, and broken up, business practices in America quality didn’t have to be a priority. This were changing. But some companies caused hardship and threatened the new discovered merging as a way to control American prosperity. prices and production (instead of forming While the rich, trust-owning businessmen trusts, competitors united into a single got richer and richer, the public got angry company. The Clayton Act helps protect and demanded the government take action. American consumers by stopping mergers President Theodore Roosevelt “busted” (or or acquisitions that are likely to stifle broke up) many trusts by enforcing what competition. came to be known as “antitrust” laws. The • With the Federal Trade Commission goal of these laws was to protect consumers (FTC) Act (1914), Congress created a by promoting competition in the marketplace. new federal agency to watch out for unfair business practices—and gave the The U.S. Congress passed several laws to help Federal Trade Commission the authority promote competition by outlawing unfair to investigate and stop unfair methods of methods of competition: competition and deceptive practices. • The Sherman Act is the nation’s oldest antitrust law. Passed in 1890, it makes it illegal for competitors to make agreements with each other that would 1 FTC Fact Sheet: Antitrust Laws: A Brief History Today, the Federal Trade Commission’s (FTC’s) • How would a monopoly affect you Bureau of Competition and the Department of personally? Imagine that all the companies Justice’s Antitrust Division enforce these three that make jeans were bought up by one core federal antitrust laws. The agencies talk company. Now there’s only one place that to each other before opening any investigation supplies jeans. What might happen to the to decide who will investigate the facts and selection and quality of what you can buy? work on any case that might be brought. But What about the price? each agency has developed expertise in certain industries. Every state has antitrust laws, too; they are enforced by each state’s attorney Want to Find Out More? general. There’s an office in your state capitol Federal Trade Commission—Guide to the that helps consumers or businesses who might Antitrust Laws be hurt when businesses don’t compete fairly. www.ftc.gov/bc/antitrust Antitrust laws were not put in place to U.S. Department of Justice—Antitrust Division protect competing businesses from aggressive www.usdoj.gov/atr competition. Competition is tough, and sometimes businesses fail. That’s the way it Kids.gov—Links to sites on money, selling, is in competitive markets, and consumers and marketing benefit from the rough and tumble competition www.kids.gov/6_8/6_8_money_selling.shtml among sellers. American Antitrust Institute—Fair Fight in the Things to Talk About and Do Marketplace (Video and resources) www.fairfightfilm.org/index.html • What if these laws had never been passed and trusts were allowed to exist? How National Council on Economic Education— would things be different today? Online lessons www.ncee.net/resources/lessons.php 2.
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