antitrust
Definition:
US antitrust legislation aims at curtailing monopolistic practices by private business and ensuring competition. Antitrust legislation developed in the USA in response to the numerous monopolies that arose because of the growth of big business and lack of government controls in the second half of the 19th century. By 1900 half the nation's railways were controlled by six financial groups which could manipulate rates. J.D. Rockefeller's Standard Oil Trust controlled most of American oil refining, US Steel controlled most steel production. Similar powerful trusts existed in meat-packing, sugar, lead and tobacco industries. Although the first US antitrust laws were enacted in Kansas in 1889, the first Federal Law was the Sherman Antitrust Act of 1890. This made it illegal to monopolize trade or conspire to restrain trade or inhibit competition. However, these terms were not clearly defined. Consequently it was unclear as to what amounted to a violation of the Act. In 1914 the Federal Trade Commission Act of 26 September created the Federal Trade Commission, empowering it to police competition by preventing persons, partnerships and corporations from using unfair methods of competition. In October of the same year (1914), the Clayton Antitrust Act tried to define illegal behaviour more specifically, and outlawed price discrimination. Further strengthening of legislation has included the 1936 Robinson-Patman Act, which amended the Clayton Act in relation to price discrimination by prohibiting excessive quantity discounts to large buyers and 'unreasonable' low retail prices, and the Celler Antimerger Act of 1950, aimed at preventing stock acquisition which might hinder competition. In reality, the effectiveness of all antitrust regulation has depended upon how the courts have interpreted it and the willingness of the US Department of Justice's Antitrust Division to investigate and prosecute alleged violations of the law. Some administrations have been more firm in their approach than others. Furthermore, it is often a difficult task to prevent a firm from acquiring too much market power and maintain the incentive to grow larger than its competitors. Large firms are often more efficient than smaller ones and it has been claimed that antitrust legislation can penalize them for this. Not surprisingly, the impact of antitrust legislation has not been clear-cut or consistent.
Cross-References:
Links:
Figures:
© Westburn Publishers Ltd 2002, The Westburn Dictionary of Marketing edited by Michael J Baker, ISBN 978-0-946433-01-8. www.themarketingdictionary.com. Entry: [Joanna Kinsey and Michael J. Baker], [1998].