Senior Of Counsel Jon Jacobson and associate Mikaela Evans-Aziz provide an overview of antitrust laws in the United States.
Wilson Sonsini's “Antitrust Conversations” video series features attorneys in the firm's antitrust and competition practice discussing topics of interest to clients, including preparing for litigation and the complexities of antitrust class actions, avoiding criminal violations, and Fundamentals of Antitrust Law. The series will include one-on-one discussions, Q&A with the members of the practice, and more.
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Transcript
Mikaela Evans-Aziz:
Hi, I'm Mikaela Evans-Aziz. I'm an associate in the antitrust group at Wilson Sonsini and I'm joined here today by my colleague Jon Jacobson. Thanks so much, Jon, for joining us today.
We're going to be speaking about fundamentals of antitrust law. Jon has decades of antitrust experience, including on the antitrust modernization commission, as the former chair of the ABA antitrust section, and in his work on numerous high-profile antitrust investigations, litigations, through trials and appeals. So Jon is the perfect person to be speaking to us today about some antitrust questions that frequently come up from our clients.
Let's start with some basics. What are the antitrust laws and why do we have them?
Jon Jacobson:
So, the antitrust laws in the United States were developed originally in the late 1800s to curb the power of the huge monopolies called trusts. There was the oil trust, the sugar trust, the gunpowder trust, and these trusts charged very high prices and ran competitors out of business. And the Sherman Act passed in 1890 was very much a response to that.
Since then, over the 131 years since the Sherman Act was passed, the focus has been more on what we now call consumer welfare or the competitive process. And that means a process that generates lower prices, greater production, greater quality, and greater innovation for the benefit of consumers. And that is the focus at least in the United States today.
Mikaela:
How are these laws enforced?
Jon:
There are a variety of enforcement mechanisms in the United States. Because these laws are so important, congress wanted multiple enforcements.
The justice department can proceed both criminally and civilly. The FTC, which was created in 1914, can proceed through administrative proceedings or through civil cases going to court.
In the United States, private parties can sue for treble-damages, which is a significant inducement. And state attorneys general have the ability to sue to enforce the various state antitrust laws. So there is a lot of enforcement in the United States.
Mikaela:
Looking outside of the United States now, do other countries also address antitrust issues in the same way?
Jon:
They do address antitrust issues, but they address them in a somewhat different way. In the United States, the focus is on, as I said, consumer welfare, meaning lower prices, greater output for consumers. In the European Commission and elsewhere in the world, there is also taken into account the impact on competitors, which can be inconsistent with a focus on consumers. For example, competitors like prices to rise. Consumers like prices to go down.
But in Europe and Asia and elsewhere, there are antitrust laws, they are vigorously enforced. In most instances, they're similar to U.S. antitrust laws, but in the areas of monopolization and other single firm conduct, they're quite different.
Mikaela:
What are the major types of prohibited behavior in the United States?
Jon:
So the antitrust laws prohibit a wide variety of conduct. The most serious are what we call per se offenses. Those include price-fixing among competitors, division of markets among competitors, bid-rigging among competitors. And those actions can be prosecuted criminally by the Department of Justice.
There are also civil matters as well. Both the Department of Justice and the FTC, as well as states attorneys general can enforce the prohibition against anticompetitive mergers. That requires a showing that the merger is going to harm competition in the marketplace. And there's quite a bit of enforcement activity on mergers.
There are also what we call rule of reason offenses, where illegality depends upon the effects in the actual market. And those would include resale price control, certain tying arrangements, and certain exclusive or nearly exclusive dealing arrangements.
So there's section two of the Sherman Act, which prohibits monopolization and attempts to monopolize. And under section two, predatory pricing, i.e., pricing below cost to eliminate a competitor, is prohibited. Certain refusals to deal are prohibited. And a number of rule of reason offenses taken by monopolists, such as exclusive dealing by a monopolist, can also be prohibited under section two.
There's also a statute in the United States called the Robinson-Patman Act, which is rarely enforced, and it's only enforced these days by private parties, that prohibits certain types of price discrimination among customers.
Mikaela:
And now for the million-dollar, or potentially billion-dollar question. How can businesses best avoid running into antitrust problems?
Jon:
Well, that is the big question. The key is issue spotting, understanding what issues present antitrust problems, or at least what issues would warrant a call to antitrust counsel.
Knowing when to contact in-house experts or outside counsel is very important. A second and important thing for companies is to have compliance programs, to have counsel come in, explain the antitrust laws, explain the dos and don'ts so that the business executives have a much better idea of what they can do, what they should not do, and for those areas that are in the middle, when they should approach counsel for advice. And then finally, for the safest protection, a number of companies engage in antitrust audits. That is, having counsel come in, interview personnel, look at emails and other documents to ensure that the company is in compliance.
Mikaela:
Well Jon, I don't want to monopolize your time, so thank you so much for joining us today. This was very helpful. And to our audience, thank you so much for tuning in to the fundamentals of antitrust law.
