How far can antitrust authorities
go in regulating the take-no-prisoners industry of high technology? That key question is at the heart of the Justice Department's latest investigation into Microsoft's
business practices. CNET'S NEWS.COM breaks down the legalese to give you a first-hand look at what antitrust really means.
Q: Why are antitrust laws important?
Antitrust laws encourage competition by preventing monopolies. True competition benefits
consumers by ensuring lower prices and new and better products. When competitors agree to fix prices, rig bids, or artificially divide the
market, consumers lose. The prices that result when competitors agree in
these ways are artificially high.
Q: What are antitrust laws and what do they prohibit?
Two major federal antitrust laws are designed to
protect competition. They are the Sherman Antitrust Act and the Clayton Act,
and the Federal Trade Commission Act.
The Sherman Antitrust
Act, passed in 1890, outlaws all contracts, combinations, and
conspiracies that unreasonably restrain interstate trade. In other words,
it prohibits actions such as price fixing, bid rigging,
|For example: If Microsoft achieves a monopoly simply by being the most efficient company with the best products, it
would not be breaking antitrust laws. But if Microsoft is using its strong position in the
operating system market to give it "unwarranted advantage" in the online service or video streaming market, Microsoft would be breaking the law.|
or the attempt to create a monopoly. Violations of the Sherman Act can
incur either criminal or civil penalties.
Price rigging and bid rigging are fairly straightforward, but the section
of the law that prohibits monopolies is a gray area. The courts have ruled
that a monopoly cannot simply be defined as a company that dominates the
market. What is important is not whether you have a monopoly but
how the monopoly was achieved. Companies are forbidden from
leveraging their strengths in one market to dominate another.
The Clayton Act,
|For example: The Justice Department could decide that Microsoft's investment in Apple Computer qualifies as a "joint venture" and therefore limits other companies in the operating systems or browser markets. (Apple has said it will use Microsoft's Internet Explorer as the preferred browser on the Mac
1914 (and amended in 1950 and 1978) states that mergers or joint ventures
among firms shall be prohibited where the effects will create a monopoly or
lessen competition. Under the Act, government economic analysis must show
that the merger is likely to raise prices or limit competition. The Clayton
Act is a civil statute, which means that it
carries no criminal penalties.
Q: What is the Hart-Scott-Rodino Act I keep hearing about?
|For example: The explosion of corporate buyouts in recent years and the low $15 million threshold has introduced Hart-Scott-Rodino into the common vocabulary of American business.
Just last month, the Justice Department approved the $24 billion merger of British Telecom and MCI. In April, it approved the Bell Atlantic-Nynex merger. All companies filed with the Justice
Department under Hart-Scott Rodino.|
Signed in 1976, the Hart-Scott-Rodino Act is a federal law requiring that
companies involved in potentially significant transactions notify the
government before mergers and acquisitions take place.
The law requires that participants in mergers worth $15 million
or more wait a period of time before closing the deals to give the
opportunity to decide whether they give one company too much market
Q: Who investigates federal antitrust cases?
Either the Justice Department or
the Federal Trade Commission investigates
antitrust cases at the federal level. Most states also have antitrust laws
that parallel federal antitrust regulations. The state laws, enforced by
the local attorney general, generally apply to violations that occur within
one state, but states can investigate companies that are also under federal
Q: Can individuals sue for antitrust?
Private parties injured by an antitrust violation can sue in federal court
for three times their actual damages plus court costs and attorneys' fees.
general may bring civil suits under the Clayton Act on behalf of injured
consumers in their states, and groups of consumers often bring suits on
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