Competition and Anti-Trust Law

In the markets of the past century, there have been various attempts to achieve the following – to increase the amount of competition in any given market. The reason for laws to govern this is simple – when a small group of individuals or companies controls a segment of the market, they can drive up prices without restraint.

Such laws which prohibit business practices preventing the creation of competition have existed since Roman times, where it was illegal to prevent ships from making deliveries of grain. Currently, the laws are used to ensure that it is not only large companies that are able to enter a given market, that mergers and acquisitions do not reduce the amount of competition, and that cartels, whereby different companies get together and form a group, are banned in many countries.

The laws differ between each country, but the fundamentals are the same. If you want to start a business in a particular field, that is your right, and existing companies cannot stop you. You are not allowed to infringe on their patents, trademarks, and copyrights, but you can create a similar product and compete. You are not allowed to get together with your competition and agree on a price for your goods. You are not allowed to buy out your competition if that would give you complete control over the market segment.

The reason the laws are referred to as anti-trust laws are because in the early 19th century, trusts were often utilized as a means of controlling competition. While trusts on their own are perfectly legal, the use to which they were applied was not. As a result, various Acts (the Sherman Act, the Clayton Act) where passed to prevent such practices.