Competition law, also known by many as antitrust law, is the field of law that promotes and maintains market competition by regulating anti-competitive conduct by companies.
The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds, and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the late 20th century, competition law has become increasingly global. The two largest and most influential systems of competition regulation are United States antitrust law, named after the trust busting of monopolistic trusts, and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks.
Modern competition law has historically evolved on a national level to promote and maintain fair competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at the nation-state level. Countries may allow for extraterritorial jurisdiction in competition cases based on so-called "effects doctrine". The protection of international competition is governed by international competition agreements.
Overview Competition law is the field of law that promotes and maintains market competition by regulating anti-competitive practices by companies. In some jurisdictions, such as the United States, competition law is known as antitrust law because of the historical practice of "trust busting" monopolistic trusts. It is sometimes also known by reference to its functions, for example, as "anti-monopoly law".
The aims of competition law are to combat economic cartels, prevent market abuse, regulate mergers and acquisitions, encourage innovation, protect consumers, and increase overall economic productivity.see, Organisation for Economic Co-operation and Development's Regulation and Sectors page. Competition law is rooted in the field of industrial organisation in economics, which studies the interaction between market structure, firm behaviour, and market power, including factors such as barriers to entry, economies of scale, and network effects. To control market power, judges and other legal officials have to rely on economic analysis, often relying upon or working with economists to do so.
History
Early forms of competition law were enacted during the Roman Republic and, later, the Roman Empire.Wilberforce (1966) p. 20Wilberforce (1966) p. 21Wilberforce (1966) p. 22 In continental Europe, competition principles developed in the medieval , while Medieval England also enacted a number of statutes controlling trade practices,Pollock and Maitland, History of English Law Vol. II, 453Wilberforce (1966) p. 23 with the common law courts creating a number of competition law doctrines that remain to this day.according to William Searle Holdsworth, 4 Holdsworth, 3rd ed., Chap. 4 p. 346
Major developments to competition law occurred with the growing rise of the market economy, industrialization, and modern capitalism. Throughout the 18th and 19th centuries, the idea that dominant private companies or legal monopolies could excessively restrict trade led to legal reforms in Europe. However, following the Panic of 1873, ideas of competition lost favor, and it was felt that companies had to co-operate by forming cartels to withstand huge pressures on prices and profits.
While the development of competition law stalled in Europe during the late 19th century, in 1889 Canada enacted what is considered the first competition statute of modern times. The Act for the Prevention and Suppression of Combinations formed in restraint of Trade was passed one year before the United States enacted the Sherman Act of 1890. During the early 20th century, legal trusts were employed by business conglomerates to establish monopolies, which led to the development of "antitrust law" in the United States.
As of 2020, over 140 competition law regimes have been established. A majority of these competition law systems were adopted in the past 30 years, following the collapse of the Soviet Union and the expansion of the European Union. Currently competition authorities of many states closely co-operate, on an everyday basis, with foreign counterparts in their enforcement efforts, in such key areas as information and evidence sharing.Marek Martyniszyn, Inter-Agency Evidence Sharing in Competition Law Enforcement , 19(1) International Journal of Evidence and Proof 11 (2015)
Rationale
Whilst competition law aims to improve economic efficiency by maintaining competitive rates and levels of productions, it is nonetheless possible, under some circumstances, for anticompetitive practices to increase welfare, or for competition law to decrease efficiency and increase costs to consumers.Bork (1993), p. 56
Sources of law The English common law of restraint of trade is sometimes regarded as the direct predecessor to modern competition law."... the modern common law of England [has] passed directly into the legislation and thereafter into the judge-made law of the United States." Wilberforce (1966) p. 7 English courts subsequently decided a range of cases which gradually developed competition related case law, which eventually were transformed into statute. For example, in 1889, Canada enacted what is considered the first competition statute of modern times: The Act for the Prevention and Suppression of Combinations formed in restraint of Trade. A year later, the United States enacted the Sherman Act of 1890. Modern competition law comprises both national and international sources of law. National competition law usually does not have extraterritorial jurisdiction, unless the economic activity has had a significant national impact, a principle known as the effects doctrine.JG Castel, 'The Extraterritorial Effects of Antitrust Laws' (1983) 179 Recueil des Cours 9 International competition law, such as European Union competition law, may have cross-jurisdictional or supranational effect, which may include criminal sanctions.Peter Whelan, The Criminalization of European Cartel Enforcement: Theoretical, Legal and Practical Challenges , Oxford University Press, 2014Office of Fair Trading, Modernisation: Understanding competition law , p. 4, published December 2004, accessed 27 November 2023In 1947, the General Agreement on Tariffs and Trade (GATT) was adopted. In 1994, the World Trade Organization (WTO) was created, establishing a range of limited provisions on various cross-border competition issues on a sector specific basis. Various proposals have been made historically for the establishment of a global antitrust code, but there remains, at present, no global competition law.see a speech by Wood, The Internationalisation of Antitrust Law: Options for the Future 3 February 1995, at http://www.usdoj.gov/atr/public/speeches/future.txt Whish (2003) p. 448 While incapable of enforcement itself, the International Competition Network (ICN) is a way for national authorities to coordinate their own enforcement activities.see, http://www.internationalcompetitionnetwork.org/
Doctrine For competition law to intervene into business activity, there must be a significant threat to market competition, consumer welfare, or economic efficiency.DG Competition, DG Competition discussion paper on the application of Article of the Treaty to exclusionary abuses PDF. . accessed 4 May 2018.See .See Competition_and_Consumer_Act_2010. Competition law aims to control a number of business practices, including monopolies and market dominance, abusive conduct, mergers and acquisitions (including horizontal and vertical agreements), and subsidies.
An early stage in assessing competition law cases is the determination of the relevant market in which competition occurs, for the purposes of microeconomic analysis of factors such as market elasticity, price, and substitute goods.See J. Gregory Sidak & David J. Teece, Rewriting the Horizontal Merger Guidelines in the Name of Dynamic Competition, 16 GEO. MASON L. REV. 885, 887 (2009); J. Gregory Sidak & David J. Teece, Dynamic Competition in Antitrust Law, 5 J. COMPETITION L. & ECON. 581, 584 (2009), https://www.criterioneconomics.com/dynamic-competition-in-antitrust-law.html.Bishop, Simon and Mike Walker (1999): The Economics of EC Competition Law. Sweet and Maxwell.Guidelines on relevant market definition with a view to determining the significant market share. Taken from www.globalcompetitionforum.org . Under the supranational EU law, a relevant market is the intersection of both the relevant product market and the relevant geographic market. The SSNIP test is usually used to define markets via assessment of demand-side substitution.The Unilateral Conduct Working Group, ‘ICN's Unilateral Conduct Workbook Chapter 3 ’ < http://www.internationalcompetitionnetwork.org/uploads/library/doc752.pdf> last accessed 4 May 2018
After defining the market, the courts may inquire as to whether a monopolization (in US law) or market dominance (in EU law) has arisen.Vatiero, M. (2009). "An Institutionalist Explanation of Market Dominances. World Competition". Law and Economics Review, 32(2):221–226. In the United States, monopoly pricing is not inherently regulated, whereas EU law considers it an antitrust offence.Greenspan, Alan, "Antitrust" , in Capitalism:The Unknown Ideal by Ayn Rand. Also The Question of Monopolies by Nathaniel_Branden defines and discusses coercive monopoly. Even where there is no monopolistic or dominant abuse, a company may be sanctioned if they acted abusively, for example, in collusion or cartelism.Kevin Scott Marshall, Stephen H. Kalos, The Economics of Antitrust Injury and Firm-specific Damages (2008), p. 228.
Abusive conduct and abuse of market position Competition laws across jurisdictions also prohibit certain categories of abusive conduct, although the categories may differ by jurisdiction, and the list of prohibited conduct are often variable and open to new additions.Continental Can Common forms of abuse as recognised across jurisdictions include the unfair tying of one product into the sale of another, causing a restriction of consumer choice and depriving competitors of outlets;Microsoft Corp. v Commission of the European Communities (2007; T-201/04). , exclusive dealing or refusal to deal with certain vendors; dividing territories among different companies to reduce competition in those territories; price fixing among cartels;Connor, John M. (2008): Global Price Fixing: 2nd Paperback Edition. Heidelberg: Springer. and the deprivation of essential facilities.Sullivan, E. Thomas, and Hovenkamp, Herbert. Antitrust Law, Policy, and Procedure: Cases, Materials, and Problems, Fifth Edition. LexisNexis Publishers, 2004. pp. 701–706.