Competition law
Overview
Competition law, also known as antitrust law in the United States, is a field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It has a critical role in promoting fair competition and economic freedom, which are essential for the efficient functioning of markets.
History
The history of competition law reaches back to the Roman Empire. The Lex Julia de Annona statute was enacted during the Roman Republic around 50 BC. To protect the grain trade, heavy penalties were imposed on anyone directly, deliberately, and insidiously stopping supply ships. Under Diocletian, in 301 AD, an Edict was issued, which attempted to establish economic stability by setting maximum prices for goods, but this was largely ineffective.
The origins of modern competition law can be traced back to the United States' antitrust laws, which were enacted in response to the monopolies that dominated the country's economy in the late 19th century. The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies, who were able to fix prices, dictate terms, and effectively control trade in the United States.
In Europe, competition law emerged in parallel with the creation of national monopolies and the development of socialist economies. The Treaty establishing the European Economic Community was signed in 1957, which included provisions for maintaining competition within the Common Market.
Principles
Competition law is based on three core principles: prohibiting agreements or practices that restrict free trading and competition between business entities; banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position; and supervising mergers and acquisitions of large corporations, including some joint ventures.
Agreements and Practices
Competition law seeks to prohibit agreements that could disrupt free trade and competition between business entities. These include agreements to fix prices, divide markets, or create restrictive supply agreements. Such agreements, which are often secret, are generally prohibited by competition law, as they are inherently anti-competitive.
Abuse of Dominance
Abuse of a dominant position occurs when a dominant firm in a market uses its position to engage in practices that restrict competition. This could include predatory pricing, tying, price gouging, refusal to deal, and many others. Competition law seeks to regulate and prevent such abuses.
Mergers and Acquisitions
Mergers and acquisitions can have significant effects on the competitive landscape of an industry. Therefore, competition law regulates these transactions to prevent them from creating or strengthening a dominant player in the market. In some jurisdictions, the competition authority can also block mergers and acquisitions that are believed to have negative effects on competition.
Enforcement
Competition law is enforced through both public and private enforcement. Public enforcement is carried out by competition authorities, which have the power to investigate potential anti-competitive behavior and impose penalties. Private enforcement, on the other hand, is carried out by individuals or companies who bring claims for damages in courts for loss suffered as a result of anti-competitive behavior.
International Cooperation
In today's globalized economy, anti-competitive practices can affect not only national markets but also international trade. Therefore, competition authorities from different countries often cooperate with each other in enforcing competition law. This can include sharing information, coordinating investigations, and assisting each other in enforcing decisions.