The Disadvantages of Antitrust Laws

by Gerald Hanks; Updated September 26, 2017
wooden gavel and book on table

The objectives of antitrust laws include encouragement of fair business competition and protection of consumers and competing companies from anti-competitive business practices. Antitrust laws prohibit the unjust attainment or conservation of monopoly power, explains San Diego lawyer William Markham, as well as the misuse of monopoly power to create a new monopoly and cooperative efforts among two or more companies to restrict entry into the market by others. While these laws have been implemented with admirable intentions, they can also result in negative consequences that can hamper an industry's effectiveness.

General Language

A major disadvantage of the antitrust laws is their use of overly broad language. These laws do not always describe anti-competitive behavior such as "monopolization" or "restraint of trade" in the most precise terms. Interpretations of these laws can differ between state and federal jurisdictions. For example, some rulings issued by California courts in antitrust cases differ from those issued by federal courts.

Political Pressure

A company that holds a monopoly may become politically unpopular. Politicians may be influenced to target monopoly companies for antitrust violations. These influences can come from news media reports, uninformed voters or lobbyists for competing companies. Even in cases where a company's monopoly represents the most profitable outcome for its industry, government officials in charge of enforcing antitrust laws may be pressured into enforcing the antitrust laws at the expense of the economic health of the industry.

Worldwide Competitive Disadvantage

The United States has some of the strictest antitrust laws in the world. These stringent laws place the U.S. at a disadvantage in the world marketplace. Current U.S. antitrust laws prohibits U.S. companies from engaging with other U.S.-based companies in anti-competitive behavior. Although U.S. officials cannot prosecute international cooperative cartels like OPEC, the website USLegal explains, they can pursue antitrust litigation against foreign companies that engage in anti-competitive practices in the United States.

Enforced Competitive Behavior

The major assumption behind antitrust laws is that unrestricted competition is the ideal economic structure for both businesses and consumers. The results of unrestricted competition often lead to a small group of winners and a larger group of companies that fail to compete. When a company or group of companies becomes dominant forces within their industries, the antitrust laws seek to "correct" this apparent competitive imbalance. The laws accomplish this by compelling the dominant entities to engage in the same behavior as they would in a more competitive environment, such as charging lower prices, which can lead to lower profits and inefficient outcomes.

About the Author

Living in Houston, Gerald Hanks has been a writer since 2008. He has contributed to several special-interest national publications. Before starting his writing career, Gerald was a web programmer and database developer for 12 years. He also started Story Into Screenplay, a screenwriting blog at www.StoryIntoScreenplay.com.

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