Antitrust laws in the USA, what are they and why?


As far as I understand, antitrust laws prevent a monopoly. What I don’t understand is why is there a law against this? If your product is successful enough that everyone wants it/needs it, why is that a bad thing?

I searched for an answer to this, but the questions are more specific. In this question, since I don’t know about the concept, I’d like to know why such law is a thing.

In: Economics

Basically, if you are the only provider for a good or service, you could charge exorbitant amounts of money and people would have no alternatives. History has shown that monopolies tend to make things worse for consumers.

Companies want one thing: profit. They will do anything to get this. The consumer benefits most from this when companies improve their services and lower costs in an effort to gain customers and profit.

Sometimes, however, companies act together to screw over customers and profit together. For example, companies might collectively agree to not lower their prices. Other times, companies will grow so large that there is no competition. If this occurs, the company has no incentive to not screw over customers. While companies can achieve this by being really good at their service, it’s more likely that they used some kind of business practice that doesn’t really benefit the consumer in order to eliminate their competition.

Questions about the US are generally better in r/askanamerican.

> As far as I understand, antitrust laws prevent a monopoly

No, that is a common misconception. Anti-trust laws prevent companies from abusing their market share to shut competitors out of the market.

The classic example is Wal-Mart coming to town. They would open up their store and offer super-low prices, so low that they were losing money. The local stores can’t compete with those prices so Wal-Mart keeps them there until the local stores go out of business.

Then, when all their competition is out of business, Wal-Mart jacks their prices right back up. That wasn’t genuine competition, WM “won” by being a bigger company, not by delivering goods more efficiently.

That is the kind of behavior that anti-trust laws try to prevent.

Antitrust laws prevent unfair monopolies. If your product is the best, then that’s fine. But if you buy out and shut down your competitors, or artificially drop prices to bankrupt competitors, or tiger wise exert positions of power to unfairly manipulate a free market, then antitrust laws apply.