What are antitrust laws for, when competition is normal with businesses?
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Antitrust laws protect competition. With some careful strategy, large businesses can team up with their few “competitors” and agree not to compete. Meanwhile, they sealclub any new businesses that may one day become competitive.
When you have a trust that means that there is no more competition. A trust is literally a bunch of companies deciding in a back room deal that they will not compete with each other and will instead fix prices and in other ways cooperate for their mutual gain.
There are laws against it because this is a situation that is very bad for consumers and for every other industry tied to the industry with the trust.
Antitrust laws are to prevent lack of competition, for example a company acquiring their competitors to the point they have a huge percentage of the market; or artificially lowering prices to drive competitors out of business so that they can gain a huge share of the market and raise prices.
When antitrust issues come up on the news, it usually accuses some company of gaining advantage against their competitors. Isn’t this the point of building a successful business? When does it become unfair or illegal?
Competition is very much not normal with businesses. It is the easiest case to study and the most efficient kind of market, but many industries do not tend “naturally” towards competition. Instead, businesses realize that if they can combine and collude to the point where the market is *not* competitive, they can collect significantly higher profits. Antitrust laws (in theory) stop them from doing this.
As a business grows larger and more successful the infrastructure they build makes it increasingly harder for anyone else to enter their market space and have a chance at competing for any reasonable amount of market share.
If this goes on long enough you end up with a single business that controls the entire supply of a certain product. And that’s very bad for the consumer. Without any competitors left to buy from, the single remaining business who controls the supply can now demand whatever absurd price they want and you’re forced to pay it or go without the product.
Anti-trust laws attempt to prevent this by preventing any single company from controlling too much of the market share for a single commodity, thereby protecting competition.
Antitrust laws concern “unfair” competition, or other situations where the intended competition is distorted in some way.
Maybe one company has a monopoly in a certain industry or region. Maybe a company is using its market dominance to coerce trading partners into one-sided agreements. Maybe a company is coercing customers to buy additional products that are only compatible with with the product in which they have market dominance. Maybe multiple companies are agreeing to set prices higher and profit off of consumers instead of competing with one another. Maybe multiple companies are agreeing to divide up a region or set of consumers so that they are competing in a broader sense but can set higher prices or perform worse customer service without an immediate fear of losing the customer.
Exactly to promote competition.
If you let businesses set pacts of non-aggression (aka cartelization) there is no more competition.
If you let one single business dominate the entire market (aka monopolism) there is no more competition either.
I was in IT in the late 80s/early 90s. Microsoft was a monster.
Whenever a smaller company had a successful product, Microsoft would give them two options. Sell to Microsoft at whatever price they decided to pay or Microsoft would come up with a similar product and bankrupt them.
I saw lots of good companies get steamrolled. Definitely stifled competition and innovation.
You have a lemonade stand on your street and I have one on mine.
We could compete, which would force us to come up with better and cheaper recipes over time to try to be better than the other.
But that’s too much effort. We could team up, agree on the same high price that would benefit both of us.
What if a third guy wants to start a stand on his street as well? We could use the money that we gained from our artificially high prices to pay the mayor to come up with some law or regulation that we can easily comply with, but we know he can’t.
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