Illinois Law
Illinois Antitrust Law
- Antitrust Law
Antitrust Law
Actions Prohibited Under Antitrust Laws
Monopolies
A business has a monopoly in the market if it has such an advantage over all other businesses in that field that it is said to have economic control. The company with the monopoly may be the only manufacturer of a particular commodity, or it may provide a service in the community to virtually all consumers desiring the service. A natural monopoly is one over which the business has no controlit forms in the normal course of a growing economy. The market may be so specialized, for example, that no other businesses have found it feasible to establish themselves in that area. A public utility is a good example of a natural monopoly. Natural monopolies are not illegal. It is illegal, though, for a business to conspire with others to drive its competitors out of business in order to create a monopoly.Unlawful Relationships With Competitors
Arrangements between competitors are called horizontal arrangements under antitrust law. Some of these arrangements run afoul of antitrust laws. Generally, the agreements businesses enter into are unlawful only if they are for the intentional purpose of restraining trade or gaining a monopoly in the market. Some agreements are per se illegal, however. A per se illegal relationship with a competitor is one in which no anti-competitive intention must be proved. The arrangement itself, no matter what the purpose, is against the law.Collective Refusal to Deal
A collective refusal to deal, also called a group boycott, is a concerted decision by competitors not to do business with another business. Unlike a single company's boycott, or a boycott by consumers of a particular business, a group boycott is unlawful because it has the effect of restraining freedom of trade. Collective refusals to deal are per se violations of the antitrust laws, that is, even if the businesses do not intend to restrain competition, their group boycott violates antitrust law.Joint Ventures
Obviously, a joint venture is not in and of itself an unlawful business action. However, depending upon the parties involved, joint ventures sometimes violate antitrust laws. If a joint venture between several competitors in a market excludes othersespecially if there are more businesses included in the joint venture than those excludedthere may be an antitrust violation. For example, if all photography equipment and processing companies in Chicago form a joint venture, excluding two independent film processing stores, the participants in the joint venture probably are engaging in unlawful business actions.Market Division
When competing businesses agree to divide up the market between themselves, they have engaged in market division. They may divide the market geographically, agreeing they will not enter the geographic area assigned to their competitors for the purpose of selling their products or services. They may divide the market by product, agreeing not to manufacture certain products so as to allow competitors to do so. They even may allocate particular customers between themselves. If the purpose and effect of dividing the market is to limit competition between them, the businesses have engaged in an unlawful antitrust activity.Price Fixing
Horizontal price fixing is the agreement between competitors to set their prices the same or within the same range. For example, if the major airlines meet and agree to offer a particular price on round-trip tickets to Paris, they have fixed prices in contravention of the antitrust laws. Depending on the circumstances, price fixing is per se illegal.Tying
Tying occurs generally when a company requires buyers to purchase one product or service (called the "tied" product or service) in order to obtain another product or service (the "tying" product or service), and the arrangement restrains trade. Illegal tying is a per se violation of the antitrust laws. Three elements must be present to constitute an illegal tie-in per se:- A tying scheme must exist, in which buyers are required to buy one commodity or service in order to obtain another commodity or service
- The seller must have enough economic power in the tying product to allow it to significantly restrict the market for the tied product
- A fairly substantial amount of interstate commerce in the tied product must be affected
Unlawful Relationships Between Businesses and Customers
Antitrust law prohibits some actions between businesses at different levels of the market. Agreements or actions between businesses and customers, between manufacturers and distributors, or between distributors and retailers, are called vertical arrangements. As a general rule, vertical arrangements are less likely than horizontal arrangements to violate antitrust laws.Exclusive Dealing
Although generally companies are free to do business with whomever they chose, some antitrust laws put a limitation on this freedom. Exclusive dealing arrangements, like market divisions, are illegal if they have the effect of lessening competition. A company that manufactures beach wear, for example, may not enter into a contract to sell its products to a retailer on the condition that the retailer refuse to carry any other lines of beach wear. The retailer should be able to carry the products of competing businesses.Price Discrimination
If it is intended to injure competition, or if it has that effect, discriminating in price is prohibited by antitrust law. Sellers are not allowed to charge two purchasers different prices for the same product, unless it is for a lawful purpose. For instance, a sale to dispose of damaged or perishable goods is not price discrimination in contravention of antitrust law. On the other hand, it is unlawful for a petroleum distributor to deal with a particular gas station differently than others, by offering the petroleum at a discount that is not offered to everyone.Price Fixing
Under some antitrust laws, a manufacturer requiring a distributor or retailer to sell its product at a set price is unlawful price fixing. Usually there must be a showing that the fixed resale price was required or compelled, for example, as part of a distributor agreement. Merely suggesting a resale price is not unlawful.Basic Federal Antitrust Scheme
The Sherman Antitrust Act
The Sherman Antitrust Act is the basic federal antitrust statute. It prohibits businesses in interstate commerce from contracting, combining, or conspiring to restrain trade, or attempting to monopolize the market in a particular area of business. Violations of this Act include making contracts that unreasonably restrain trade, price fixing, group boycotts, allocating markets, and attempting to form and maintain a monopoly in an industry to injure competition. Persons found in violation of certain aspects of the Sherman Antitrust Act may be fined or jailed. In practice, however, these violations generally are handled by civil, rather than criminal, lawsuits. The Antitrust Division of the Department of Justice (DOJ) enforces the Sherman Act.The Clayton Act
The other major federal antitrust law is the Clayton Act. This law specifically prohibits leases, sales, contracts for sale, or other conditions, agreements, or understandings that have the effect of substantially lessening competition or creating a monopoly in a line of commerce. Price fixing, price discrimination, tying, and exclusive dealing are covered by this law.An amendment to the Clayton Act was enacted by Congress in 1936 to strengthen standards prohibiting price discrimination, which theretofore were seen as ineffective. This amendment, known as the Robinson-Patman Act, makes discrimination in price, services, or facilities unlawful for both sellers and buyers when it has a tendency to create a monopoly, restrain competition, or violate trade regulations. The Act seeks to assure that suppliers of products treat buyers even-handedly. It requires that buyers be given an equal opportunity to participate in certain types of seller programs relating to resale, such as advertising and promotional programs, and that such benefits be disbursed to buyers on equal terms in proportion to their participation.
The Clayton Act also is enforced by the DOJ. The Federal Trade Commission (FTC) has co-jurisdiction with the DOJ to enforce this Act, although the DOJ has exclusive jurisdiction to enforce its criminal aspects. Also, each individual state is considered a "person" under the Act. A state may file an antitrust action as an injured party, seeking injunctive relief or damages.
The Federal Trade Commission Act
Deceptive statements or acts violate the Federal Trade Commission Act if they constitute unfair competition affecting commerce. A business violates this Act if it is responsible for a material practice, representation, or omission likely to mislead reasonable consumers. People and businesses are proscribed from making false statements about their own products or the products of competitors, if the advertisements or statements have the effect of deceiving or tending to deceive consumers regarding a purchasing decision. The primary goal of this statute is to protect the public from anti-competitive acts. There is no private right of action; the FTC represents the public in lawsuits to enforce this Act.Illinois Antitrust Law
Antitrust Law
The Illinois Antitrust Act is based largely on the federal Sherman Act and, therefore, proscribes monopolization, price fixing, tying agreements, exclusive dealing, and other conduct that unreasonably restrains trade. The Illinois Antitrust Act prohibits any contract, combination, or conspiracy between competitors to fix prices, control the supply or sale of products or services, or allocate customers or markets. These are per se violations of the Act. It is also a violation of the Act to contract, combine, or conspire in a way that unreasonably restrains trade, to attempt to acquire a monopoly, to exclude competition or fix prices, or to enter into an exclusive dealing agreement that substantially lessens competition or tends to create a monopoly.Tying arrangements are not specifically addressed by the Illinois Antitrust Act, but the Illinois Supreme Court has concluded that the legislature intended to deal with such arrangements "harshly." Tying agreementswhen a party agrees to sell one product but only on the condition that the buyer also purchase a different productare illegal per se when the party has sufficient economic power with respect to the tying product and can restrain a substantial amount of commerce in the tied product.
Also under Illinois law, a manufacturer generally has the right to deal, or refuse to deal, with whomever it likes, as long as it does so independently. In order to show an "exclusive dealing" arrangement in violation of the Act, there must be an express or implied agreement not to carry a competing product, and such an agreement must have a substantial anticompetitive effect on the market.
Some price fixing arrangements are prohibited by the Illinois Antitrust Act. Price discrimination is not necessarily a violation, however. Price discrimination violates the Act only when it is predatory and the result of a concerted refusal to deal or a conspiracy. If the plaintiff simply did not obtain the product or services at a lesser price as bargained for by a competing buyer, there is no violation.
Unfair Trade Practices
Illinois has adopted both a Consumer Fraud and Deceptive Business Practices Act and the Uniform Deceptive Trade Practices Act. The Consumer Fraud Act prohibits intentional unfair acts, practices, and methods of competition, and deceptive acts or practicessuch as fraud or misrepresentationin the conduct of trade or commerce. Even if no person actually has been misled or deceived, such deceptive practices are unlawful. In construing the Act, Illinois courts consider interpretations of the Federal Trade Commission Act. The Illinois law also identifies particular acts that are violations, including wrongfully advertising a service as "factory authorized." The Uniform Deceptive Trade Practices Act enumerates various acts that constitute deceptive trade practices, including any conduct that "creates a likelihood of confusion or misunderstanding."To state a cause of action under the Consumer Fraud Act, there must be: (1) a statement by the seller, (2) of an existing or future material fact, (3) that was untrue, regardless of the defendant's knowledge or lack of knowledge of its falsity, (4) made for the purpose of inducing reliance, (5) on which the victim relies, and (6) that resulted in damages to the victim. An advertisement, for example, is deceptive on its face if it creates a likelihood of deception or has the capacity to deceive.
How to Avoid Antitrust Violations
Create a Written Policy
Antitrust liability is a serious concern for any business, large or small. As the old maxim goes, an ounce of prevention is worth a pound of cure. A business' top management should be familiar with basic antitrust policies and laws, and should articulate a commitment to avoid behavior that unreasonably restrains trade. This business goal should be stated in a written program in which antitrust laws are described for employees, and managers are educated about how the particular business should operate to avoid antitrust liability.Avoid Conspiring with Competitors
As a general rule, avoiding all contracts, conspiracies, and concerted action with competitors will ensure that a business stays clear of horizontal arrangements that violate antitrust laws. This means never discussing certain subjects with competitors, much less contracting with them regarding issues that could be construed as trade restraint or monopoly creation. Businesses should not agree with competitors over what prices to charge, for example, nor should they divide up a product or geographic market with competitors. In fact, keeping in mind the goal of antitrust lawto encourage competitionis helpful. A businessperson should adopt a business goal of competing vigorously with his or her competitors in the market.Avoid Vertical Restraints
Businesses should deal evenly with their distributors, franchisees, and customers, avoiding contracts or agreements that favor some members of a group over others or restrain their market behavior. Tying, for example, is almost never a good idea; a business should make its products available separately. Similarly, exclusive dealing is allowed under some circumstances, but conspiring with others to exclude a competitor or competitor's distributor from the market is unlawful. Again, a businessperson who remembers that healthy competition is the best way to avoid antitrust liability, and who refrains from putting unnatural restraints on trade, will most successfully stay within the bounds of antitrust law.Resources
Eliot G. Disner, Antitrust for Business: Questions & Answers (Federal Legal Publications, Inc., New York, NY 1989).
John H. Shenefield & Irwin M. Stelzer, The Antitrust Laws: A Primer (The American Enterprise Institute Press, Washington, DC 1993).
United States Department of Justice, Antitrust Division, 10th & Constitution Avenues N.W., Washington, DC 20530, (202) 514-2410 (Regulatory Affairs).
The Competition Bureau of the Federal Trade Commission, 6th & Pennsylvania Avenues N.W., Washington, DC 20580, (202) 326-2565 answers general inquiries.
Illinois Attorney General, Public Interest Division, 100 W. Randolph St., 12th Floor, Chicago, IL 60601, (312) 814-3749.