Antitrust litigation was developed as a response to the threat of monopolies. Basically, some companies effectively controlled entire industries. In these instances, every step of the supply chain might be connected, allowing one company to dominate the industry.
Monopolies are a threat to fair competition in the marketplace. The creation of monopolies can create an uneven playing field, as more wealth is concentrated in the hands of fewer entities. Monopolies shrink the options available to consumers.
Antitrust laws seek to break down monopolies and unfair business practices to foster equal opportunities for business growth and success.
Antitrust litigation involves investigation into things like monopoly leveraging, price fixing or predatory pricing, unfair competition, and unfair and deceptive trade acts and practices. Antitrust litigation encourages diversification of holdings.
Monopoly leveraging is defined as the use of monopoly power attained in one market to gain a competitive advantage in another. The definition of this term has been expanding as antitrust policy in general changes in force and complexity.
The area of law dealing with monopoly leveraging is usually applied in the context of Section 2 of the Sherman Antitrust Act. Courts have sometimes used monopoly leveraging to describe the way in which monopolization is attempted or pursued.
Price Fixing and Predatory Pricing
Price fixing occurs when the price of goods and/or services is wrongfully artificially manipulated to benefit specific companies or individuals. Collusion occurs in these cases when it can be proven that companies agreed to sell competing products for the same price, essentially eliminating competition. This allows companies to dictate the price, rather than allowing the fair market of supply and demand to determine value.
Predatory pricing is a practice in which a company can lower its prices so far below its competitors as to force them out of business. To do this, a business would have to be able to sustain an economic loss for an extended period of time, selling goods or services at well below market value. Its competitors would collapse when they were unable to meet these unrealistically low prices. Predatory pricing eliminates fair competition in the marketplace.
Unfair competition falls under the area of law dealing with antitrust regulations. Unfair competition generally involves deceptive business practices that cause economic hardship to an individual, a group of individuals, or another business. Areas addressed in unfair competition legislation include fair competition, honesty in advertising and trademark protections. These cases are usually civil in nature, but may sometimes result in criminal charges.
Unfair competition laws may also define the circumstances under which damages may be recovered. Both consumers and competing businesses can claim damages.
Two main areas of unfair competition laws are unfair business practices and deliberate attempts to misrepresent a product. There may also be national laws and regulatory agencies that protect against unfair competition.
Practices that might fall under unfair competition laws include:
- trademark infringement;
- false advertising;
- selling products by using bait-and-switch techniques;
- using similar packaging or a similar name to confuse customers into thinking they are buying a different product;
- misstating ingredients or appropriate product use;
- badmouthing the quality of a competitor’s product.
Unfair and Deceptive Trade Acts and Practices
Unfair business practices occur when a business acts in a manner that breaches the general consumer trust in such businesses. They can apply to many industries, from the obvious in the purchase of various products and services to less obvious cases such as debt collection and tenancy matters.
Usually matters that are classified as unfair business practice involve fraud, misrepresentation, or an act that by its commission alone implicates the business in having leveraged terms that are excessively unfair.
Unfair business practices laws are designed to protect consumers. The statutes usually will define the type of act that qualifies as an unfair business practice and state the recommended remedy. This usually involves restitution but may also grant an injunction to cease the practice in question.
If the circumstances are particularly egregious, the court may mandate punitive damages or an injunction to cease operations altogether. Many jurisdictions require that anyone filing a claim for unfair business practices suffer some sort of tangible financial damage.
Deceptive Trade Practices is a broad term for unfair and injurious consumer practices. This may include false or deceptive advertising or other practice that will likely mislead a consumer, to that consumer’s detriment. Deceptive trade practices are regulated by the Federal Trade Commission (FTC). Also, each state has consumer protection statues that allow state attorneys, together with consumers, to file lawsuits over unfair consumer practices.
Bait and Switch
The term “bait and switch” is commonly used when talking about a deceptive trade practice in retail sales. This term is applied when a retailer promises a customer one type of product or deal in its advertising, but when the customer visits the shop the advertised deal is not available. Generally, at this point, the customer is switched to a more expensive product. The logic is that the retailer lures in the customer with the “bait” of a great deal, then takes advantage of him when he’s already in the store and more likely to settle for something different than what was promised.
A bait-and-switch operation is a form of false or misleading advertising, which is regulated by consumer protection statutes as Fraud.
While most commonly seen in the retail sales industry, bait-and-switch tactics also can be found in the following instances:
- Employers who advertise a job opening that gives a misleading impression of duties, working condition or compensation,
- Hotels – advertising a lower rate and tacking on hidden fees upon check-in,
- Telecommunication Companies – offer services at introductory price and then escalate the price drastically after that time period,
- Contractors – add on extra fees in excess of the service estimate.