US prosecutors recently filed antitrust charges against one of the nation’s largest internet search providers in their first crackdown against a tech company for anticompetitive practices since 1998. The US Department of Justice (DOJ) claims the company’s use of exclusionary contracts and other business practices reinforce its dominant position in the market to the detriment of consumers.
What are antitrust laws?
Antitrust laws prohibit practices that restrain competition, such as competitor agreements, mergers and acts designed to achieve or maintain monopoly power. The major US antitrust laws — the Sherman Act, the Federal Trade Commission Act and the Clayton Act — aim to promote and protect competition in the marketplace and ensure consumers benefit from lower prices, higher quality, more selection and better customer service. Businesses must comply with federal antitrust laws the Federal Trade Commission (FTC) and DOJ enforce, as well as with state antitrust statutes that states’ attorney generals oversee.
US Supreme Court Justice Thurgood Marshall wrote that antitrust laws “are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.”
DOJ alleges agreements reinforce dominant market position
According to the DOJ, the tech giant’s use of contractual agreements and other practices force consumers to use its services to the detriment of its competitors. The DOJ maintains that these business dealings have helped the company grow to its current dominant position in which it controls almost 90% of online searches in the US.
US regulators point to agreements that pay other companies to prioritize the tech giant’s search engine results over others, as well as requiring they install its search engine platform on mobile devices and computers, specifically prohibiting competitors’ platforms. While the tech company argues consumers do have the choice to use other services, the DOJ maintains that it has monopolized the search engine market to such an extent that it’s not feasible for others to challenge the company’s dominance. The government maintains that by restricting search engine competition, the company offers consumers and advertisers less choice and competitive prices, which stifle innovation in the market.
Antitrust violations bring severe consequences
The DOJ has not yet proposed potential remedies — such as selling off parts of the company or unwinding business contracts — as such issues are typically pursued in the later stages of a case. Besides such actions to reduce the company’s market power, the tech giant faces significant fines and penalties if found guilty.
The Sherman Act authorizes both civil and criminal penalties against individuals and businesses. While most enforcement actions are civil and criminal actions generally are restricted to clear and intentional violations, criminal penalties can run up to $100 million for a corporation and $1 million for an individual, together with up to 10 years in prison. The Clayton Act also authorizes private parties to sue for triple damages when they have been harmed by conduct that violates either the Sherman or Clayton Act; they may also obtain a court order prohibiting the anticompetitive practice in the future. On top of federal penalties, companies face state and even foreign penalties if they are found to have violated state or foreign antitrust laws.
Although the government may be focusing on big tech companies at the moment, antitrust laws apply to virtually all industries and business activities, at every level. And companies don’t need to be dominant to violate antitrust laws. Agreements to fix prices or bid rigging can also get a company into serious trouble with enforcement authorities. As part of a comprehensive compliance program, antitrust and competition law training helps ensure employees understand the principles of fair competition and their responsibility to recognize and avoid antitrust behavior.