Updated July 21, 2022
Antitrust Law: An Introduction
Recent years have witnessed a resurgence of both popular
that it is both descriptively and normatively incomplete.
and political interest in antitrust. This renewed attention has
One point of contention involves anticompetitive conduct
produced a flurry of legislative activity, with several
by buyers, which most directly harms sellers rather than end
Members of Congress introducing proposals to reform
consumers. Whether—and how—such harms are relevant
various elements of competition law. This In Focus
under the consumer-welfare standard is a complicated
provides an overview of antitrust doctrine and selected
question. In some cases, reductions in buy-side competition
antitrust legislation pending before Congress.
do harm consumers. For example, a merger that gives a
firm the ability to depress input prices by purchasing less
The Goals of Antitrust
may harm consumers by leading to lower output. In other
The antitrust laws are designed to protect economic
buy-side cases, however, injuries may be limited to sellers.
For example, a merger might increase a firm’s bargaining
competition. At that level of generality, there is little
controversy. However, there is profound disagreement
leverage with suppliers without giving it incentives to
about antitrust’s more specific goals. Safeguarding
purchase fewer inputs. In that case, the main effect of
“competition” can mean a variety of things, and disputes
diminished competition may be a wealth transfer from
about the appropriate targets of antitrust policy have
sellers to the powerful buyer, without any effects on final
persisted since its inception.
output. Powerful buyers may even benefit consumers by
passing along some of their cost savings. Some
Economists tend to approach this issue with similar
commentators have appealed to these fact patterns to argue
that “trading partner welfare” or safeguarding the
discussions of the effects of market power—the ability of a
“competitive process” represent more descriptively accurate
firm to profitably charge prices above levels that would
prevail in a competitive market. Economic theory identifies
and normatively desirable benchmarks for antitrust policy
two relevant effects. First, market power can produce
than consumer welfare. The possible tension between these
allocative inefficiency: when prices exceed competitive
goals and the consumer-welfare standard may become
levels, some consumers who would have purchased a
increasingly salient as antitrust enforcers take a greater
product at the competitive price choose to forgo it or
interest in labor markets, where workers rather than
substitute less desired alternatives. Thus, market power can
consumers are the most direct victims of anticompetitive
lead to suboptimal allocations of scarce resources. Second,
conduct.
market power can result in wealth transfers: consumers
who buy a product at an uncompetitive price are poorer
The above discussion does not exhaust the possible ends
than they would be in a competitive market, while the seller
that antitrust can serve. There is a long-standing debate over
is richer.
whether antitrust should promote “noneconomic” objectives
like personal liberty, protecting small entrepreneurs, or
Today, antitrust is principally concerned with preventing
preserving the integrity of the political process. Although
anticompetitive conduct that enables firms to exercise
there has recently been a resurgence of interest in such
market power. However, the distinct effects of market
goals among some antitrust commentators, those
power highlight a fissure in the debate over antitrust’s more
considerations have not played an explicit role in the
foundational goals. In a narrow subset of cases, efficiency
development of antitrust decision rules for several decades.
and consumer welfare may pull in opposite directions. For
The Key Statutes
example, some mergers may lower production costs, but
The persistence of disputes over antitrust’s goals may be
also increase market power. Some commentators—
advocates of a “total welfare” standard—maintain that
partially attributable to the sparseness of the key federal
antitrust should permit such transactions as long as the
antitrust statutes. The three core provisions—Sections 1 and
gains in productive efficiency outweigh the losses in
2 of the Sherman Act and Section 7 of the Clayton Act—
allocative efficiency and consumer welfare. By contrast,
are succinct and vague, effectively granting the federal
defenders of the “consumer welfare” standard advocate
courts common law authority to fashion competition policy
blocking such deals when they are likely to effectuate a
based on prevailing economic theories.
wealth transfer from consumers to producers. Although the
Section 1 of the Sherman Act: Restraints of Trade
competition laws of some countries embrace the
Section 1 of the Sherman Act prohibits contracts “in
total-welfare standard, U.S. antitrust doctrine prioritizes
restraint of trade.” Under Section 1 doctrine, a few types of
consumer welfare and does not typically permit producer
gains to offset downstream harms.
agreements are per se illegal because they almost always
harm competition. The per se category now encompasses
While the consumer-welfare standard thus plays a central
horizontal price fixing, horizontal market allocation, and
role in contemporary U.S. antitrust, some have suggested
some horizontal boycotts. (In antitrust parlance, agreements
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Antitrust Law: An Introduction
between competitors are described as “horizontal,” while
institutions (e.g., abuse of standard-setting organizations or
agreements between firms at different points in a
enforcement of fraudulent patents); and exclusionary
distribution chain are described as “vertical.”)
product design (i.e., designing products in ways that make
it difficult for rivals to produce substitutes).
While a narrow range of conduct remains per se illegal
under Section 1, most agreements are evaluated under what
Section 7 of the Clayton Act: Mergers
is called the Rule of Reason, which requires plaintiffs to
Section 7 of the Clayton Act prohibits mergers and
establish that a defendant has market power and that a
acquisitions that threaten “substantially to lessen
challenged restraint harms competition. Today, many
competition, or to tend to create a monopoly.” Today,
horizontal restraints and all vertical restraints except tying
merger control is largely a bureaucratic affair. The
arrangements—which are governed by a special test—are
Department of Justice and Federal Trade Commission—the
subject to the Rule of Reason. Courts ordinarily employ
federal antitrust enforcers—play a central role in merger
some variation of a three-part burden-shifting framework in
law via the Hart-Scott-Rodino “preclearance” process and
Rule-of-Reason cases. Under that framework, plaintiffs
the promulgation of merger guidelines. Substantively,
bear the initial burden of proving that a challenged restraint
Section 7 doctrine has shifted from a largely structural
has a substantial anticompetitive effect. If the plaintiff
approach that prevailed in the 1950s and 1960s—which
carries that burden, the defendant must then adduce a
heavily emphasized market concentration levels and was
procompetitive rationale for the restraint. If the defendant
highly skeptical of consolidation—to more flexible
can do so, then the burden shifts back to the plaintiff to
inquiries into the details of specific industries and theories
show that the procompetitive efficiencies could be
of harm. In horizontal mergers, the regulators typically
reasonably achieved through a less anticompetitive means.
evaluate two possible harms: coordinated effects (i.e.,
whether a transaction will facilitate collusion or parallel
Federal courts have also held that some restraints that are
pricing) and unilateral effects (i.e., whether a transaction
not per se illegal can nevertheless be condemned under
will give a firm unilateral pricing power). In vertical
Section 1 without a full Rule-of-Reason analysis. The
mergers, by contrast, the agencies assess whether a
framework for these “quick look” cases is not definitively
transaction will foreclose rivals’ sources of supply or
settled, but the basic idea is that some types of conduct are
distribution, raise entry barriers, facilitate the exchange of
inherently suspect even if they are not per se illegal. As a
competitively sensitive information, or enable collusion.
result, plaintiffs can prevail in such cases without detailed
market analysis or proof of anticompetitive harm. Courts
Selected Legislation
have applied the “quick look” analysis to horizontal
The 117th Congress has featured several bills that would
restraints involving self-regulation of learned professions,
reform various aspects of antitrust law.
output restrictions in markets that require some cooperation
among competitors, and anticompetitive agreements that
Restraints of Trade. S. 2375, S. 483, and H.R. 1367 would
arguably have noncommercial motivations.
prohibit non-compete agreements in employment contracts,
subject to certain exceptions. Under current Section 1
Section 2 of the Sherman Act: Monopolization
doctrine, non-competes typically receive lenient judicial
While Section 1 of the Sherman Act governs multilateral
scrutiny.
restraints of trade, Section 2 prohibits unilateral
anticompetitive conduct by dominant firms—in a word,
Monopolization. S. 225—the most comprehensive antitrust
monopolization. Section 2 does not prohibit “bigness”
legislation in the 117th Congress—would broaden the legal
standing alone. Rather, monopolization is a two-element
standard for monopolization and change several doctrinal
offense: plaintiffs must establish that a firm with monopoly
rules in the monopolization case law.
power (a large degree of market power) engaged in
exclusionary conduct.
Mergers. S. 225 would also expand Section 7 of the
Clayton Act and require the parties to certain large mergers
Courts and legal academics have struggled to formulate a
to bear the burden of proving that their transactions do not
general standard for distinguishing exclusionary conduct
harm competition. S. 3847, S. 1074, and H.R. 7101 would
from legitimate competition on the merits. Instead of
categorically prohibit mergers that exceed certain numerical
relying on such a standard, the case law has developed a
thresholds involving firm size, transaction size, market
variety of conduct-specific tests, along with a
share, and market concentration.
burden-shifting framework that broadly mirrors the
Rule-of-Reason inquiry under Section 1. While a detailed
Big Tech. Other legislation would reach beyond general
review of monopolization law is beyond the scope of this In
antitrust and apply a variety of special competition rules to
Focus, much of the conduct challenged under Section 2
large technology platforms (S. 3197, S. 2992, H.R. 3849,
falls into the following categories: exclusionary pricing
H.R. 3826, H.R. 3825, and H.R. 3816).
(e.g., below-cost pricing intended to eliminate rivals);
refusals to deal (e.g., denial of access to essential
Jay B. Sykes, Legislative Attorney
infrastructure or technology); exclusionary distribution
(e.g., tying, bundling, or exclusive dealing); misuse of
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Antitrust Law: An Introduction


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