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state and federal laws designed to maintain and preserve business competition. These laws are based on the belief that free enterprise and healthy competition are good for individual consumers as well as the economy.
In general, a violation of an antitrust law occurs when all three of these parameters apply to a business activity:
There is a monopoly, a contract, a conspiracy or a combination of such.
The existence of the monopoly or conspiracy creates a restraint of trade – which is a negative impact on an individual's or a company's ability to do business.
The restraint of trade unreasonably restricts competition and functions against the public interest. |
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| true or false:if a group of brokers belonging to a certain Board of REALTORS® get together and decide they will charge a 20% commission on the purchase of all commercial properties, those brokers are violating antitrust laws. |
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| as businesses faced increasing competition. With the intention of controlling prices, competing businesses coordinated prices in order to minimize competition and increase profit. In essence, it was a form of monopolization, as companies consolidated their operations in the market. |
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| true or false: It wasn't until the case of John D. Rockefeller's Standard Oil in 1882 that big business became an issue that the public needed to confront. Standard Oil merged with its competition by forming the Standard Oil Trust. This was basically the establishment of what is known now as a board of trustees. |
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true;
the public was seeing limited competition and restrictive price controls in two industries: the railway industry and the oil industry. These two entities prompted public discontent, which in turn led to the desire and intent to control big business and monopolistic practices. |
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| The Sherman Antitrust Act of 1890 |
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Definition
is the principal federal statute that covers competition and is one of the most important pieces of antitrust legislation.
Antitrust laws prohibit:
Price Fixing – Collusion between or among members of a particular trade to maintain prices at a set level.
Group Boycotts – Agreements between or among members of a particular trade that would prevent other members from fair participation in the trade's activities.
Market Allocation – Agreements between or among members of a trade to avoid doing business in specific market areas.
Tie-in Arrangements – Arrangements that requires a buyer to purchase additional or unrelated products or services when making a product purchase. |
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| The penalties for antitrust violations can be severe. Individual violators of the Sherman Act can be fined up to $350,000 and sentenced to up to 3 years in federal prison for each offense; corporations can be fined up to $10 million for each offense. |
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| true or false: In June of 2004, President George W. Bush signed into law the Criminal Antitrust Penalty Enhancement and Reform Act, increasing the maximum criminal penalty for individuals to 10 years' imprisonment and a $1 million fine, and the maximum penalty for corporations to a $100 million fine. |
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| Clayton Antitrust Act of 1914 |
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made both substantive and procedural modifications to federal antitrust law. The Clayton Act was designed to cover restraints on interstate trade or commerce that are not covered under the Sherman Act. This included preventing individuals from serving as directors at competing companies.
Under the Clayton Act, private individuals are permitted to sue antitrust violators. If the suits are successful, the individuals can recover three times the damages incurred plus court costs and attorneys' fees. |
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| The Federal Trade Commission (FTC) was formed through an act of Congress in 1914. The FTC has the power to judge whether particular trade practices are unfair. The FTC can enforce compliance with the Sherman Act and some sections of the Clayton Act. |
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| Collusion between brokers and sales people with competing companies to set commission rates is illegal. |
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| true or false: In order to avoid the appearance of price fixing, brokers from different brokerages must never have a conversation about the commission rates they charge to clients. The only type of discussion about commission rates that is permitted would be the discussion of how the commission would be split between the listing broker and the selling broker in a cooperative transaction. |
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| true or false: In order to avoid the appearance of price fixing, brokers from different brokerages must never have a conversation about the commission rates they charge to clients. The only type of discussion about commission rates that is permitted would be the discussion of how the commission would be split between the listing broker and the selling broker in a cooperative transaction. |
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| occurs when competing firms agree to split up an area and refrain from doing business in each other's territory. |
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| or tying agreement– is an arrangement that requires the buyer to agree to something in exchange for the sale. |
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| What kinds of discussions about commission rates are brokers allowed to have that would not violate the Sherman Act? |
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| Brokers may discuss how the commission would be split between the listing broker and the selling broker in a cooperative transaction. They may also discuss commission rates with their affiliated licensees or with potential employees during an interview. |
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| What do we call the unreasonable restriction of business activities that results from conspiracy among members of a trade? |
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