European Union Law

In 1957 six Western European countries signed the Treaty of the European Community (EC Treaty or Treaty of Rome), which over the fifty years has grown into a European Union of nearly half a billion citizens. The European Community is the name for the economic and social pillar of EU law, under which competition law falls. Healthy competition is seen as an essential element in the creation of a common market free from restraints on trade. The first provision is Article 81 EC, which deals with cartels and restrictive vertical agreements.

Competition Law: United States Antitrust

The Sherman Act did not have the immediate effects its authors intended, though Republican President Theodore Roosevelt's federal government sued 45 companies, and William Taft used it against 75. The Clayton Act of 1914 was passed to supplement the Sherman Act. Specific categories of abusive conduct were listed, including price discrimination (section 2) exclusive dealings (section 3) and mergers which substantially lessen competition (section 7). Section 6 exempted trade unions from the law's operation. Both the Sherman and Clayton acts are now codified under Title 15 of the Untited States Code.

Since the mid-1970s, courts and enforcement officials generally have supported view that antitrust law policy should not follow social and political aims that undermine economic efficiency. The antitrust laws were minimalized in the mid-1980s under influence of Chicago school of economics and blamed for the loss of economic supremacy in the world.

United States (antitrust)

"Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine....

Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine...."

United States Antitrust

Big trusts became to synonymous with big monopolies, the perceived threat to democracy and the free market these trusts represented led to the Sherman and Clayton Acts. These laws, in part, codified past American and English common law of restraints of trade.

Senator Hoar, an author of the Sherman Act said in a debate, "We have affirmed the old doctrine of the common law in reard to all inter-state and international commercial transactions and have clothed the United States courts with authority to enforce that doctrine by injunction.

Evidence of the common law basis of the Sherman and Clayton acts is found in the Standard Oil case, where Chief Justice White explicitly linked the Sherman Act with the common law and sixteenth century English statutes on engrossing. The Act's wording also reflects common law. The first two sections read as follows,

Competition Law ( United States Antitrust)

The American term antitrust arose not because the US statutes had anything to do with ordinary trust law, but because the large American corporations used trust to conceal the nature of their business arrangements.

Competition Law (Restraint of Trade)

Modern competition law begins with the United States legislation of the Sherman Act of 1890 and the Clayton Act of 1914. While other, particularly European, countries also had some form of regulation on monopolies and cartels, the US codification of the common law position on restraint of trade had a widespread effect on subsequent competition law development. Both after World War II and after the fall of the Berlin wall competition law has gone through phases of renewed attention and legislative updates around the world. The two largest and most influential systems of competition regulation are United States antitrust law and European Community competition law. National and regional competition authorities across the world have formed international support and enforcement networks.

Competition Law (Restraint of Trade)

In times of such slow communications, commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v. Roussillon Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promise's protection. So in the Nordenfelt case Lord McNaughton ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v. The Provident Supply and Clothing Co.

Competition Law (Restraint of Trade)

The common law has evolved to reflect changing business conditions. So in the 1613 case of Rogers v. Parry a court held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held that a man cannot bind himself to not use his trade generally by Chief Justice Coke. This was followed in Broad v. Jolyffe and Michell v. Reynolds where Lord Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?"

Competition Law (Restraint of Trade)

The English law of restraint of trade is the direct predecessor to modern competition law. Its current use is small, given modern and economically oriented statutes in most common law countries. Its approach was based on the two concepts of prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade.

Competition Law (Renaissanace Developments)

"To expect indeed that freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is more unconquerable, the private interests of many individuals irresistibly oppose it. The Member of Parliament who supports any proposal for strengthening this Monopoly is seen to acquire not only the reputation for understanding trade, but great popularity and influence with an order of men whose members and wealth render them of great importance."

Competition Law (Renaissance Developments)

From King Charles I, through the civil war and to King Charles II, monopolies continued, especially useful for raising revenue. Then in 1684, in East India Company v. Sandys it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in the conditions prevailing overseas. In 1710 to deal with high coal prices caused by a Newcastle Coal Monopoly the New Law was passed. Its provisions stated that "all and every contract or contracts, Covenants and Agreements, whether the same by in writing or not in writing...are hereby declared to be illegal." When Adam Smith wrote the Wealth of Nations in 1776 he was somewhat cynical of the possibility for change.

Competition Law (Renaissance Developments) cont.

The court found the grant void and that three characteristics of monopoly were (1) price increases (2) quality decrease (3) the tendency to reduce artificers to idleness and beggary. This put a temporary end to complaints about monopoly, until King James I began to grant them again. In 1623 Parliament passed the Statute of Monopolies, which for the most part excluded patent rights from its prohibitions, as well as guilds.

Competition Law (Renaissance Developments)

When a protest was made in the House of Commons and a Bill was introduced, the Queen convinced the protesters to challenge the case in the courts. This was the catalyst for the Case of Monopolies or Darcy v. Allin. The plaintiff, an officer of the Queen's houselold, had been granted the sole right of making playing cards and claimed damages for the defendant's infringement of this right.

Competition Law (Renaissance Developments)

Europe around the 16th century was changing quickly. The new world had just been opened up, overseas trade and plunder was pouring wealth through the international economy and attitudes among businessmen were shifting. In 1561 a system of Industrial Monopoly Licenses, similar to modern patents had been introduced into England, But by the reign of Queen Elizabeth I, the system was reputedly much abused and used merely to preserve privileges, encouraging nothing new in the way of innovation or manufacture.

Competition Law (Middle Ages)

So the legislation read here that whereas, "it is very hard and difficult to put certain prices to any such things...[it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects. Around this time organizations representing various tradesmen and handicrafts people, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835...

Competition Law (Middle Ages)

Examples of legislation in mainland Europe include the constitutiones juris metallici by Wenceslaus II of Bohemia between 1283 and 1305, condemning combination of ore traders increasing prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno's legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed "to prevent losses resulting from monopolies and improper contracts which many merchants and artisans made in the Netherlands." In 1553 King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilize prices, in the face of fluctuations in supply from overseas.

Competition Law (Middle Ages)

A fourteenth century statute labeled forestallers as "oppressors of the poor and the commmunity at large and enemies of the whole country. Under King Edward III the Statute of Laborers of 1349 fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law. Also under Edward III, the following statutory provision outlawed trade combination. "...we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain."

Competition Law ( Middle Ages )

Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest. The Domesday Book recorded that "foresteel" (i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England. But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 1266 to fix bread and ale prices in correspondence with corn prices laid down by the assizes. Penalties for breach included amercements, pillory and tumbrel.

Competition Law (Roman legislation)

An early example of competition law is the Lex Julia de Annona, enacted during the Roman Republic around 50 BC. To protect the grain trade, heavy fines were imposed on anyone directly, deliberately and insidiously stopping supply ships. Under Diocletian in 301 AD an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing of contriving the scarcity of everyday goods. More legislation came under the Constitution of Zeno of 483 AD, which can be traced into Florentine Municipal laws of 1322 and 1325. This provided for confiscation of property and banishment for any trade combination or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive right. Justinian 1 subsequently introduced legislation to pay officials to manage state monopolies. As Europe slipped into the dark ages, so did the records of law making until the Middle Ages brought greater expansion of trade in the time of lex mercatoria.

Competition Law (History)

Law governing competition are found in over two millennia of history. Roman Emperors and Medieval monarchs alike used tariffs to stabilize prices or support local production. The formal study of "competition", began in earnest during the 18th century with such works as Adam Smith's The Wealth of Nations. Different terms were used to describe this area of the law, including "restrictive practices" "the law of monopolies", "combination acts" and the restraint of trade".

Competition Law (Principle)

Substance and practice of competition law varies from jurisdiction to jurisdiction. Protecting the interests of consumers (consumer welfare) and ensuring that entrepreneurs have an opportunity to compete in the market economy are often treated as important objectives. Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatization of state owned assets and the establishment of independent sector regulators. In recent decades, competition law has been viewed as a way to provide better public services. It has been argued that competition laws can produce adverse effects when they reduce competition by protecting inefficient competitors and when costs of legal intervention are greater than benefits for the consumers.

Competition Law (Principle)

Competition law, or antitrust law, has three main elements:
Number One: prohibiting agreements or practices that restrict free trading and competition between business. This includes in particular the repression of cartels.
Number Two: banning abusive behavior by a firm dominationg a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
Number Three: supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

Competition Law

Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally with the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level. The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral Negotiations, the World Trade Organisation (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.

Competition Law

The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny , and sometimes severe sanctions. Since the twentieth century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Community competition law. National and regional competition authorities across the world have formed international support and enforcement networks.