Antitrust laws are laws that seek to ensure competition in the marketplace by preventing the undue acquisition or use of market power by one firm or a few powerful firms. The principal American antitrust laws are the Sherman Act, Clayton Act and the Federal Trade Commission Act. Antitrust laws can be enforced by the Department of Justice, Federal Trade Commission or by private lawsuits.
Antitrust laws prohibit “monopolization,” which means engaging in anticompetitive behavior to dominate a market. One example of such behavior is “predatory pricing,” which means selling at a loss to undersell competition and drive them from the market. Tying a dominant product to another product to bolster the latter’s position in the market is also often prohibited.
Mergers between large, powerful players in markets dominated by an already small number of firms (such as airlines or car manufacturers) can also be challenged by the Department of Justice on antitrust grounds.
Antitrust law also forbids “collusion,” wherein market competitors agree to set prices. Many other types of agreements in restraint of trade are also prohibited or limited by antitrust laws.