Press-Enterprise - November 30, 2014

There is a saying among antitrust lawyers: Don’t say you “won” an antitrust lawsuit — just by being in one means you lost. Business litigation is almost always expensive and challenging. Antitrust litigation can be several times worse.

So what is antitrust? And why should all business owners care about it?

Antitrust laws are statutes that exist at the federal and state levels. At the federal level, the major antitrust statutes include the Sherman Act, the Clayton Act, the Robinson-Patman Act and the Federal Trade Commission Act (which covers not just antitrust, but also unfair competition and deceptive acts and practices).

At the California state level, the major antitrust statutes include the Cartwright Act and the Unfair Competition Law (which also covers unfair and deceptive acts and practices). Generally speaking, the federal statutes concern matters of interstate commerce and the California statutes are more locally oriented.

The laws are in place to ensure that consumers get the prices and deals in the market place that only vigorous competition can deliver. In his 1776 classic, “The Wealth of Nations,” Adam Smith touted how the healthy pursuit of economic self-interest by competing businesses produces the best products at the lowest prices.

But he was also familiar with the dark side of the market: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

The antitrust laws strive to make illegal such “contrivances to raise prices.” These “contrivances” can take the form of monopolization (acquiring market power to dominate a relevant geographic and product market); anticompetitive mergers and acquisitions; and agreements and “understandings” among businesses to restrict prices or product output.

Both the federal and state antitrust laws (except for the Federal Trade Commission Act and California’s Unfair Competition Law) provide for hefty penalties, fines, damages and attorney fees. Hard-core violations, such as competitors agreeing on prices or territories where they will not compete (called horizontal price fixing and territorial market allocation in antitrust jargon), are felonies under the Sherman Act and the Cartwright Act that can result in prison time.

The federal government, the state Attorney General and the local District Attorney can prosecute antitrust violations both civilly and criminally. Businesses and consumers can also sue for antitrust damages, including “treble” damages, which means for every dollar of actual damages the plaintiff gets three back.

Most people think of antitrust as an issue for big corporations. It is true that the Microsofts, Apples and Amazons of the world always have to think about antitrust, especially in this global economy.

The European Union can be harsh in antitrust enforcement – in some respects much more so than U.S. prosecutors. Even China, ostensibly a communist country, has recently adopted antitrust laws. What was originally an American concept has now gone global.

But antitrust remains perilously local, particularly for the unsophisticated business owner. For example, a prospective client wanted his business to sue another business for breach of contract based on a document that purported to identify territories where they would not compete against each other. He complained that the other business kept competing in his territory and he wanted to sue for breach of contract. Not only was the contract unenforceable, it was smoking-gun proof of a felony. He walked out of the meeting in disbelief, shaking his head and muttering, “this is done all the time.”

What should business owners do? If they belong to trade associations where competitors meet, they should make sure the association has antitrust compliance guidelines. Refrain from talking to competitors about how they compete. Most importantly, if they learn they are the target of a possible private lawsuit or government antitrust investigation, they need to retain counsel immediately.

On the other hand, if a business is the victim of a possible antitrust violation, the owner may wish to consider the full panoply of remedies the antitrust laws offer because they can be formidable.

*This article first appeared in The Press-Enterprise on Nov. 30, 2014. Republished with permission.