The Nuts and Bolts of Antitrust Laws
Byline: Marcy Gordon Associated Press
WASHINGTON u From busting up John D. RockefellerAEs Standard Oil Trust in 1911 to going after MicrosoftAEs use of its Windows monopoly, antitrust policy has been an important element of the U.S. regulatory landscape.
Now, in tough recession times, the Obama administration is swinging back the pendulum, maintaining that lax enforcement over the past decade has worsened economic woes and hurt consumers by failing to protect business competition.
What are antitrust laws and how can such government policies affect business and the economy?
Here are some questions and answers.
Q: First of all, what is antitrust? What does it mean and what is its purpose?
A: Antitrust laws are designed to prevent combinations of companies that would boost their dominance in a market so much that it could hurt competition and, by extension, consumers. Two more definitions can help explain it:
* Monopoly, where a company may be the only one that produces a particular product or service.
* Trust (sometimes called a cartel), in which a group of companies, or countries, agree together to assert power over the price or the supply of a product.
Q: So how does it work in the government?
A: Antitrust policies, administered by the Justice Department and the Federal Trade Commission, can either ban proposed mergers of companies outright or put conditions on them u especially requiring some assets of the combined company to be sold off.
That happened amid the financial crisis late last year, when the Justice Department allowed PNC Financial Services Group Inc.AEs $5.6 billion buyout of National City Corp. u provided that Pittsburgh-based PNC divest 61 branches of Cleveland-based National City. Both banks had been stung by losses on securities tied to high-risk subprime mortgage loans.
PNC was the first U.S. bank to use money obtained under the governmentAEs $700 billion financial bailout program for an acquisition.
New mergers could sweep across the landscape as the recession pushes more companies to consolidate. President Barack ObamaAEs new antitrust chief, Assistant Attorney General Christine Varney, said Monday the administration would pursue antitrust cases even in a troubled economy.
The government regulators also police the market behavior of big combined companies, checking for cutthroat business practices. …