Evolution of Competition Law in US and EU
This article analyses the evolution of competition law in the United States
of America and the European Union. This article is divided into two main
components, the first component is about the Evolution of Antitrust law in USA
and is further divided into three parts comprises of the history of the Sherman
act, the Clayton Act and other amendments to the act. The second part of the
article will provide a brief overview of evolution of competition law in Europe.
Competition law is legislation which governs and regulates all those
corporations which can influence market conditions. One big corporation can use
its power and dominance for restricting other companies enter into the market.
To regulate this type of conduct and to control anti-competitive practices,
competition law is needed along with a common law system.
The main purpose of
the competition is to limit negative competition in the market, to avoid the
accumulation of resources in some hands, to stop market distortion, to create a
healthy competition and good marketplace for consumers and eliminate all
unethical and unfair trade practices which adversely effect market by inflation
and by decreasing product performance.
Evolution Of Competition Law In The US
Sherman Act of 1890;
It is considered America's oldest law and played a significant role in the
evolution of competition law in the US. The framers of the Sherman act find its
roots in the American common law system and made it to maintain competition in
the market. The Sherman act of 1890 was mainly made to limit the competition in
US markets. Sherman act of 1890 prohibits enterprises to form agreements with
one another which will create negative competition or limit competition in the
The concentration of wealth, rapid industrialisation and accumulation of wealth
in hands of corporations are factors which lead to the enactment of this act.
Many companies and establishments came together and formed monopolies in
markets. Corporations like railroads, oil corporations and Tobacco corporations
were too powerful and were in a dominant position to influence the market.
The Public, legislators and other competitors felt the need for legislation to
control them and to satisfy the public need, congress came up with this
legislation. The main aim of this act is to break up all such trusts which
create negative competition and resort to healthy competition in the market. In
the Sherman act of 1890, section 1 deals with and prohibits all those agreements
which restrain trade or cause hindrance to it.
Whereas section 2 of the act deals with monopoly. They were some loopholes which
could not mitigate the problems, so in 1914 the US Congress enacted the Clayton
act and the Federal Trade Commission act. One of the loopholes is that instead
of forming trusts, corporations started forming mergers and regulated prices and
production through it. Prices went up due to mergers and created a different
form of monopoly which adversely affected customers.
To protect customers from high costs, the Clayton act regulated all mergers and
acquisitions. In addition to it, the US congress set up an administrative body
through the Federal Commission act of 1914. The functions of the body are to
protect consumers from unfair, deceptive and fraudulent practices and the
commission has the authority to investigate such corporations or persons who are
being suspected of in engaging unfair trade practices.
The Clayton act was further amended in the years 1936 and 1950, Robinson Patman
act(1936) prohibited certain forms of price discrimination. Whereas the
CellerKefauver act (1950) was introduced to address some loopholes in
anti-merger provisions about asset acquisitions. Then came the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 which played an important role in the
evolution of US anti-trust law.
This act discusses the mandatory filing before the federal commission for any
sort of merger and acquisition which also includes the transfer of securities or
assets to make ensure that any transaction will not violate the anti-trust laws
and affect the US market adversely. It must be kept in mind that judicial
interpretation of anti-trust laws also played a significant role in transforming
the anti-trust laws in the US. Cases such as the Morton Salt case, Standard Oil
company case and Kodak case are considered important cases in understanding the
competition law in the US along with its evolution.
Evolution Of Competition Law In The EU
Competition law in Europe is divided into two parts, first part is about member
countries and the effect of the law on member states. The second part regulates
the transactions between member countries in terms of trade and business. The
first competition law in Europe is The Treaty Establishing the European Coal and
Steel Community or Paris treaty, signed in the year 1951.
France, Germany, Italy, Netherlands, Belgium and Luxembourg were the member
countries who signed the treaty, which created a community in trade and
business. The objectives of this treaty are to ensure equal opportunity to
member countries in the production of coal and steel, limit the powers of
Germany and ensure free and healthy competition.
Later they felt the need of atomic energy regulations and a common market, which
lead to the European Economic Community (EEC) and was signed by all member
countries of the Paris Treaty at Rome in 1957. the important provisions of this
treaty are Article 85 and 86, which prohibits the abuse of dominant position and
it also nullified all those agreements which affect trade between the states by
preventing or restricting trade which distorts the competition in the market.
Thereafter the treaty was renamed to Treaty for the functioning of the European
Article 101 of the treaty prohibits all those agreements which affect the trade
between member states. It also states that all the anti-competitive agreements
and decisions are void. A few exemptions were provided in clause 3 of the
Whereas article 102 of the treaty talks about the abuse of a dominant position,
which includes a provision relating to unfair purchase or selling prices, a
provision relating to unfair trade conditions like limiting productions or
applying dissimilar conditions to equivalent transactions with other trading
parties and placing them in negative competition. There are certain case laws
also helped in shaping the competition law in Europe.
The article intends to give an abridged version of the Evolution of Competition
law in the US and Europe. When Indian Competition Law is compared with these two
important jurisdictions, we can find some similarities, as the aim of
competition law or legislation is to ensure healthy competition in the market.
In this article, we have also discussed various elements that influenced
competition law's historical development in the US and Europe.
The competition law aims to ensure a good marketplace for consumers and
producers by prohibiting all anti-competitive agreements and unethical trade
practices. Corporations having dominant positions may restrict and stop small
corporations from coming into the market and anti-competitive agreements will
adversely affect customers. This article aims to make us understand the
importance of competition law through its historical development.
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