One of the responsibilities that the Federal Trade Commission is tasked with is to be on the lookout for unfair business practices that serve to reduce competition in a free market economy. Specifically, some of the activities that the FTC monitors are anticompetitive business practices that can include, among other things, such actions as price fixing and group boycotts, as well as exclusionary exclusive dealing contracts.
The reason that artificially reducing competition can negatively affect a free market economy is that it may inevitably lead to artificially higher prices while simultaneously reducing the quality of services. Unfair competition is also likely to hamper innovation and research as well as development initiatives. Simply put, if there is only one service in town, there’s little reason to strive to offer a better, higher quality or cheaper product or service.
Generally speaking, anticompetitive actions, which often result in business disputes and business litigation, can be lumped into two categories. The first is called horizontal conduct and essentially refers to specific agreements between competitors that serve to benefit and further the interest of only those competitors. Some examples of collusion between competitors include agreements to artificially fix market prices. Another example is rigging bids on projects to either keep the bids low or ensure that a specific bidder ends up with the winning bid.
The other category is called single firm conduct and basically refers to monopolizing the market via unreasonable means. This category is fairly straightforward. Basically, it applies to actions taken by a business which is in a dominant position in its industry that serve to exclude competitors from competing or deny new business entry into the market altogether.
Federal regulators closely monitor and scrutinize business mergers and acquisitions to ensure that a business is not becoming so large as to reduce competition. Regulation during such transactions is part of doing business. Still, moving forward may require legal guidance to ensure that a deal is acceptable to federal regulators and will avoid or overcome any related business litigation.
Source: Federal Trade Commission, “Anticompetitive Practices,” accessed May 4, 2015