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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 market.

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 Union (TFEU).

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 article.

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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