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What Is an Antitrust Law?

In the US, an antitrust law was originally derived from the Sharman Antitrust Act, which was the first piece of legislation that restricted businesses and individuals from creating monopolies or cartels. Another piece of antitrust litigation is the Clayton Antitrust Act, which was later amended by the Robinson-Patman Act, and prohibits businesses from acquiring, merging, or taking over other businesses if the end result means less competition.

Essentially, an antitrust law is a form of government regulation that limits the existence of monopolies and ensures market competition as well as social welfare. Antitrust laws were originally created to stop trust monopolies from acquiring more assets. An antitrust law generally refers to a piece of legislation that curtails a certain type, form, or detail of monopolization.

Government legislation in the form of an antitrust law regulates the existence of monopolies since this type of business has been found to be detrimental to economic growth and social welfare. Monopolies have the authority to dictate the prices of commodities, lower the quality of their products, and disregard the needs of the consumer. Economic stagnation has also been a detrimental consequence of the existence of monopolies since this economic system has complete power to make any decision, whether sound or unwise.

However, there have been certain exceptions to the prohibitions set by an antitrust law. Exceptions are generally given when monopolies are justified in safeguarding public welfare. A classic example of justified monopolies is a car corporation that manufactures its own parts and components in order to ensure quality control over their products.

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