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What Are Antitrust Laws?

Government regulation can be present in order to prevent the existence of monopolistic entities and to encourage healthy market competition. Antitrust laws enforce these regulations by limiting the existence of monopolies and ensuring market competition as well as social welfare. Antitrust laws were originally created to stop trust monopolies from acquiring more assets.

In the US, the original antitrust laws emerged 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 amended by the Robinson-Patman Act. This prohibits businesses from acquiring, merging, or taking over other businesses if the end result means less competition.
Government policies regulate 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. Thus, governments have found it necessary to regulate such a practice. Monopolies have also been linked to economic stagnation due to the authority wielded and unwisely used.

However, there are certain exceptions to antitrust laws that deem monopolization as necessary if public welfare is at risk. Such is the case of manufacturing corporations, which need to produce their own parts and components in order to ensure quality control of the product.

Some businesses view antitrust laws as limiting free trade and would prefer a more laissez faire approach in order to conduct the necessary business.

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