Antitrust litigation is legal action related to antitrust proceedings, which are designed to identify and break down monopolies and unfair business practices in the interest of encouraging competition and ensuring that everyone in the market has an equal opportunity. Many companies prefer to avoid such litigation, if possible, because it can be very costly and the consequences can include fines or mandates to divest their holdings.
The advent of antitrust legislation came about in the early 20th century, as lawmakers and others began to recognize the threat posed by monopolies. Some companies effectively controlled entire industries, and it was not uncommon to have vertical monopolies, in which every step of the supply chain was controlled, allowing a company to completely dominate an industry. In response, several governments began working to break up monopolies that they felt were unfair, and a number of laws were put in place around the world to prohibit monopolies and put policies in place to allow governments to take action against companies engaging in questionable practices.
A government can initiate antitrust litigation by indicating that it thinks a company has a monopoly or is engaging in price fixing, price discrimination, or other activities that are considered suppressive to competition. When brought to court, companies usually retain lawyers who specialize in antitrust actions to defend themselves. In some cases, a company may agree to divest or diversify holdings before going to court to avoid a costly and potentially reputation-damaging trial.
Antitrust laws also cover issues like unfair pricing to dealers. If, for example, a company gives one dealer a 30% discount and another dealer a 15% discount, this can be prosecuted under antitrust laws. This practice is viewed as unfair because it gives one dealer an unreasonable advantage and suppresses competition between dealerships. Litigation can cover these kinds of situations as well.
Governments embark on antitrust litigation to protect consumers and to protect the integrity of the market. If a company behaves in a way that violates antitrust laws, it can have a ripple effect, causing damages to consumers and a wide variety of other companies. Forced divestiture of holdings leads to more diversity and price variation in the market, allowing consumers more opportunities. In some cases, it can be highly beneficial for the companies separated from a parent company, as they may have more room to thrive and grow once they are out of the control of a parent company with other interests in mind.