Antitrust Law: What It Is and How It Works

What antitrust law is

Antitrust law is the body of rules that keeps companies from choking off competition, at the cost of sellers, buyers and anyone hoping to enter a market. The name comes from “trust”, the large concentrations of economic power the first antitrust law in the world, written in the United States in 1890, was aimed at breaking up. The basic idea hasn’t changed much since, even if authorities around the world describe it in different words: a market where companies genuinely compete tends to produce lower prices and better products for buyers. That’s why antitrust law sits close to consumer rights: a market where nobody can shut out competition is already a first layer of protection for shoppers, well before any rule written specifically for consumers.

Restrictive agreements between competitors

The first kind of conduct antitrust law bans involves agreements among rivals. According to Italy’s AGCM, when companies coordinate instead of competing — carving up a market, raising prices together, or blocking new rivals from entering — they harm consumers. In the European Union, the same conduct is banned under Article 101 of the Treaty on the Functioning of the EU, which targets agreements among two or more independent companies that restrict competition. According to the European Commission, the clearest example of a violation of Article 101 is a cartel among competitors, which can involve fixing prices or splitting up a market.

Practical example: two companies selling the same kind of product agree not to undercut each other on price in a given area, dividing up customers instead of competing for them. That’s the kind of conduct a restrictive agreement describes, per the AGCM: coordinating instead of competing, at the expense of buyers.

In the United States the same conduct is a crime, not just a regulatory violation: the Department of Justice prosecutes it as such whenever rivals join forces on pay or pricing, steer the outcome of a bid, or carve up who gets which customers, workers or territory.

Abuse of a dominant position

The second banned conduct doesn’t involve an agreement among several companies, but the behavior of just one. Article 102 of the EU Treaty bans companies in a dominant market position from abusing it, for example by charging unfair prices, limiting output, or refusing to innovate at consumers’ expense. The AGCM steps in for the same reason when a company that controls a market abuses that power, for instance by keeping potential rivals from entering it.

In the United States, the law uses different words to describe something similar: federal law bans holding a monopoly over a market for goods or services, plotting with others to get one, or trying to build one alone.

Merger control: three possible outcomes

The third area antitrust law covers is mergers and acquisitions. The European Commission’s merger control checks whether a proposed deal would harm competition: some mergers can reduce competition by creating or strengthening a dominant player, hurting consumers through higher prices, less choice or quality, and less innovation. The outcome of that review can go one of three ways.

In Italy, the same check falls to the AGCM, which verifies that a merger or acquisition won’t give the resulting company excessive market power or shrink the room left for competition. In the United States, according to the Department of Justice, a merger is illegal when combining two companies may substantially reduce competition or tend to create a monopoly.

The Sherman Antitrust Act: where it all began

The first antitrust law is American, and predates Italy’s AGCM by exactly a century. The Sherman Antitrust Act was enacted on July 2, 1890, and its first section declares illegal every contract, combination in the form of a trust or otherwise, or conspiracy that restrains trade among the states or with foreign nations. The original text still stands, codified at 15 U.S. Code § 1.

Who enforces antitrust law in the US: the DOJ and FTC

Two federal agencies share the job of enforcing that law. The Department of Justice’s Antitrust Division exists to keep markets competitive, bringing enforcement actions and publishing guidance on how the antitrust laws apply. The Federal Trade Commission’s Bureau of Competition polices the same ground, working with the Bureau of Economics, with consumers as the intended beneficiary. The two agencies split up sectors and cases between them, but the stated goal is the one every antitrust authority in the world shares.

Antitrust law in the European Union and Italy

At the European level, the same subject falls to the European Commission, one of the institutions covered in how the European Union works. EU antitrust rules ban both agreements among companies that restrict competition and abuse of a dominant position, with Articles 101 and 102 applied across every member state, Italy included.

In Italy, the authority in charge is the AGCM, the Competition and Market Authority, sometimes just called Antitrust. It’s an independent administrative authority, ruling with full autonomy from the government: it doesn’t answer to a minister or take instructions on individual cases from the executive branch. It was created by an ordinary legal norm, law no. 287 of October 10, 1990, devoted specifically to protecting competition and the market. Its remit covers the same three grounds seen above — restrictive agreements, abuse of a dominant position, and mergers — the same ground the European Commission and the AGCM work side by side, at different scales.

Why it matters for shoppers, not just businesses

US regulators also explain antitrust law from the buyer’s side. According to the FTC, vigorous competition among sellers lowers prices for buyers, both individuals and businesses. It also raises the quality of products and services, widens the choices on offer, and pushes companies to innovate more.

It’s the same principle that runs through the study of microeconomics and macroeconomics: competition pushes companies to improve so they don’t lose customers, and antitrust law exists to stop an agreement, an abuse, or a merger from removing that pressure.