Antitrust

Antitrust laws are designed to prevent the formation of business monopolies or to break up monopolies that are determined to be unfair. The purpose of antitrust laws is to encourage competition and prevent monopolies from taking unfair profits. The problem with a monopoly in a capitalist economic system is that without competition, the producer who holds the monopoly charges more for its product than it would be able to if there were competition and can also produce a product with inferior quality.

Antitrust legislation originated in response to the dominance of “trusts” in the United States in the nineteenth century. Trusts were a special form of monopoly in which shareholders pooled their resources; technically, no single owner held a monopoly, but the effect was that large industries like iron and coal were turned into monopolies. The Sherman Antitrust Act, enacted in 1890, is still part of U.S. antitrust legislation, although it has been supplemented over the years.