I often read about
antitrust cases alleging price-fixing. Many of these cases are
class actions. I've never really understood what "antitrust" means
or exactly what a "class action" is. Can you explain these terms in
layman's language?
A: "Antitrust" is a confusing name for a
complex area of law. Many nonlawyers misuse the word, giving it a
meaning that is almost opposite its true denotation when they say
things like "the airlines' behavior is antitrust."
A trust is an old synonym for a monopoly or cartel that acts
like a monopoly. In 1990, Congress passed a law designed to do away
with monopolies, so the antimonopoly law was called the "antitrust"
law. The hyphen was later dropped.
For companies in service businesses like travel, there is really
only one antitrust law, which is the one passed in 1890, now called
the Sherman Antitrust Act. The law prohibits two broad categories
of behavior by companies.
First, under Section 1 of the Sherman Antitrust Act, all
agreements that restrain interstate commerce are illegal.
However, as the Supreme Court recognized early in the 20th
century, Congress didn't really mean to outlaw all restraints, just
the bad ones.
Ordinary restraints, such as an employee's agreement to work
only for one employer, are just fine. The Supreme Court later
divided the bad restraints into two categories: "per se" violations
and "rule of reason" violations. The first category refers to the
very bad agreements, such as price-fixing by competitors and group
boycotts.
The second category refers to agreements that could be bad
depending on the defendant's market power, such as exclusive
dealing and tying arrangements. The important thing to remember is
that you have to prove an agreement in order to prove a Section 1
violation.
Section 2 of the act makes it illegal for a company to
monopolize a market, regardless of any agreement.
Here again, the Supreme Court long ago decided that Congress
really meant to outlaw only monopolies that suppress competition by
such tactics as predatory pricing. Later, the Act was interpreted
to prohibit attempts to monopolize, as well.
So, in short, Section 1 of the Sherman Antitrust Act outlaws
agreements to fix prices and to conduct boycotts and other joint
behavior that courts have found to be bad.
Section 2 covers a single company's attempts to monopolize or
maintain a monopoly through unfair methods. Don't call these
behaviors "antitrust." Rather, say that they violate the antitrust
laws.
Next week, I'll cover what class action means.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].