The Purpose of Antitrust Laws

Governments all over the world enact competition laws with a lot of objectives in mind. The main purpose of antitrust laws range from protecting the consumers to controlling the inflation in the economy. Some of the main reasons why governments enact antitrust laws are elucidated in this article.

Protection of Consumers

It is the consumers who will be directly impacted by the anti-competitive business practices followed by big corporations. The main logic behind this argument is that consumers in a market may not be willing to exert any pressure on the corrupt business practices followed by the big businesses in a country as they are dispersed across the country or across the world. The so called buying power of the buyers can turn out to be fictional as many consumers find it hard to unite and stand up to the corrupt business practices of the big business corporations. As a result, it is the responsibility of the governments to come out with proper anti-competition laws with the explicit purpose of controlling the conduct of big business houses.

Defence of Small Firms

Another section of the economy that will be directly impacted by the business practices of big corporations is the small firms. Hence, a key purpose of antitrust laws is the protection of small enterprises. Small firms with limited resources at their disposal find it hard to withstand the onslaught of big businesses. Lack of access to proper firm level infrastructure can turn out to be a bane for small companies in their struggle to survive against the big corporations. In case where the smaller firms in an economy are not properly protected, it becomes very difficult to develop viable competitors to the current industry leaders in the future. However, some analysts criticize this objective by telling that artificial protection accorded to businesses can lead to inefficiencies in the market place that will again stifle the competition. Researchers argue that dealing many of the problems that are faced by smaller firms need to directly dealt through government intervention rather than through key policy instruments at the disposal of the governments like competition policy. Using of the competition policy towards such ends can create unnecessary problems for the smooth functioning of the policy mechanism.

Promoting Market Integration

As per the Treaty of Rome, promotion of proper market integration is one of the key objectives of anti-competition policy enacted by any country in the world. Policies against price discrimination and vertical restraints have led to the prohibition of the markets to be segmented. Good market integration would result in the creation of one single market where goods and services can move across freely. Free movement of goods and services will result in cheaper prices for the consumers and higher efficiencies in the market.

Economic Freedom

In certain countries like Germany, guarantee of economic laws is one of the main reasons behind the enactment of the anti-competition laws. Some arguments related to territorial restraints, resale price, maintenances and other practices have good justification related to the economic efficiency terms.

Fighting Inflation

Fighting inflation is one of the key purposes of antitrust laws. Inflation is one major problem that every major economy wants to avoid. Inflation results in higher prices for the goods that are sold across the country. In order to properly check inflation, governments should ensure that goods sold by multiple (both small and big) players in the market are freely available in the market. Lack of any good competition between the different players in the market can lead to supply side constraints that can increase the inflation rates in the country. A good competition policy that can facilitate multiple players smoothly operating in the market has the potentiality to curb inflation. Anti-competition policies prevent any supply side constraints by controlling the abusive business practices of big corporations.

Fairness

The last major purpose of antitrust laws is fairness in the business dealings. This objective is similar to the prevention of the abuse of dominant position by the big major players in the market. Anti-competition laws that are enacted with this objective squarely rule out any chances of a big firm charging higher prices from the consumers. Another benefit of competition laws that will be enacted with this objective is that big firms will not be in a position to impede the entry of smaller players who are highly vulnerable to the unfair business practices of big corporations.