Governments enact antitrust laws to facilitate free and fair competition between market forces. They are intended to prevent the rise of monopolistic and restrictive trade practices in the market economy.
The underlying rationale is that freedom of contract and trade should not be allowed to such an extent that it leads to its own destruction or degradation.
That being said, antitrust laws are not necessarily against business deals and relationships. In fact, relationships and engagement between different companies are necessary for a successful business environment.
But anti-trust laws do discourage such business transactions, mergers, takeovers, and connivance between two or more companies which have the effect of adversely closing down other businesses. In the operation of the economic system, they are intended to prevent the concentration of economic power in a few hands to the common detriment.
Since modern liberal welfare states are based on facilitating a healthy market competition for the benefit of all, they discourage the monopoly and dominance of only a few players in the market.
Historical experience shows that barring a few exceptions, monopolistic practices generally have generally proved bad both for the economy and society in the long run.
The purpose of anti-trust or competition laws, therefore, is to regulate monopolies. Most antitrust laws regulate monopolies in two ways either by restricting per se violations or by using the rule of reason.
Trade practices that are ought-rightly anti-competitive are restricted immediately but trade practices in the fluid category are judged by regulatory authorities using reason on a case-by-case approach.
The overall essence of antitrust laws, therefore, is not to touch upon every business deal but to restrict and regulate only such practices and entities that adversely affect competition to the greater disadvantage of others. Free and fair competition is often considered a sine-qua-non for the overall growth of the business and economy.
While the law should facilitate and encourage trade and commerce, at the same time, it should also ensure that some fishes do not eat all other fishes of the pond. It will imbalance the whole ecosystem of the market.
Read more| Company Law Notes