Antitrust Enforcement ∗

This article explores the enforcement of those laws intended to promote competitive markets through the prohibition of certain practices such as price-fixing, welfare-reducing mergers, and monopolization. The discovery and prosecution of violations are examined including the role of leniency programs. The determination of penalties is investigated with an assessment of their relationship to optimal penalties. Enforcement policy is found to vary over time and its determinants are reviewed. Finally, the efficacy of enforcement is assessed. Antitrust enforcement is the process by which a more competitive environment is created through the prohibition of certain practices deemed illegal by antitrust laws. Restraints of trade such as price-fixing and bid-rigging are prohibited in the U.S. under Practices designed to create monopolies (such as predatory pricing and tying) are prohibited in the U.S. under Section 2 and in the E.U. under Article 82. Mergers that are harmful to competition are prohibited in the U.S. Merger Regulation. Though this article will take a U.S. focus, much of what is described is applicable to many OECD countries. 1 Enforcement can involve three stages: i) discovery and evaluation of a possible antitrust violation; ii) prosecution when it is deemed there is a violation; and iii) levying of penalties and enacting of remedies when prosecution is successful. Antitrust cases can arise in a variety of ways. With a recent exception noted below, cartels are generally not discovered by the antitrust authorities but rather customers, employees, and even competitors. Though not yet widely used, economic and econometric methods for detecting * I appreciate the comments of Vivek Ghosal.