Anti-competitive practices are business or government practices that prevent or reduce competition in a market. Anti-trust laws differ among state and federal laws to ensure businesses do not engage in competitive practices that harm other, usually smaller, businesses or consumers. These laws are formed to promote healthy competition within a free market by limiting the abuse of monopoly power. Competition allows companies to compete in order for products and services to improve; promote innovation; and provide more choices for consumers. Some business practices may be pro-competitive, economic methodological tests and empirical legal cases are used to test whether business activity constitutes as anti-competitive behavior.
Anti-competitive behaviour is used by business and governments to lessen competition within the markets so that monopolies and dominant firms can generate supernormal profits and deter competitors from the market. Therefore it is heavily regulated and punishable by law in cases where it substantially affects the market.
Anti-competitive practices are commonly only deemed illegal when the practice results in a substantial dampening in competition, hence why for a firm to be punished for any form of anti-competitive behaviour they generally need to be a monopoly or a dominant firm in a duopoly or oligopoly who has significant influence over the market.
Anti-competitive behaviour can be grouped into two classifications. Horizontal restraints regard anti-competitive behaviour that involves competitors at the same level of the supply chain. These practices include mergers, cartels, collusions, price-fixing, price discrimination and predatory pricing. On the other hand, the second category is vertical restraint which implements restraints against competitors due to anti-competitive practice between firms at different levels of the supply chain e.g. supplier-distributer relationships. These practices include exclusive dealing, refusal to deal/sell, resale price maintenance and more.