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Antitrust Laws and the Cartwright Act

DEFINITION

EXPLANATION

Prior to antitrust laws, it was common practice for larger multinational companies to work with one another to prevent competition in the industries they participated in. Many of these companies would fix prices and reduce or increase quality to make it difficult for other competitors to make ground. Such acts constituted unfair monopolistic practices that affected the natural process of supply and demand and ensured supremacy of industries by one or a few brands. Clearly, these anticompetitive acts negatively impacted consumer’s ability to purchase the best products for the lowest prices.

To combat anticompetitive practices, the government passed various legislation in the hopes that it would deter monopolization of industries. One of most powerful antitrust acts was the Cartwright Act.

The Cartwright Act introduced strict measures to deter price fixing and instituted severe penalties to companies that broke the law.  The Cartwright Act makes it unlawful for two or more companies or individuals with skill, expertise, and capital to restrict the natural flow of trade by working together with the intent to stifle competition.

Main Provisions of the Cartwright Act

Division of the Market Schemes: One way companies would ensure they could monopolize the market is to work with other industry leaders to divide the market between competitors, such as one company only selling one product, while the other company apart of the scheme promises to not sell that product in return for the other company not selling another product.

Price Fixing: Price fixing is the process of companies working together with the intent to fix prices not based on supply and demand, but rather by agreements between competitors.

Price Alterations: This is when a competitor sells a product or service to one party for a lower or higher price than another party. This practice is known as discriminatory. This practice is heavily opposed by many industries as they believe it wipes away free market practices.

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