What is antitrust law? Antitrust is a body of law designed to promote economic competition. An important goal and perhaps the only goal of antitrust law is to insure that markets are competitive. The underlying theory is that if all exchanges of goods and services take place at a competitive price, society as a whole will be wealthier than it would be if some exchanges occurred at a higher or lower price.

In a perfectly elastic economy, if the price of a product rises, more of it will be produced because existing firms will increase their output or new firms will enter the market and start producing more products or services. As a result of the increased output, the price of the product or services will decrease. A physician in a perfectly competitive market has little discretion about what price to charge.

Without competition, monopoly power may result. Monopoly power is the power to reduce output and increase prices. The monopolist can manipulate price. Antitrust law makes having monopoly power or using monopoly power illegal. In addition, any conduct that unreasonably restrains trade or reduces competition is illegal, if certain criteria are met.

One of the landmark antitrust cases provides historical perspective. In the early 1880's, eighteen railroads combined and created the Trans-Missouri Freight Association. This association was known in common parlance as a "railroad trust". This association established freight rates for all the participating railroad companies. That is, the association terminated price competition among the eighteen railroads. The consumer had no power to force competition in the railroad by shopping for the lowest price. U.S. v. Trans-Missouri Freight Association 166 U.S. 290 (1897).

The name "antitrust" comes from efforts by Congress to stop the corporate trust like the Trans-Missouri Railroad Trust.

Most of American industry is enjoying relief from antitrust litigation. However, the health care industry is experiencing a growing number of cases. Antitrust enforcement in the health care industry appears to be running counter to the trend in the rest of the economy.

For many years, the health care industry was considered exempt from antitrust laws under something called the "learned professions exemptions". However, industry began to attract attention because of its size and increasing costs. Policy makers began looking for ways to force the industry to reduce costs. Application of antitrust laws to force the industry to compete was viewed as one way to cut costs. The Department of Justice and the Federal Trade Commission began to target the health care for enforcement efforts.

There are certain areas where continued antitrust litigation will take place in health care. These include price fixing, boycotts, and private lawsuits against hospitals and physicians brought by physicians who have lost privileges or lost access to the hospital. This last group of lawsuits has been the largest single source of health care antitrust lawsuits.

Therefore, antitrust law is designed to promote economic competition and protect the individual from the resulting economic harm. Violations of the Sherman Antitrust Laws can lead to both criminal and civil prosecution.