Small Businesses Practices To Avoid

Small businesses often face stiff competition from larger businesses, and as a result they may resort to strategies that they think will help their business improve its performance. Occasionally, because of a lack of understanding of federal laws, these strategies inadvertently violate federal antitrust laws. By not knowing what business practices are considered unfair by antitrust laws, small businesses are leaving themselves open to serious federal charges and a loss of their business. This article is intended to help small businesses understand the basics of antitrust laws so that they know what business practices and strategies to avoid in the future.

Monopolization

Most people have heard of monopolization of a market, and most people know that law prohibits this practice. Unfortunately most people don’t know or understand what types of business practices actually construe monopolization of a market. Monopolization can occur in any size of market from a small local market to a national market. Monopolization involves any one of the following business practices: acquiring competitor’s businesses in an attempt to maintain control of a monopoly position in a specific market, controlling market prices through various means, and excluding competitors in a market.

Unfair Business Conspiracies

Conspiring to maintain the prices of services and goods in a particular market is considered to be an unfair business practice. The first type of conspiracy that is prohibited by federal antitrust law is conspiring with competitors to control the price of specific services or goods. For example if all the tire stores got together to discuss how specific tires should be priced, they could be charged with a violation of antitrust laws.

The second conspiracy that is prohibited by federal antitrust laws involves the conspiracy of one group of companies to boycott another company or supplier. This conspiracy inhibits the ability of another competitor from entering into a market, and inhibits their rights within a free market system.

The final conspiracy that is outlawed by federal antitrust laws involves market territories. It is against federal antitrust laws for competitors to get together to discuss the division of a market into territories or assigning specific customers to specific businesses. Again this practice is unfair because it eliminates the free choice of a customer in regards to who they want to give their business to, and it inhibits the functioning of a free market system.

Using Company Power within a Market to Gain an Unfair Market Advantage

The final business practice that is considered unfair by federal antitrust laws is the use of market position to coerce suppliers into giving your company a better price on materials then they offer other companies in your market. This can be done through threats to terminate large orders for supplies, it can be done by pressuring the supplier with unreasonable requests, or it can be done by using the company’s buying power to get a discount that makes their retail price for merchandise way below what other competitors in the market can afford to charge. Wal-Mart has often been criticized for using their buying power to undersell local small stores and businesses. Smaller stores can’t buy in the quantities that Wal-Mart can and as a result they are unable to sell their items for the extreme low prices that Wal-Mart can. As a result many small businesses often go out of business when a Wal-Mart enters their market. This is why this business practice is considered unfair, and why it is against federal anti-trust laws.