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Definition

competition law

Contributor(s): Ivy Wigmore

Competition law is the body of legislation intended to prevent market distortion caused by anti-competitive practices on the part of businesses. In the United States, Canada and the European Union, competition law is also known as antitrust law.

The purpose of competition law is ensuring a fair marketplace for consumers and producers by prohibiting unethical practices designed to garner greater market share than what could be realized through honest competition. The effects of anti-competitive practices include not just difficulty for smaller companies entering or succeeding in a market, but also higher consumer prices, poorer service and less innovation.

Anti-competitive practices include, among many other examples: Predatory pricing, which involves a monopoly or oligopoly charging an exorbitant price for something that the consumer has little choice other than to purchase; price fixing, which involves collusion between would-be competitors to set similar prices for products; bid rigging, which involves colluding to select the winner of a contract in advance; and dumping, which involves selling a product at such a low price that smaller companies are unable to compete and may be forced out of the market. Although specific legislation varies from one country to another, those practices are generally prohibited by competition law.

The earliest competition law was levied in 50 B.C. to protect the grain industry in the Roman Empire prohibiting blockage of supply ships.

This was last updated in April 2019

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