Competition law

Competition law, which is also called antitrust law, regulates how companies behave to keep markets competitive and prevent anti-competitive practices. Its origins go back to the Roman Empire, where business activities by traders, guilds, and governments were monitored and sometimes harshly punished. Since the late 1900s, this area of law has grown more global. The two most influential systems are United States antitrust law—named after the historical breaking up of monopolistic trusts—and European Union competition law. Around the world, national and regional competition authorities have created networks to support and coordinate enforcement.

Historically, modern competition law developed at the national level to ensure fair competition within a country’s borders. National competition law usually does not apply to activities outside those borders unless those activities have a significant effect inside the country. Some countries allow their competition law to reach beyond their territory using what is called the "effects doctrine." International competition is protected through international competition agreements.

The field aims to stop economic cartels, prevent abuse of market power, regulate mergers and acquisitions, encourage innovation, protect consumers, and boost overall economic productivity. It draws on industrial organisation in economics, which looks at how market structure, company behavior, and market power interact—including factors like barriers to entry, economies of scale, and network effects. Judges and legal officials often rely on economic analysis, sometimes working with economists, to control market power.

Early competition laws existed during the Roman Republic and Empire. In continental Europe, medieval *lex mercatoria* developed competition principles, while Medieval England passed laws controlling trade practices and created common law doctrines that still exist. Major changes came with the rise of market economies, industrialization, and modern capitalism. During the 1700s and 1800s, the idea that dominant private companies or legal monopolies could unfairly restrict trade led to legal reforms in Europe. But after the Panic of 1873, competition ideas lost favor, and people thought companies needed to form cartels to survive price and profit pressures.

While Europe’s competition law development stalled in the late 1800s, Canada passed what is considered the first modern competition statute in 1889—the Act for the Prevention and Suppression of Combinations formed in restraint of Trade—one year before the United States enacted the Sherman Act of 1890. In the early 1900s, business conglomerates used legal trusts to create monopolies, which led to U.S. antitrust law. By 2020, over 140 competition law systems existed, most adopted in the last 30 years after the Soviet Union collapsed and the European Union expanded. Today, competition authorities from many countries regularly share information and evidence with foreign counterparts.

Although competition law aims to improve economic efficiency by keeping production rates and levels competitive, in some situations anti-competitive practices can actually increase welfare, or competition law itself can reduce efficiency and raise costs for consumers.

The English common law of restraint of trade is often seen as the direct forerunner of modern competition law. English courts decided cases that gradually built competition-related case law, which later became statutes. For example, Canada’s 1889 statute and the U.S. Sherman Act of 1890 are key early laws. Modern competition law comes from both national and international sources. National law usually lacks extraterritorial reach unless the activity has a significant national impact—the effects doctrine. International competition law, like European Union law, can have cross-border or supranational effects, sometimes including criminal penalties. The General Agreement on Tariffs and Trade (GATT) was adopted in 1947, and the World Trade Organization (WTO) was created in 1994, establishing limited, sector-specific provisions on cross-border competition issues. There have been proposals for a global antitrust code, but none exists yet. The International Competition Network (ICN) helps national authorities coordinate their enforcement, though it cannot enforce laws itself.