Antitrust Division of the Justice Department  the division of the Justice Department in the United States that enforces antitrust legislation, along with the Federal Trade Commission.
antitrust policy  government actions designed to promote competition among firms in the economy; also called competition policy or antimonopoly policy.
average total cost pricing  a regulatory method that stipulates that the firm charge a price that equals average total cost.
Clayton Antitrust Act   a law passed in 1914 in the United States aimed at preventing monopolies from forming through mergers.
contestable market  a market in which the threat of competition is enough to encourage firms to act like competitors.
deregulation movement  begun in the late 1970s, the drive to reduce the government regulations controlling prices and entry in many industries.
economies of scale  also called increasing returns to scale; a situation in which long-run average total cost declines as the output of a firm increases.
exclusive dealing  a condition of a contract by which a manufacturer does not allow a retailer to sell goods made by a competing manufacturer.
exclusive territories  the region over which a manufacturer limits the distribution or selling of its products to one retailer or wholesaler.
Federal Trade Commission (FTC)  the government agency established to help enforce antitrust legislation in the United States; it shares this responsibility with the Antitrust Division of the Justice Department.
Herfindahl-Hirschman index (HHI)  an index ranging in value from 0 to 10,000 indicating the concentration in an industry; it is calculated by summing the squares of the market shares of all the firms in the industry.
horizontal merger  a combining of two firms that sell the same good or the same type of good.
incentive regulation  a regulatory method that sets prices for several years ahead and then allows the firm to keep any additional profits or suffer any losses over that period of time.
marginal cost pricing  a regulatory method that stipulates that the firm charge a price that equals marginal cost.
market definition  demarcation of a geographic region and a category of goods or services in which firms compete.
natural monopoly  a single firm in an industry in which average total cost is declining over the entire range of production and the minimum efficient scale is larger than the size of the market.
predatory pricing  action on the part of one firm to set a price below its shutdown point in order to drive its competitors out of business.
price fixing  the situation in which firms conspire to set prices for goods sold in the same market.
resale price maintenance  the situation in which a producer sets a list price and does not allow the retailer to offer a discount to consumers.
rule of reason  an evolving standard by which antitrust cases are decided, requiring not only the existence of monopoly power but also the intent to restrict trade.
Sherman Antitrust Act  a law passed in 1890 in the United States to reduce anticompetitive behavior; Section 1 makes price fixing illegal, and Section 2 makes attempts to monopolize illegal.
treble damages  penalties awarded to the injured party equal to three times the value of the injury.
vertical merger  a combining of two firms, one of which supplies goods to the other.