A Brief History of Competition Law – Part 2

A Brief History of Competition Law – Part 1 While the term ‘Renaissance’ originally referred to a cultural movement that characterized the period from around the 14th to 17th centuries, it has also come to refer to an historic era affecting other aspects of daily life, including that of trade and competition. During this Renaissance period, particularly from the 16th century onward, international trade started booming. While much of this trade and the resultant wealth were illicit, authorities saw the need to regulate trade to engender a spirit of fairness and free competition. The precursor of modern patent laws, known as the Statute of Monopolies, was passed by England’s parliament in 1623. Prior to the Statute of Monopolies, patent laws were subject to abuse by authorities. History reveals that Elizabeth I was known to have granted patents for everyday household commodities such as salt and starch, thereby creating monopolies on necessities. Her successor, James I, followed in her footsteps, making life very difficult for their citizens.

In the following years, various attempts were made to break monopolies and set laws to encourage competition and free trade. But those with good intentions often found that traders maintaining monopolies had the kind of wealth that bought themselves a favored position with authorities. Other developments that eventually led to modern competition law included laws relating to restraint of trade. As the term suggests, restraint of trade prevents parties from setting up, or engaging in, similar activities in opposition to one another. Restraint of trade clauses may form part of an agreement between employer and employee, especially when the employee will develop marketable skills at the expense of the employer. Or the buyer of a business may put a restraint of trade clause in the agreement to prevent the seller from using his expertise to set up a business to compete against the one he has just sold. Restraint of trade is generally subject to a time period and/or a geographic area.

Modern day competition law is generally accepted to have had its foundations in the Sherman Act (1890) and the Clayton Act (1914) – both instituted in the United States. At the time, European countries had various forms of rules and laws to regulate monopolies and competition, but further developments, particularly after World War II and the fall of the Berlin wall in 1990, have elements of the Sherman and Clayton Acts as their foundation. With the rapid development of international trade going into the 21st century, competition and anti-trust laws have had to keep pace. To be continued… Part 3