Fair competition 101: What it means for small businesses

As a small business owner, you may have heard terms like “fair competition” and “antitrust” in the news or during policy debates. But what do these terms actually mean, and why do they matter to small businesses?

Fair competition refers to the rules, policies and market conditions that prevent dominant companies from abusing their power to shut out smaller competitors.

The policies that promote fair competition can sometimes seem complicated, technical or even a little wonky. But these issues affect small business owners every day, whether you’re dealing with suppliers, selling products online, competing against large chains, or trying to afford healthcare coverage for your employees.

When large corporations manipulate markets to gain more control, small businesses often pay the price through higher costs, fewer choices and barriers to growth. Understanding how these practices work is the first step toward advocating for a system that gives small businesses a fair chance to succeed.

What small business owners think about the state of competition in America

Our research makes it clear: Small business owners are feeling unfairly squeezed by corporate America. Small businesses report they are being harmed by self-preferencing, predatory pricing, price discrimination and other abusive practices. What’s more, a study from 2022 shows that more than half of small business owners agree that large companies have an unfair advantage in their industry or line of work.

Small businesses want a more equitable playing field

• 82% agree our economy is changing and it's time to update our current laws for the modern age to protect consumers and small businesses 
• 80% agree large companies have too much control over markets, and local, state, and federal government need to step in to help create a more equitable playing field
• 65% percent believe their state should do more to strengthen its anti-monopoly laws and enforcement

A quick history of antitrust laws

Key government entities that enforce or issue competition laws: The Federal Trade Commission, the Department of Justice and the White House direct federal antitrust enforcement efforts.

• The Sherman Antitrust Act (1890) was the first federal law created to prevent monopolies and promote fair competition in the U.S. economy. It prohibits businesses from engaging in anti-competitive behavior such as price-fixing, market allocation, bid-rigging and efforts to monopolize an industry. 
• The Clayton Antitrust Act (1914) strengthened federal antitrust protections by addressing business practices the Sherman Antitrust Act did not clearly prohibit. It bans anti-competitive practices such as certain mergers and acquisitions, exclusive dealing agreements, price discrimination and corporate actions that may substantially reduce competition. It also helps prevent harmful market consolidation before monopolies fully form.
• The Robinson-Patman Act (1936) prevents large franchises and chains from engaging in price discrimination against small businesses. There are ongoing efforts in Congress to encourage RPA enforcement via the federal appropriations cycle. However, there are exceptions and loopholes in this law and cases related to the RPA have been on the decline since the 1980s because of its complexities. 

Policy developments to watch in the states

So, what can be done to curb unfair competition in this country? Across the nation, states are introducing policies designed to create fairer markets and help small businesses compete and thrive.

• In California, the COMPETE Act closes a loophole in current antitrust law and allows small business owners to challenge behavior by a single seller or powerful buyers that goes beyond normal competition and limits your ability to operate your business efficiently, like being forced into "take-it-or-leave-it" contracts with no real ability to negotiate, losing access to customers because a dominant platform controls search, visibility, or referrals, and being blocked from entering or expanding in a market due to exclusive deals or restrictive terms.
• In Georgia, lawmakers recently introduced a resolution that would create the Georgia Senate Study Committee on Protecting Free and Fair Markets. The committee would examine how the state can promote entrepreneurship, lower costs and ensure markets remain fair and competitive for Georgia small businesses and consumers.
• Minnesota recently introduced legislation that would prohibit the use of surveillance pricing in connection with a consumer transaction.
• In New York, the Consumer Grocery Pricing Fairness Act would enable small and mid-size grocers to access fair wholesale pricing, allowing them to compete and keep prices down. And, the Fair Pricing Act would regulate hospital and healthcare pricing, and prevent hospital conglomerates from using their outsized market power to inflate healthcare pricing.
• If passed, this North Carolina bill would require a biannual analysis of the state’s economic progress, including how policies that promote competition and reduce monopolistic practices could support small business growth and expansion.
• In Virginia, lawmakers recently passed a law expanding the state’s restrictions on non-compete agreements beyond just “low-wage employees” to cover a broader group of workers. Other proposed legislation includes a bill that would prohibit surveillance pricing, a practice that uses personal data to charge different prices to different consumers. And, legislation that would allow consumers and independent repair providers to take legal action against agricultural equipment manufacturers that fail to provide the documentation, parts or tools needed for diagnosis, maintenance and repair on fair and reasonable terms.

What can small business owners do to curb unfair competition?

Now that you know more about fair competition, you may begin to recognize how unfair or even predatory business practices are affecting your small business. These challenges can show up in countless ways, from rising costs and unfair contract terms to online platforms prioritizing their own products over yours.

If any of these issues resonate with you, we want to hear your story.

Small business voices are essential to the fight for fair competition. Policymakers need to hear directly from the people experiencing the real-world impacts of shrinking markets, growing corporate concentration and unfair business practices. By speaking out, small business owners can help shape policies that create a more competitive, affordable and equitable economy for everyone.

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