The Clayton Antitrust Act 1914
The Clayton Antitrust Act 1914
The Clayton Antitrust Act 1914
Woodrow Wilson (1856–1924)
The Clayton Antitrust Act was passed by Congress in 1914 to clarify and enhance the Sherman Antitrust Act (1890). Large firms were able to take advantage of several loopholes in the latter’s imprecise language, allowing them to engage in certain restrictive business arrangements that, although not unlawful in and of themselves, resulted in concentrations that harmed competition.
Despite the trust-busting actions of Presidents Theodore Roosevelt and William Howard Taft under the Sherman Act, it appeared to a legislative committee in 1913 that big business had continued to grow bigger and that a few persons had the capacity to throw the country into a financial crisis. When President Woodrow Wilson requested a major overhaul of existing antitrust laws, Congress reacted by establishing the Clayton Act.
The Clayton Act made unlawful some commercial activities that are favorable to the establishment of monopolies or that result from them, whereas the Sherman Act merely made monopolies illegal. Specific types of holding corporations and interlocking directorates, for example, as well as discriminatory freight (shipping) agreements and the division of sales regions among so-called natural competitors, were prohibited. The Robinson-Patman Act (1936) and the Celler-Kefauver Act (1950) altered two portions of the Clayton Act to strengthen its provisions.
The Robinson-Patman amendment made Section 2, which deals with pricing and other types of discrimination among customers, more enforceable. The Celler-Kefauver Act strengthened Section 7, which prohibits one firm from acquiring either the stocks or the physical assets (i.e., plant and equipment) of another if the acquisition would reduce competition; it also expanded the scope of antitrust laws to include all types of mergers if the effect would substantially lessen competition and tend to create a monopoly. Horizontal mergers—those involving companies that manufacture the same sort of goods—were formerly forbidden by legislation.
The Celler-Kefauver Act, on the other hand, went a step further by prohibiting even cross-industry mergers (i.e., conglomerate mergers). The Federal Trade Commission is in charge of enforcing the Clayton Act and other antitrust and consumer protection laws.
SEE ALSO:
The Sherman Antitrust Act (1890);
The Microsoft Monopoly (2000).
SOURCES:
The Clayton Antitrust Act 1914